UK car manufacturing is at tipping point and needs support similar to property and hospitality sectors

The upturn in July’s figures for car production by 51 per cent compared to June is welcome news for the automotive manufacturing industry. However, with year on year production down 40 nearly per cent, the industry remains at a tipping point and in need of urgent targeted Government support, similar to the property and hospitality sectors, be it an excise duty holiday, temporary VAT cuts or an extension of the flexible furlough scheme.

Richard Bartlett-Rawlings, partner at RSM, comments: ‘The automotive manufacturing industry in the UK is worth more than £100billion per year supporting a wide supply chain and is a world leader for research and development. What is clear is the sector needs targeted Government support, as the next few months will be make or break for many in the industry.

‘Manufacturers are getting back to production which is obviously great news.  However, they are not yet at full production, whilst facing huge operational and capital investment costs. At the moment, the pent-up demand for cars that has built up over the past few months is filtering through into the production and sales statistics. However, with the end of the furlough scheme in October and the looming uncertainty of Brexit, there will likely be a downturn in consumer demand. This will mean people may well delay discretionary spend, such as a new car, until they have more certainty about jobs and the wider economy.

‘The UK automotive industry is a key sector within the economy supporting thousands of high-quality jobs and needs specific and targeted support. There are many forms that can be explored from re-introducing the subsidy for electric and hybrid vehicles, a cut of VAT to 5 per cent as seen for food and drink, a tax holiday such as property or a targeted extension of flexible furlough. This will allow manufactures to balance supply and demand, protect jobs and cash flow and get back to full operational capacity at the right time.’

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