What happens when economies grind to a halt
Figures released by SMMT showed the UK new car market fell more than -44% in March – hardly a surprise with showrooms locked down for most of the month to contain the spread of the coronavirus, but very concerning nevertheless. Some 203,370 fewer cars were registered, making it the lowest March since we moved to the bi-annual plate change system in the late nineties. It could have been even worse had the significant advanced orders placed for the new ‘20 plate not been delivered in the early part of the month, and much steeper declines have been reported across many European markets.
There was some good news contained within these truncated figures, however, with registrations of the latest alternatively fuelled cars continuing to perform strongly. Early adopters were able to take delivery of the latest battery electric and plug-in hybrid vehicles before the crisis took hold.
Whilst this aspect was welcome, it is important not to draw long-term conclusions during such unprecedented times, other than it being a stark realisation of what happens when economies grind to a halt. How long the market remains stalled is uncertain, but it will reopen and the latest, safest and cleanest products will be there to help attract buyers into showrooms.
In terms of managing businesses during this crisis, there was a raft of announcements from government this week, including a welcome letter of comfort from the secretary of state for business thanking manufacturers for their “critical” efforts and clarifying that there is “no restriction on manufacturing continuing under the current rules”.
To help businesses understand and implement these rules, government also published updated advice on social distancing in the workplace. Additionally, and importantly for the wider sector, the business secretary also said that, “It is vital that we ensure that servicing, parts and raw materials are available to keep vehicles and services on the road and operating. I would like to give you all my personal thanks for everything you are doing.”
This is just one of the asks SMMT has made of government in recent weeks as we try to ensure companies and workers have the reassurance and support they need during this challenging time. The coronavirus Job Retention Scheme (JRS) now has more clarity, with advice this week on calculations on average earnings and the inclusion of sales commissions helpful.
However, it is worth noting that HMRC aims to open the JRS to claims on 20 April and it’s expected to take four to six days from receipt of a claim to the payment being made. Members are, therefore, advised to apply early so that PAYE payments can be made – and cashflow eased – as soon as possible, given payroll runs are often made soon after that date.
So it is encouraging to see progress being made with many critical measures implemented. The fact remains, however, that we still need to get liquidity into the sector urgently and SMMT continues to push hard for solutions that apply to companies of all sizes, including larger businesses, and for other measures that would make a difference now, such as business rate holidays for manufacturing and tax deferrals on national insurance contributions.
We will continue pushing over the weekend as we recognise that time is critical.
Despite the challenging situation, the automotive sector is responding to calls to make PPE equipment and ventilators, with many companies already donating essential safety clothing and masks to organisations in need. At the same time, others are supporting emergency services, local authorities, volunteer groups and other critical services with transport