Rishi Sunak urged to rescue Britain’s ailing car industry as production slumps 27.3%

Calls for UK finance minister to bolster sector in March 3 budget after 17th month of decline

Cars parked up after coming off the production line at the Vauxhall manufacturing plant at Ellesmere Port in north west England . The slump in Britain's car production was the worst January performance since 2009. AFPShow less

UK car production slumped by a quarter in January when the country faced tighter movement restrictions prompting calls for Finance Minister Rishi Sunak to support the sector in next week’s budget.

The number of cars built last month fell by 27 per cent to just over 86,000, a drop of 32,262 on January 2020, the Society of Motor Manufacturers and Traders said on Friday.

It was the worst January performance since 2009 and a 17th consecutive month of decline for the sector, signalling that the problems are not all pandemic-related.

“Yet another month of decline for UK car production is a grave concern and next week’s budget is the Chancellor’s opportunity to boost the industry by introducing measures that will support competitiveness, jobs and livelihoods,” SMMT chief executive Mike Hawes said on Friday.

"We must get our Covid-secure car showrooms back open, ideally before April 12. This will be the fastest way to UK automotive manufacturing recovery.”

The SMMT hopes Mr Sunak will unveil measures in his March 3 budget that enhance Britain’s car manufacturing competitiveness, such as an extension to Covid-19 support schemes including the furlough programme and reform of business rates to encourage manufacturing investment and more support for skills and training.

Analysts expect Mr Sunak to extend the furlough programme at least to the summer while business rates relief could also be extended for sectors badly hit by the crisis.

While the SMMT said the pandemic contributed to the slide in output because of extended factory shutdowns, closed showrooms and difficulties for customers to test-drive cars, global supply chain issues were also a factor along with friction in new trading arrangements with the European Union after Brexit.

European car marker Stellantis said on Thursday that ongoing talks with the British government over the future of a Vauxhall plant in northern England were "productive but not conclusive".

Stellantis – a merger of French firm PSA and US-Italian rival Fiat Chrysler – expects "an eventual binding commitment by the UK government" regarding the future of the Ellesmere Port facility in northern England, which employs 1,000 staff and is linked to thousands more in the supply chain. Car manufacturing for both domestic and overseas markets fell in January to 16,692 and 69,360 units respectively, representing drops of 18.3 per cent and 29.1 per cent.

Exports still accounted for more than eight in 10 of all cars made last month, however, shipments to major markets such as the EU, US and Asia were all significantly lower, the SMMT said.

Dwindling production since the start of the pandemic has cost the industry £11.3 billion ($15.75bn), despite manufacturing businesses remaining open during the latest lockdown in England. Weak consumer demand is a contributor as closed showrooms make it difficult for customers to test-drive cars, with some forced to resort to click-and-collect options.

On a positive note, UK production of battery electric, plug-in hybrid and hybrid vehicles rose from last year, with a combined rise in output of 18.9 per cent to 21,792 units.

It means more than one in four of all cars leaving factories are built to run on alternative fuels, a healthy indicator the sector will transform in time to meet the ban of sales of new petrol and diesel cars from 2030.

“While there have been some very welcome recent announcements, we need to secure our medium to long-term future by creating conditions that will attract battery gigafactory investment and transform the supply chain,” Mr Hawes said.