Navigate these choppy waters and the sector can drive growth
The automotive sector can be intrinsic to UK economic growth, to decarbonisation and our trade balance but we need the right conditions and a framework for competitiveness. Achieving that growth will not be easy as the global challenges before us are significant and, as a trade intensive industry, the rise in protectionism – retaliatory or otherwise – threatens what could be a tremendous opportunity for the UK.
There is no denying the current situation is extremely challenging. The latest vehicle production data, issued today by SMMT, shows demand for British-built cars actually rose in March, up for the first time in 12 months and driven by robust export demand that increased by 30.6%, but this could not overcome an overall decline in first quarter performance. The reasons are well-known – investments in new models and technologies, structural changes and subdued demand globally combine to constrain output to levels last seen in the pandemic. With almost three quarters of car output alone shipped overseas last month, the importance of global markets – and free and fair trade – is critically important to our recovery and growth.
Of additional concern is the fact that the figures reflect demand levels ahead of the announcement of new US tariffs. Their impact will likely be seen imminently as US demand – especially for our world renown high value, small volume manufacturers – suffers as a result of additional and punitive tariffs and ongoing political uncertainty. For many of these manufacturers, the US can represent somewhere between a third and over half their total output. Their customers – high net worth individuals – are shrewd, pausing purchases of what, for most of them, would be discretionary spend given they likely have a fleet of cars already. And given these vehicles are built to order, they know they will be subject to the additional Section 232 tariff of 25%. The logical reaction of any consumer in that position would be to wait and see as the language and position of the administration on tariffs and deals seems to be changing daily.
This turmoil and uncertainty is, however, a clear and present danger to the sector. We need a deal; one that works for both sides but one that can be achieved quickly and supports the automotive industry. This week’s Business and Trade Select Committee, was therefore, a timely opportunity for SMMT and senior industry representatives from BMW and Nissan to explain the challenges – trade and otherwise – facing the sector and the measures needed to alleviate the threat to operations, not just of vehicle manufacturers, but to suppliers and the wider community.
The focus must be on making the UK automotive manufacturing sector as competitive as possible. We need energy cost relief urgently – we already pay over 60% more than the EU average and twice as much as many of our competitor locations. We need changes to the skills regime to help us upskill our workforce so they can build the new electric vehicles we need to produce. We need a stronger market, supported by incentives and regulatory easements that match supply to demand. And we need reforms to planning and grid connections so we can, as a country and as manufacturers, invest in the infrastructure we need to support this transition.
The Industrial and Trade Strategies, therefore, must be published as planned by this summer, with automotive and advanced manufacturing at their core and a clear delivery plan to support the growth of Britain’s most valuable goods export industry. Finally, just a reminder that it is not too late to register for the CV Show which takes place from 29 April – 1 May at the NEC, Birmingham. It will provide an unmissable opportunity to see the latest commercial products from more than 300 exhibitors, to network with some 15,000 attendees and engage with our world-class CPD accredited seminar sessions. I look forward to seeing many of you there.