Budget for growth but markets and supply chain matter
Last week’s Budget was the perfect moment for the chancellor and her government to put a down payment on the UK’s future growth. After all, the automotive industry – a growth-driving, decarbonisation-critical sector in the midst of rapid technological change – has monumental growth potential in the near and long term. It was positive, therefore, that government reiterated its £2bn commitment to automotive transformation funding as part of its modern Industrial Strategy, a commitment which promises to support the scaling up of manufacturing as we transition to net zero, digitalisation and automation.
A thriving manufacturing sector needs to ensure it is globally attractive; skilled, productive, innovative and open to investment. The cost of doing business, however, also matters. Energy costs, for instance, are critical to an industry whose decarbonisation technologies will place greater demands on the grid. But with our biggest input costs still our people, the chancellor’s increase to National Insurance contributions will add significant pressure to automotive companies – particularly the supply chain, composed of more than 2,500 SMEs. At a time when SMEs are already challenged with finding the significant resource which net zero requires, we need to make things easier, not harder for them.
Our supply chain underpins the entire automotive ecosystem and supports tens of thousands of high skill, high value jobs across the country. So with decarbonisation only accelerating, and as more countries around the world compete for the growth offered by new investment in next-generation technologies and skills, next year’s Spending Review must find the funds to help our supply chain remain competitive and able to invest in its future in the UK.
Future investment is vital and government’s fresh growth agenda is therefore very welcome. It must be holistic, however, and one area of global competitiveness often overlooked is the strength of the local market. Manufacturers want to build close to where they sell and that’s one reason why strong domestic markets for zero emission vehicles matters. These are the very vehicles which government is compelling manufacturers to sell, so it’s disappointing that the Budget was absent of any significant new stimulus for these markets. Continuing the Plug-in Van Grant and company car tax benefits is welcome, but these alone are insufficient to generate the levels of private consumer demand which are mandated.
Given this mandate amounts to the world’s most ambitious EV transition goals, it should be matched with equally ambitious purchase incentives. Failure to support the market with the substantive measures needed not only puts the UK’s decarbonisation targets in serious doubt but risks reduced investment, with an impact on jobs and economic growth – the antithesis of the ambitions we all share. An urgent review of market support and regulation is therefore crucial.
