The SMMT has said that the impact of the COVID-19 pandemic on the UK automotive sector means car and light commercial vehicle production is forecast to fall by a third to just 920,000 units this year.
The trade association also warned that the sector needs a restart package to save jobs and pave the way for recovery.
Go deeper with GlobalData
The SMMT also suggested the UK automotive sector would be helped in recovery by a tariff-free FTA with the EU, which would put it on a path to full recovery over a five-year timescale, with vehicle output reaching pre-crisis levels of 1.35 million units by 2025.
UK government support for the sector during the COVID-19 crisis has left up to one in six jobs at risk of redundancy, according to the SMMT. With a third of automotive workers still furloughed, the end of the government’s job retention lifeline in November highlights the critical need for a dedicated restart support package to safeguard these jobs, the SMMT maintains.
More than 6,000 UK automotive job cuts have been announced in June, a result of global lockdowns, closed markets and shuttered plants. Showrooms in England and Wales are now re-opening and production lines restarting, but reduced demand and social distancing are slowing productivity.
The SMMT is calling on government to address this with a support package for the entire sector to help drive demand and ease cash flow. Measures including unfettered access to emergency funding, permanent short-time working, business rate holidays, VAT cuts and policies that boost consumer confidence would accelerate a sustainable restart for the market and manufacturing – a pre-requisite to the recovery phase, and to ‘unlocking the investment needed to drive a green future for the UK’.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataMike Hawes, SMMT Chief Executive, said that while the UK automotive sector is fundamentally strong, the prolonged shutdown has squeezed liquidity, with pressures rising as expenditure resumes before invoices are paid.
“Government’s intervention has been unprecedented. But the job isn’t done yet. Just as we have seen in other countries, we need a package of support to restart; to build demand, volumes and growth, and keep the UK at the forefront of the global automotive industry to drive long-term investment, innovation and economic growth,” Hawes said.
No-deal Brexit risk
Mike Hawes also said that the sector needs more certainty over future trade arrangements with the EU when the Brexit transition period ends at the end of this year. “Certainty that a full, zero-tariff deal will be in place by the end of the transition period will give businesses on both sides chance to prepare, and help drive investment into the new skills, facilities and technologies that will be integral to delivering a zero-carbon future for the UK.”
Hawes called for a comprehensive Free Trade Agreement (FTA) with the EU that maintains tariff and quota free trade. “With such a deal, a strong recovery is possible, we can safeguard the industry and our reputation as an attractive destination for foreign investment and a major trade player,” Hawes maintains.
Although car and light commercial vehicle production volumes are forecast to decline by a third to just 920,000 units this year, the SMMT says a tariff-free FTA in place would yield full recovery for the sector by 2025 with annual output forecast at 1.35 million units.
However, it also says a ‘no deal’ scenario would severely damage these prospects and could see volumes falling below 850,000 by 2025 – the lowest level since 1953. This, the SMMT said, would mean a GBP40 billion cut in revenues, on top of the GBP33.5 billion cost of COVID-19 production losses over the period.
