UK car industry launches plan to save itself, and deliver £50bn economic boost

A new multi-pronged plan to revive the UK’s floundering car industry could inject an additional £50 billion into the economy over the next decade, coming alongside investment by the government as part of its new Industrial Strategy.

At the Society of Motor Manufacturers and Traders’ (SMMT’s) annual International Automotive Summit, the UK car industry set out the details of its ‘Competitive Edge’ report. This outlines the key changes that need to be implemented in order to propel the nation to become one of the world’s top 15 forces for automotive manufacturing.

Of the 10 main points highlighted, the most crucial involve reducing energy costs – which have recently been squeezing makers’ profit margins as electricity prices soar and EV manufacture requires more power – driving consumer demand for electric vehicles, and securing investment from overseas.

As part of the report, the SMMT once again restated its wish for the Government to implement further changes and fiscal incentives beyond those already outlined in the ZEV (zero-emission vehicle) mandate; industry leaders want the Government to slash VAT on both the purchase of new electric cars for private buyers, as well as that on public charging.

Auto Express asked whether, at this stage and with the tight-stringed nature of the public purse, whether such an introduction would be realistic – and SMMT chief executive Mike Hawes admitted that getting any of its wishes in this regard would be “rather optimistic”.

“If you look at the fundamentals, the underlying level of demand for EVs is below the regulation,” he said. “Looking at Europe, you can see what impact incentives have on driving demand; if we are to get something substantive, [this] will likely come at the next fiscal event – the Autumn Budget.”

That’s not to say the government hasn’t announced anything that will be of help to the UK car industry; following a big dip in production and profits due to tariffs imposed by US President Donald Trump, Labour’s new Industrial Strategy aims to reduce energy costs which are, at the time of writing, double the EU average.

With car manufacturers currently paying £200 million per year in energy taxes alone, firms will soon be able to save money by dodging pre-existing green energy levies. The Government also plans to cut through red tape and speed up grid connections in order to ensure new factories are set up swiftly; the SMMT says a swift implementation of this strategy could diminish manufacturing costs by up to 20 per cent.

However, while the SMMT has generally been complimentary of the new Labour administration – Hawes said the government “should be commended for signing three [trade] deals over the last few months” – it believes the changes outlined don’t quite go far enough.

The Government’s proposals already include a relief on standing charges for battery production, but the SMMT says this should also be extended to automotive manufacturing in general, in order to “level the playing field” compared with other markets.

Speaking of which, Hawes explained that the success of the UK car industry also depends on investment from – and trade deals with – other nations. The SMMT believes a closer relationship with the EU should aid both supply chains and exports, while Hawes explained that the industry is “very open to new entrants” when it comes to foreign manufacturers deciding whether or not to build their cars in the UK.

The SMMT says that these changes, combined with reconfigured apprenticeship levy funding, which will allow up to 50 per cent of finances to be spent on upskilling staff, will be a “springboard for success” – injecting up to an extra £50 billion into the economy between 2026 and 2035 and stimulating the UK car market to over 2 million new registrations per year.

“Do [all of] this,” Hawes continued, “and the automotive sector will repay that investment in full, delivering the economic, social and environmental benefits the UK deserves.”

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