27 October 2022
Richard Bartlett-Rawlings, partner and automotive manufacturing specialist at RSM UK, comments: ‘UK car production in September 2022 was down by 6%, following four consecutive months of growth. Despite showing positive signs of recovery in the four months previously, manufacturers are operating in a subdued production environment driven by energy price increases and an erosion of profit margins. This growth is therefore not likely to return, unless the UK government implements long-term support measures to facilitate future growth and ensure jobs.
‘While the government’s decision to keep the annual investment allowance at £1m will be seen as one small crumb of comfort by the industry, many will be concerned at the potential cliff edge on the horizon as the energy price guarantee comes to an end in April 2023. With the corporation tax rate set to increase to 25%, this will be a further disincentive for many businesses to invest or maintain production in the UK. For manufacturers and other energy intensive sectors, a practical solution to rising energy costs and labour issues is needed. While investing in people can encourage production, investing in technology provides a long-term productivity solution; eliminating recruitment anxieties, incentivising energy efficient behaviours and supporting the shift towards an electric vehicle market. But, this market is already looking vulnerable following BMW’s announcement to axe on electric Mini production in the UK.’
He added: ‘Looking ahead, automotive manufacturers are part of a capital-intensive industry and must invest continuously to innovate and grow. Our latest report with Make UK highlighted how only 9% of manufacturers factor in government support when thinking about investment, with 21% saying that paying higher corporation tax would have a material impact and demotivate investment, which, following the recent economic chaos, needs urgent government attention. With emergency support measures coming to an end next April, automotive manufacturers will be eagerly awaiting for clarity from Jeremy Hunt’s update on 17 November.’