UK car production down -42.8%, 11,000 jobs lost in coronavirus crisis

(Source: SMMT)

UK car manufacturing output declined -48.2 per cent in June, Society of Motor Manufacturers and Traders figures reveal. Only 56,594 units were produced in the month. The SMMT revealed that the 381,357 cars produced in the first half of 2020 represent the weakest six months of UK manufacturing since 1954. This is -42.8 per cent down on 2019’s first half, with more than 285,000 units fewer produced. 11,349 jobs have been lost across manufacturing and retail during the pandemic. The SMMT warns that the fear of Brexit tariffs could endanger more jobs without dedicated restart support. The society called for greater urgency in talks to secure an ambitious free trade agreement with the European Union. Its latest survey data shows nine in 10 firms are missing clarity of information to allow them to prepare for the end of the transition to the new ongoing relationship between the UK and EU.

The SMMT said that while post-shutdown production slowly ramped up in June, strict social distancing measures and weak demand across global markets continued to restrict output. June manufacturing for the domestic market was down by -63.8%, reflecting the gradual easing of the UK’s retail lockdown. Dealerships reopened gradually around the home nations, starting with England (1 June), followed by Northern Ireland (8 June), Wales (22 June), and Scotland (29 June). Production for export also fell, by a substantial -45.0 per cent, although overseas orders accounted for nine out of 10 vehicles built as key global markets, including in the EU, China, US, South Korea and Japan, opened for business earlier than the UK.

The SMMT’s June figures represent a vast improvement on April and May, when only a combined 5,511 cars were built. But the month still rounded off the worst first six months for UK car production since 1954, when 379,510 units were maufactured. Just 381,357 cars have been built since January, a decline of -42.8 per cent representing a loss of 285,164 units.

‘A perfect storm’ – analysts on the SMMT figures

Job losses and potential Brexit headwinds

As a consequence of the crisis, the SMMT calculates that at least 11,349 job cuts have already been announced across the industry, including manufacturing, supply chain and retail. New Auto Analysis figures suggest car production losses could total 1.46 million units by 2025 – worth just over £40 billion – if no FTA is in place by the end of 2020, forcing the sector to trade on WTO terms with full tariffs applied.

With significant questions remaining about the nature of trading conditions from 1 January, including uncertainty about customs procedures, regulation, and tariffs, the SMMT issued an online member survey on 17 July 2020 to companies representing £84bn turnover and 226,000 employees. This revealed lack of clarity is now severely hampering nine in 10 companies’ (93.5 per cent) ability to prepare for the end of the transition period. The coronavirus crisis has exacerbated this, with six in 10 (61.3 per cent) automotive companies saying Covid-19 has diverted resources away from Brexit preparations, while more than seven out of 10 (77.4 per cent) view securing a tariff and quota free FTA as crucial to their future success.

Mike Hawes, SMMT chief executive, said: “These figures are yet more grim reading for the industry and its workforce, and reveal the difficulties all automotive businesses face as they try to restart while tackling sectoral challenges like no other. Recovery is difficult for all companies, but automotive is unique in facing immense technological shifts, business uncertainty and a fundamental change to trading conditions while dealing with coronavirus.

“The critical importance of an EU-UK FTA is self-evident for UK Automotive. Our factories were once set to make two million cars in 2020 but could now produce less than half that number, a result of the devastating effects of the pandemic on top of already challenging market conditions and years of Brexit uncertainty. This industry has demonstrated its inherent competitiveness and global excellence over the past decade. Its long-term future now depends on securing a good deal and a long-term strategy that supports an industry on which so many thousands of jobs across the country depend.”

Production outlook

The latest independent production outlook commissioned by SMMT, and also released today, now expects just over 880,000 cars to be produced in the UK this year. This would be some -32 per cent lower than made in 2019 and -30 per cent less than was anticipated in January pre-crisis. If realised, this would be the lowest total since 1957 when 860,842 cars were produced.

The analysis also suggests that without a positive trade agreement with the EU, and the industry trading on WTO terms with 10 per cent tariffs, output could stay around the 800,000 mark, or less, to 2025. A successful conclusion to negotiations with a zero tariff and quota FTA would see car volumes (not including light commercial vehicles) recovering to pre-crisis levels of 1.2 million units within the next few years and the potential for further long-term growth after that, according to Auto Analysis.

The SMMT concludes its half-year statement by stressing the automotive sector’s position as one of the nation’s most valuable economic assets and a global trading powerhouse, sustaining more than 820,000 jobs with 168,000 directly in manufacturing. It argues that a successful restart of the £82 billion industry would help sustain jobs nationwide, boost tax revenues and international trade, plus drive a green recovery for the UK by helping government meet climate change and air quality goals.