Auto sector calls for renewed government support

4 min read

Automotive

This is the latest weekly update from Santander’s automotive team on how the coronavirus pandemic is affecting our clients and the sector as a whole.

Automotive

The Chancellor’s summer statement on 8 July was met with disappointment by the Society of Motor Manufacturers and Traders (SMMT), which said: ‘The UK now stands alone as the only country of Europe’s five biggest economies not to provide dedicated support for its automotive industry, a situation that will only deter future investment.’

The organisation pointed out that the German Government had proposed a €5bn package of incentives, while the French Government has unveiled an €8bn plan. The SMMT’s new car registration figures for June indicated the scale of the problem facing the UK industry with a 35% decline year-on-year.

Looking at current trends across Europe, governments are offering greater incentives for electric car purchases in line with the idea of a more sustainable post-coronavirus recovery. Stimulus measures are also being introduced in China. Meanwhile, investment in autonomous-drive technology is likely to be subdued as manufacturers focus on core activities such as electrification and near-term market demand.

Following recent virtual events looking at opportunities in South Africa and Central and Eastern Europe, our focus is turning to other markets. On 5 August, we’ll take part in an event with the Department of International Trade’s (DIT) Midlands office looking at the automotive supply chain in Mexico and the Nuevo Leon automotive cluster in particular.

On 29 September, we’ll be running a webinar with DIT, SMMT and the Basque automotive organisation, Acicae, looking at the excellent trading opportunities in Northern Spain. Further details of both events will be available in the coming weeks.

 

Manufacturing sector news

The Chancellor’s summer statement was billed as an attempt to protect UK jobs from the impact of the coronavirus pandemic. The following measures were announced

  • A Job Retention Bonus worth £1,000 per employee for businesses bringing back staff from furlough and continuously employing them until January 2021.
  • A Kickstart Scheme to support young people in finding a job, with the Government paying the wages and overheads for any employer hiring 16 to 24-year-olds who are at risk of long-term unemployment or on Universal Credit.
  • Expanding traineeships to get young people into work with the Government paying employers £1,000 to take on trainees.
  • A new apprenticeship bonus worth £2,000 for any employer in England taking on an apprentice under the age of 25, and £1,500 for apprentices aged 25 or over. This applies from 1 August 2020 to 31 January 2021.
  • A temporary VAT cut on food and non-alcoholic drinks from 15 July to 12 January 2021 to support businesses and jobs in the hospitality sector.
  • An Automotive Transformation Fund providing an additional £10m funding for innovative research and development projects to scale up manufacturing of the latest technology in batteries, motors, electronics, and fuel cells.

Read analysis of the proposals from MakeUK.

MakeUK has recently published its latest Manufacturing Monitor, which provides insight into how businesses in the manufacturing sector are coping with coronavirus and its effect on economic activity. The organisation says 98% of manufacturers are openly trading, with 44% planning to continue apprenticeship training.

The latest IHS Markit/CIPS PMI data shows a stabilisation, with a June figure of 50.1 against 40.7 in May. Manufacturing production rose slightly last month, while new order intakes and employment levels fell more slowly.

Earlier this month, MakeUK and BDO published their Regional Manufacturing Outlook for 2020. Read the full report, which highlights manufacturers’ contributions to regional economies in terms of output, jobs, investments, and exports.

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