Car manufacturing falls by 45% as coronavirus wreaks further havoc on industry

British car manufacturing shrunk by 45% in August as coronavirus continues to wreak havoc

Situation could be made worse by no-deal Brexit, industry warns

CAR production in the UK fell by 44.6% in August as the second wave of the coronavirus pandemic stalled efforts to get the country’s manufacturing industry back on its feet. The dismal month contributed to a drop in production of more than 40% over the course of the year. That presents a loss of 348,821 units, worth £9.5bn to British car makers.

Just 51,039 units came off UK production lines last month, according to the Society of Motor Manufacturers and Traders (SMMT), due to weak demand overseas as well as a fall in output. It also reflects what was an unusually busy August in 2019, when factories worked through what is normally a shutdown period due to a timeline altered by Brexit.

Production for UK buyers has been hit the most, dropping 58.3% compared with the same month last year. While production for overseas fell by a lower proportion year-on-year (41.1%), the hit is harder in terms of total volume as exports account for 85% of UK car production.

In its report, the SMMT praised the extension of job protection measures by the British government. Chancellor of the Exchequer Rishi Sunak last week announced new measures that will cover the costs of two thirds of an employee’s wages for what he called “viable” industries, as long as the staff work at least a third of their normal hours and the employer pays the remaining wage bill.

Sunak said: “The government will directly support the wages of people in work giving businesses who face depressed demand the option of keeping employees in a job on shorter hours rather than making them redundant.”

However, the Labour party have criticised the measures for excluding businesses that rely on mass gatherings, such as wedding venues, musicians and events organisers. The shadow minister for business and consumers, Lucy Powell, accused the Winter Economy Plan of “consigning whole sectors of our economy to the scrapheap, damaging lives and livelihoods, and threatening the recovery”.

But the SMMT called the Job Support Scheme “welcome news” and said that “flexible measures to support short time working and cashflow are essential for automotive businesses while market demand and production capacity remain diminished.”

It also pointed out that at least 13,500 jobs are known to have been cut from the automotive sector this year, and that a member survey revealed one in six jobs in the industry are at risk of redundancy when the current job support scheme ends. Six thousand jobs were cut in June alone.

World class British car makers such as McLaren and Bentley had to cut jobs in order to stay afloat, with the former cutting 1,200 jobs and selling its Woking HQ, while the latter cut 1,000 jobs.

The SMMT warned that the adverse effect of what is predicted to be a 34% drop in volume compared with last year would be exacerbated by the prospect of a no-deal Brexit.

SMMT chief Mike Hawes said: “These are increasingly disturbing times for UK car makers and suppliers with the coronavirus crisis weighing heavily on the sector. Companies are bracing for a second wave with tighter social and business restrictions making the industry’s attempts to restart even more challenging.

“The UK industry is fundamentally strong and agile, and the measures announced … by the Chancellor are welcome and essential, although we await more details of how they will work for all businesses and crucially large manufacturers.

“Companies need to retain skilled jobs and maintain cashflow and we may need more support to boost business and consumer confidence later this year. Moreover, with fewer than 100 days until the Brexit transition period ends, we need urgent agreement of an ambitious free trade deal with our largest market to avoid the second shock of crippling tariffs.”

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