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Cars sit on the forecourt of a Jaguar Land Rover new-car showroom in Tonbridge, England, just prior to the British car-maker's announcement on June 15, 2020 that it would cut 1,100 temporary jobs in the UK.
BEN STANSALL/AFP/Getty Images
As Britain’s economy slowly emerges from three months of near total lockdown, few industries have been hit harder than the country’s auto sector, which has seen sales plummet and more than 6,000 jobs disappear.
The industry has been pummeled by the COVID-19 pandemic, which shut factories and closed showrooms in March. Car production has begun to restart and most dealerships reopened earlier this month, but experts say it could take five years for British car makers to recover.
The pandemic has had “an extremely severe impact on the U.K. auto industry,” Graham Hoare, the executive director of business transformation at Ford of Britain told an industry conference on Tuesday. “COVID is clearly devastating.”
Vehicle production in Britain
for export market
By volume, in thousands
Commercial vehicles
Cars
All Vehicles
140
1,600
120
1,200
100
80
800
60
40
400
20
0
0
‘
08
‘
09
‘
10
‘
11
‘
12
‘
13
‘
14
‘
15
‘
16
‘
17
‘
18
‘
19
JOHN SOPINSKI/THE GLOBE AND MAIL,
SOURCE:THE SOCIETY OF MOTOR MANU-
FACTURERS AND TRADERS
Vehicle production in Britain
for export market
By volume, in thousands
Commercial vehicles
Cars
All Vehicles
140
1,600
120
1,200
100
80
800
60
40
400
20
0
0
‘
08
‘
09
‘
10
‘
11
‘
12
‘
13
‘
14
‘
15
‘
16
‘
17
‘
18
‘
19
JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE:THE SOCIETY
OF MOTOR MANUFACTURERS AND TRADERS
Vehicle production in Britain for export market
By volume, in thousands
Commercial vehicles
All Vehicles
Cars
140
1,600
120
1,200
100
80
800
60
40
400
20
0
0
‘
08
‘
09
‘
10
‘
11
‘
12
‘
13
‘
14
‘
15
‘
16
‘
17
‘
18
‘
19
JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE:THE SOCIETY OF MOTOR
MANUFACTURERS AND TRADERS
Sales ground to a halt in April and have shown only modest improvement since then. Vehicle production is also expected to fall by one-third this year to 920,000 units and one in six industry jobs could vanish, according to a report from the Society of Motor Manufacturers and Traders. The SMMT said it doesn’t expect production to return to precrisis levels until 2025.
Fallout from the pandemic has already hit several companies. Luxury car maker Bentley Motors recently announced that it was cutting 1,000 jobs, or one-quarter, of its work force because of the outbreak. McLaren Automotive, Aston Martin and the car dealership chain Lookers have also axed more than 3,000 jobs in total, and several auto parts businesses have collapsed.
COVID-19 isn’t the only challenge confronting the industry. Britain has yet to reach a trade deal with the European Union with only five months to go before the U.K. severs its remaining ties to the EU. Although Britain officially left the bloc last January, the country has remained inside the EU’s single market and customs union as part of a transition period that runs until Dec. 31. If a trade deal is not struck by then, British cars will face hefty import duties in the EU and border controls. That could be devastating given that 81 per cent of all cars made in Britain are exported and more than half of those exports go to the EU. The SMMT said that if a deal wasn’t struck, car production could fall to 850,000 units, the lowest level since 1953, and remain suppressed for years.
Total automotive trade in britain
By trade value (£100 million)
Imports
Exports
£60
50
40
30
20
10
0
2009
2011
2013
2015
2017
2019
JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: THE
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS
Total automotive trade in britain
By trade value (£100 million)
Imports
Exports
£60
50
40
30
20
10
0
2009
2011
2013
2015
2017
2019
JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: THE
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS
Total automotive trade in britain
By trade value (£100 million)
Imports
Exports
£60
50
40
30
20
10
0
2009
2011
2013
2015
2017
2019
JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: THE SOCIETY OF MOTOR
MANUFACTURERS AND TRADERS
A trade deal “is essential for the well-being of the auto industry,” Mr. Hoare said. “Not just the well-being, I think it’s really the survival of the auto industry.” He added manufacturers were already struggling to cope with the pandemic and new emission standards. “Another burden of a lack of a free-trade agreement effectively just makes the activities we’re performing in the U.K. a little bit less viable,” he said. Nissan’s chief operating officer Ashwani Gupta has also indicated that the company’s facility in Sunderland, the largest car plant in Britain, would not be viable without a trade deal.
British Prime Minister Boris Johnson has come under pressure from the industry to provide financial support, especially now that the German and French governments have announced billions of dollars worth of aid packages. The SMMT wants the British government to offer emergency funding and cut the sales tax on cars.
Mr. Johnson has yet to respond to the request, but he has been eager to restart the economy, which has been devastated by the pandemic. Gross domestic product shrank by 20.4 per cent in April and is on track to contract by 25 per cent in the second quarter, according to the Bank of England.
On Tuesday, Mr. Johnson announced a further easing of lockdown measures he imposed in March to stop the spread of the coronavirus, which has killed more than 42,000 people. Restaurants, pubs, museums, hairdressers and cinemas can reopen on July 4, and the two-metre physical-distancing rule has been relaxed to one metre. “Today, we can say that our long national hibernation is beginning to come to an end and life is returning to our shops, streets and homes and a new, but cautious, optimism is palpable,” Mr. Johnson told the House of Commons. Car dealerships and some other shops were allowed to open last week.
Reducing the two-metre rule will be critical in helping car makers restart their plants, said Adrian Hallmark, chief executive officer of Bentley. The company recently resumed operations, but the two-metre rule meant that its plants could only operate at half capacity. Cutting the restriction to one metre will restore full production. “It’s almost business as usual,” he said.
There have been some signs of a recovery. Car sales in China have picked up sharply and sales across Europe have improved in June. However, experts said it wasn’t clear if that trend will continue or if it only reflected orders that had been booked before the pandemic.
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Paul Waldie