Huge struggle ahead for UK car manufacturing – Brexit, cash flow, taxes and dented consumer spending

Richard Bartlett-Rawlings, partner at RSM, comments: ‘This month’s figures show that production remains consistent with the recovery seen in September but is well below 2019. With tighter national restrictions, many dealerships closed again and dropping consumer confidence, the data is not surprising. Both production and demand are anticipated to remain subdued for the rest of 2020.

The industry has managed to rebuild to a certain level of production but the end of the Brexit transition, slow economic recovery, dented consumer confidence and fragile supply chains will all combine to make it a huge struggle for the industry.

We don’t know when things are going to look better.  The uncertainties of Brexit are top of the list at the moment with risk on many levels and the UK economy is not expected to reach a pre-crisis level until the end of 2022 .  A deal will be required to ensure that the stresses within this sector don’t fracture the fragile recovery and present further uncertainty to those employed within the industry.

Supply chains and stockpiling

Aside from managing demand on a UK, European and global level, manufacturers also need to mitigate supply chain risk and cash flow.  The fear of potential border delays post 31 December and the raft of tax and VAT changes that need to be fully understood and planned for are making some automotive businesses consider stockpiling once again to minimise immediate disruption.

Net zero

With the Government planning to ban new petrol and diesel car sales in 2030, there will be no doubt be opportunities through more funding that will be made available to the industry in the future. Thankfully we have a lot of leading research, development and skills that we can take advantage of in the UK.  This however, is a small light at the end of a long tunnel as, at the moment, there are just too many uncertainties and risks to manage.