Consumer and business confidence a necessity for recovery
The automotive industry has demonstrated incredible resilience during what has been a damaging year for both vehicle manufacturing and sales, two critical contributors to the UK economy. In the important month of September, the number of new cars registered by UK buyers decreased by -4.4% according to the latest figures released by SMMT this week.
Since the introduction of the two-plate system, September has provided a significant boost in registrations and while this has not been the case this year, the decline could have been significantly worse given the challenging climate. The relaxation of Covid lockdown restrictions from June did see consumers return to showrooms and factories restart production lines, but the hoped-for recovery – to claw back the losses – of the UK new car market has yet to happen. Supply issues will not have helped and, whilst there was evidence of private retail demand, the market needs greater confidence if it is to recover fully.
Unfortunately, however, in the short term we are likely to see the market under continued pressure, with myriad challenges over the next quarter. Brexit uncertainty and the threat of tariffs are major concerns, while the shift towards zero emission-capable vehicles is demanding huge investment from the sector. The increase in plug in vehicle registrations is encouraging but we must ensure fleet renewal takes place across all technologies and segments if climate change and air quality targets are to me met in the coming years.
The sector’s success depends on the confidence of consumers and businesses, so the threat of a rise in unemployment following the upcoming end of the government’s furlough scheme coupled with the risk of greater restrictions on society – a result of the pandemic – suggest a bumpy road ahead.
Clarity from the government regarding the nature of our future overseas trading relationship with the EU would provide a much-needed boost to everyone’s confidence and is a necessity for recovery. With the government’s 15 October deadline less than a week away, a free trade agreement to deliver zero tariffs, zero quotas and workable rules of origin must be prioritised. After the seemingly never-ending negotiations, the next week promises to be a defining period in the Brexit process.