Lack of coherent industrial strategy leaves manufacturers vulnerable to headwinds

31 August 2023

Richard Bartlett-Rawlings, partner and automotive manufacturing specialist at RSM UK, comments: ‘In July, UK car production saw an uplift of 31.6% (76,451 units), following double digit growth (14.2%) for the first seven months of the year. This steady upward trend demonstrates a slow unwinding of supply chain issues that have been hampering manufacturers over the past few years. 

‘However, despite positivity, significant headwinds remain for car production in the UK and manufacturers will need to balance output levels against the cost-of-living crisis, inflationary pressures, post-Brexit changes to cross border trade rules and a pivotal shift towards low carbon motoring.’

‘The surge in interest rates could deter consumers from purchasing a new car as the uncertainty around future annual percentage rates (APR) will offset demand, as households prioritise basic needs over a change of vehicle. In addition, looming rules of origin legislation will make it more difficult to export UK-made vehicles to the EU. If calls from UK and European manufacturers to delay the January 2024 implementation date are not acted on, then the red tape burden could derail progress and impact growth in the sector.’

‘The recent changes to the ULEZ scheme in London are an indication as to how local regulations could drive the take up of electric and low emission cars, which continue to make up the highest proportion of new car registrations. As the changes are implemented on a local level, it does demonstrate, yet again, a lack of a coherent strategy within the UK to support industry; improve infrastructure; and drive forward net zero targets.’

He added: ‘Due to poor infrastructure and alternative transport options, many motorists are dependent on their cars living outside of urban centres. As such the required behavioural change to reduce traffic will be limited, as most journeys made are necessary and cannot be transferred to other transport types. What is clear is that this car dependency will apply a stealth motoring tax on drivers, with little alternative to pay.’

‘In the longer term, as more move to electric and low emission vehicles, it is hard to see how government plans to fill the gap left from reduction in Vehicle Excise Duty, and whether this will be locally or nationally driven? Like businesses, consumers need to understand the longer term strategy which will impact large investments, there have been too many ineffective policy decisions that ordinary people are suffering the effects of now.’