A third of employees working in the auto industry are still on furlough and up to one in six jobs are at risk as a result of Covid-19.
The impact of the coronavirus crisis on the £18.6 billion automotive sector is revealed today (Tuesday, June 23) in a new survey from the Society of Motor Manufacturers and Traders (SMMT).
So far, more than 6,000 UK automotive job cuts have been lost in June as 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, says the SMMT.
Mike Hawes, SMMT chief executive, said: “UK Automotive is fundamentally strong. However, the prolonged shutdown has squeezed liquidity and the pressures are becoming more acute as expenditure resumes before invoices are paid.
“A third of our workforce remains furloughed, and we want those staff coming back to work, not into redundancy.”
SMMT is calling on Government to address this with a support package for the entire sector to help drive demand and ease cash flow, including business rate holidays, VAT cuts and financial incentives such as a scrappage scheme.
Hawes continued: “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.
“Support delivered now is an investment in the future of one of Britain’s most valuable assets… investment that we will repay many times over.”
Brexit impact on auto industry
SMMT says that the pending jobs crisis is amplified by the prospect of a ‘bare bones’ or no-deal Brexit so an injection of fresh momentum into free-trade agreement talks is welcome.
Hawes said: “Covid has consumed every inch of capability and capacity and the industry has not the resource, the time nor the clarity to prepare for a further shock of a hard Brexit.
“That’s why we do need to ‘turbo charge’ the negotiations to secure a comprehensive Free Trade Agreement 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.”
The news comes as SMMT publishes its second Annual Trade Report for 2020, UK Automotive Trade in a post-Covid World, with new figures highlighting the risk a no-deal Brexit would pose to the UK’s status as the world’s 10th largest exporter of goods.
The impact of the pandemic on manufacturing is expected to cut annual car and light commercial vehicle production volumes by a third to just 920,000 units this year.
With an ambitious, tariff-free free trade agreement in place, full recovery is expected to take up to five years, with output reaching pre-crisis levels of 1.35 million units by 2025, it says.
However, 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 would mean a £40 billion cut in revenues, on top of the £33.5 billion cost of Covid-19 production losses over the period.
Automotive is one of the UK’s most valuable economic assets, exporting more goods than any other sector, generating billions for the economy and supporting some 168,000 high-skilled and high-paid manufacturing jobs in communities across every nation and region of the UK.
SMMT‘s 2020 Trade Report shows the potential to build on this success as global markets recover, identifying key growth regions that the UK is well placed to serve, if the right conditions are in place.