11 Aug 2020
What impact has COVID-19 had on the automotive sector?
Coronavirus. The Rona. The 'current situation'. However you refer to it, you'll undoubtedly be
aware of the ever-present impact of the current global Covid-19 pandemic.
The United Kingdom has been in lockdown since the 23rd March, 2020. During these last 4 months, the UK has seen limitations on non-essential businesses opening, legally enforced social distancing, and even restrictions on how many times you can exercise a day. There's no denying that the last few months have been incredibly stressful for individuals and businesses alike, and it's a great relief to many that we're gradually easing out of lockdown.
We're approaching at least some level of normality with pubs and restaurants reopening, nonessential travel on public transport being allowed, and progressively larger social gatherings being permitted (albeit still at a social distance). In the grand scheme of things, the UK appears to be operating as normally as possible in the current climate. However, in reality, you'd be hard-pressed to find an industry that was performing to its full, pre-pandemic potential.
Of most interest is the automotive industry which, unsurprisingly, has not been immune to the detrimental effects of Coronavirus. The automotive industry and its workforce have felt the devastating impact of prolonged shutdown due to the nationwide lockdown.
The Society of Motor Manufacturers & Traders (SMMT) stated that the UK automotive sector is in need of a financial support package from the Government in order to recover from the economic devastation caused by the pandemic. The SMMT hopes that a financial support package would help to drive production demand and increase cashflow through automotive businesses. The package would hopefully also include limitless access to emergency funding, VAT cuts, and new policies aimed at improving customer confidence in the automotive sector.
With this policy in place, the UK automotive sector may have the resources to recover from the continuing effects of Covid-19. Namely, over 6,000 UK automotive jobs have been cut since June due to lockdown, and a third of employed automotive workers currently remain in furlough. Whilst it's obviously the hope that these workers will be able to return to their jobs, current projections predict that 1 in 6 automotive workers may face redundancy. It's clear that the UK's automotive industry is in need of governmental support and funding to help the sector get back to its feet and keep the UK at the forefront of the global automotive industry.
Despite this aspiration, Covid-19 isn't the only crisis facing the UK's automotive sector. The SMMT has also warned that a hard Brexit from the European Union could exacerbate the automotive industry's troubles. The SMMT chief executive, Mark Hawes, has stated that Brexit negotiations must be prioritised in order to secure a comprehensive Free Trade Agreement (FTA) with the EU to make recovery possible. The SMMT hope for an FTA which maintains tariff and quota-free trade, enabling the UK automotive industry to remain a major player in foreign investment and trade.
With this FTA in place, the UK's automotive industry will hopefully recover and return to its pre-pandemic levels of trading of 1.35 million units by 2025.
The SMMT has also emphasised the danger of a no-deal Brexit, stating that if a no-deal scenario occurs, commercial vehicle production in the UK would likely plummet to below 850,000 by 2025. To put that into perspective, a production rate this low hasn't been seen since 1953. This drastically reduced production rate would likely result in £40 billion cut in revenue, on top of the whopping £33.5 billion already lost due to the pandemic.
You'd be forgiven for feeling anything but confident when it comes to the future of the UK's automotive sector. Whilst the future may seem bleak, we should be hopeful that the proposed policies and FTA will come to fruition. If they do, the policies will help to restart the market, increase production and manufacturing, and avoid currently furloughed workers from facing redundancy.
As is the way with pretty much everything in these unprecedented times, we'll just have to wait and see.
However, Mane remains confident. The quality of people working in the industry is high. They are passionate about it and given the opportunity, will make the difference to the successful recovery of the sector.