No new-car sales incentives for UK as jobs become main focus

10 July 2020

10 July 2020

The UK Government has ruled out any incentive schemes for new-car sales while announcing a package of measures that may benefit automotive businesses in other ways.

Many other European countries have stepped in to help their automotive industries with grants for new-car registrations, with some also providing incentives for used-car sales, in the wake of the coronavirus (COVID-19) pandemic. While many governments are focusing these plans on battery-electric vehicle (BEV) models, others are offering discounts, albeit smaller ones, on new petrol and diesel vehicles.

However, the UK will not be going down this path. Rather than focus on boosting vehicle sales, which slumped by 35% in June, it will provide help to employers who decide to keep workers after the government’s furlough scheme ends.

Small business benefits

A ‘job-retention bonus’ of £1,000 (€1,116) will be paid to employers for every furloughed employee retained to the end of 2021, as long as they earn over £520 a month. As carmakers closed factories and staff were furloughed, this will provide a small boost for manufacturers. However, smaller automotive companies, including parts suppliers, motor factors and workshops, will benefit more from this plan, as these businesses will have taken more of a financial hit during the lockdown.

There will also be support for young workers, with a £1,000 grant per trainee for employers who take on those aged 16-24 in England, while hiring an apprentice under 25 will see a £2,000 grant paid per head, reduced to £1,500 for over 25s.

The news was announced as part of a ‘summer statement’ presented by UK chancellor Rishi Sunak. ‘Our plan has a clear goal: to protect, support and create jobs,’ he commented. ‘It will give businesses the confidence to retain and hire. To create jobs in every part of our country. To give young people a better start. To give people everywhere the opportunity of a fresh start.’

Mixed reaction

The lack of direct automotive support was noted by the Society of Motor Manufacturers and Traders (SMMT). ‘Today’s announcements to safeguard jobs and encourage consumer spending in some parts of the economy are welcome, but it’s bitterly disappointing the chancellor has stopped short of supporting the restart of one of the UK’s most important employers and a driver of growth,’ said chief executive Mike Hawes.

‘The automotive sector has been particularly hard hit, with thousands of job losses already announced and many more at risk. Of Europe’s five biggest economies, Britain now stands alone in failing to provide any dedicated support for its automotive industry, a situation that will only deter future investment.’

The Institute of the Motor Industry (IMI) however, was pleased to see the attention on jobs and, in particular, apprenticeships, as it campaigns to increase numbers of trainees in the automotive sector.

‘We are delighted to see the injection of funds – albeit only for the short-term – for the creation of new apprenticeships,’ said CEO Steve Nash. ‘Recent IMI research had suggested that 71% of automotive businesses were cutting their apprentice new starts in 2020, with a drop of as much of 65% this year. So we hope this will encourage a rethink in that area. The introduction of incentives for trainees – with vital support from careers advisors – should also be good news for the training centres, which have predicted a fall of on average 38% in their intake for 2020 and 2021.

‘We also know that a large proportion of the current apprentice cohort in our sector has been languishing at home on furlough, so we are delighted that employers will be incentivised to bring furloughed employees back to work – rather than lay them off.’

Different track

The UK’s stance is different from many other markets in Europe and comes at a time when the country’s automotive industry is already struggling as Brexit negotiations continue. Investment in the sector has dropped since the 2016 EU referendum, while the idea of tariffs being introduced on imports and exports is causing concern among manufacturers.

With Autovista Group forecasting a drop of 30% in new-car registrations for 2020, any sales help would have been highly appreciated by the automotive industry in the most challenged of European markets. The revelation that France has already managed to turn its registrations around following the COVID-19 induced lockdowns, recording a 1.2% year-on-year increase in June as a comprehensive incentive package kicked in, will only stoke concerns in the UK’s automotive sector.