SMMT Manufacturing Data: Car Production Rise in June figures no surprise, but end of flexible furlough, balance of supply and demand and Brexit are cause for concern

The upturn in June’s figures for car production are no surprise, considering the significant drop-in production of over 95 per cent in May. However, the number of cars produced in June 2020 was down by more than 48 per cent for the same month last year.

Richard Bartlett-Rawlings, partner at RSM, comments: ‘There are positives to be taken from June’s growth in units manufactured in the UK. We have seen many UK manufacturers restart production lines and adapt shift and working patterns to reflect the current social distancing rules. Demand for new vehicles is growing and as more of the world continues to emerge from lock down this will continue. However, the next few months could be make or break for many and the industry will be need to flexile and agile in order to balance supply and demand. This is particularly important with new spikes in cases and local and regional lock downs being re-introduced. Securing a positive trade agreement with the EU soon will also be hugely important for output.

‘Reshoring will also continue at pace within UK manufacturing, with improved quality and speed of delivery being two critical benefits. In light of coronavirus, many more businesses are looking to shorten supply chains and improve resilience – often looking at multiple suppliers and UK-based options that might have been discounted in the past.  Giving the industry some further flexibility will help to get these new relationships established.

‘Both the Automotive Transformation Fund (ATF) Competition Launch and the Industrial Energy Transformation fund initiatives from government may benefit the sector to some degree but funding for energy efficient projects simply won’t be enough in the immediate future for an industry that has seen such a dramatic fall in demand.

We have seen the extra measures that government has introduced for retail, leisure and hospitality. Given the automotive industry was been hit equally hard and that manufacturing is a key component of our recovery, there is a call to be made for similar treatment. For example, extending the flexible furlough scheme would enable businesses to remain agile in an ever-changing global environment, maintaining employment and balancing cash flow.’