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One in 6 UK auto jobs at risk once furlough ends, says trade body

One in six jobs risks disappearing from the British auto industry unless the UK government expands its financial support for carmakers and suppliers coming out of lockdown, the main sector trade body has warned.

The Society of Motor Manufacturers and Traders on Tuesday called for a package of support measures, including “unfettered access to emergency funding”, a permanent flexible furlough programme and a cut in value added tax.

Speaking at the SMMT virtual summit on Tuesday, the head of Ford in the UK also said that a scrappage scheme was “key” to getting people to buy new cars, despite the FT previously reporting that ministers were not considering one.

The trade group also warned that output from the country’s car plants will fall to 1950s levels if the Brexit transition period ends without a UK-EU trade deal, compounding the impact of the coronavirus crisis.

Though dealerships have reopened demand has remained poor as consumers are reluctant to spend © Peter Byrne/PA

Car sales have collapsed during lockdown with factories and showrooms closed for months, but even once they reopened demand has remained poor as consumers are reluctant to spend.

Some 25,000 roles in total are at risk in automotive factories and garages, the SMMT calculated, based on a survey of its members. One in three of the 150,000 people employed in manufacturing in the sector are on the government’s furlough scheme.

“A third of our workforce remains furloughed, and we want those staff coming back to work, not into redundancy,” said Mike Hawes, SMMT chief executive, on Tuesday.

While the SMMT has not publicly called for a scrappage programme, Ford, one of the UK’s largest brands, said such a scheme would help drive demand.

“A VAT change would be helpful, but we’re looking to get people with older vehicles into the showrooms and replacing their vehicles with fresher product,” Graham Hoare, Ford’s UK chairman, told the virtual summit. “It is really key to get those lower cost transactions happening.”

Bentley chairman Adrian Hallmark also told the summit a scrappage scheme would be a major environmental boost by “taking old cars off the road”, saying that “both scrappage and VAT adjustment have a role to play”.

The industry also wants current temporary measures that allow staff to switch between factory work and being furloughed to become permanent, because of the uncertainty about how long it will take consumer demand to recover.

Analysts expect global car output to return to pre-crisis levels only in 2023.

The SMMT also called for easier access to funding for smaller businesses, which have missed out on government loan schemes.

“Government intervention has been unprecedented,” said Mr Hawes. “But the job isn’t done yet. Just as we have seen in other countries, we need a package of support to restart; to build demand, volumes and growth.”

The industry wants “measures including unfettered access to emergency funding, permanent short-time working, business rate holidays, VAT cuts and policies that boost consumer confidence” to “accelerate a sustainable restart for the market and manufacturing”.

Jaguar Land Rover has been forced to take loans from China © Simon Dawson/Bloomberg

Not all companies have been able to access funding programmes. Jaguar Land Rover, the UK’s largest carmaker, which employs about 31,000 people, was forced to take loans from China after being turned down from the Bank of England’s loan guarantee scheme because of its poor credit rating. 

Mr Hawes added: “The prolonged shutdown has squeezed liquidity and the pressures are becoming more acute as expenditure resumes before invoices are paid.”

The furlough scheme is due to end in October, but many companies fear staff on the programme will be released if the businesses cannot afford to pay them to return to work, the SMMT said.

Last month, several of the UK’s largest car dealers warned that they expect to cut tens of thousands of jobs once the scheme runs out.

On Brexit, the trade body warned that car production in the UK could fall to less than 850,000 in 2025, a level last seen in 1953, if Britain faced tariffs and border checks with the EU when the transition period finishes at the end of this year.

The calculations are more severe than previous warnings because of the additional impact of the pandemic.

Output this year is expected to fall to 920,000, but may recover to the pre-crisis level of 1.35m by 2025 if trading with the EU can continue freely, it said.

This article was first published at https://www.ft.com/content/fd991e4e-830a-4a56-8e6b-035f165648e1

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