Monday 4 May 2020 10:01 am

Exclusive: Car industry calls for coronavirus stimulus to jumpstart recovery

The UK car industry has called for a government stimulus package and extended furlough support to help it recover from the coronavirus crisis.

Speaking to City A.M., Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said the government will need to jumpstart the sector in order to get demand going again.

Read more: SMMT: UK car production falls 38 per cent, 10 times worse than Brexit drops

“There will be some demand but we really want to see is a quick stimulus to demand to get people to consider buying cars,” Hawes said.

“Of course people’s livelihoods have been seriously threatened by what’s going on, but we need to get a quick boost in the market to get the wheels of manufacturing turning.”

Coronavirus has devastated the car industry, with SMMT data this week showing vehicle production plummeted 37.6 per cent in March.

That is 10 times the size of the decline the car industry experienced at the height of Brexit uncertainty.

Listen to our daily City View podcast as we chart the economic fallout and business impact of the coronavirus pandemic.

Car manufacturers need furlough scheme extended

Hawes also said that the job retention scheme would have to be extended to account for a gradual return to work of car industry employees.

Under current rules, employees must be furloughed for a minimum of three weeks. But Hawes called for more “flexibility” to support workers on a week-by-week basis, or to support those working shorter hours.

According to the SMMT’s survey, 60.6 per cent of the full-time car industry workforce is being paid via the job retention scheme.

Sign up to City A.M.’s Midday Update newsletter, delivered to your inbox every lunchtime

He warned the “real squeeze” on firm’s finances could come when they go back to work.

“When you go back, there’s no furlough scheme, you’ve got to pay wages, you’ve got to purchase materials and components, and so forth,” Hawes told City A.M.

“At the same time you’re not getting any revenue because the stuff that you’re making you got to sell as well. 

“So there’s a squeeze coming then, when we go back. That’s why we need to make sure that these schemes work as quickly as possible now to make sure there’s access to cash when firms need it.”

Only 17 per cent of SMMT members who have applied have received cash through the Coronavirus Business Interruption Loans Scheme (CBILS).

Read more: Coronavirus business loans: Liberal Democrats leader calls for ‘loan marketplace’

“The government is spending billions supporting the economy. We don’t want that to be a lost investment.”

Mike Hawes, SMMT chief executive

Country will ‘lose billions’ without Brexit trade deal

Read more: Brexit trade talks: Will the deadline be extended over coronavirus?

However, Hawes said even if the car industry does secure government stimulus, that will be wasted if it cannot secure a Brexit free trade deal this year.

Currently the UK is in a transition period until the end of 2020, after which it will fall back on World Trade Organization terms without a free trade deal with the EU. That could lead to large rises in tariffs for exporters, such as car manufacturers.

“The bottom line is that we need a deal, and a good deal, to maintain the free flow of goods and our competitiveness,” Hawes said.

“The thought of just getting manufacturing ramped up after coronavirus and then facing a no-deal Brexit with no free trade agreement, and hence, the imposition of tariffs at 10 per cent, just doesn’t bear thinking about.

“The government is spending billions supporting the economy. We don’t want that to be a lost investment.”

Number 10 has thus far been adamant that it will be able to strike a Brexit trade deal with the EU by the time the Brexit transition period ends on 31 December.

However, after the first two rounds of talks, major flashpoints have emerged around fisheries and the so-called level playing field.

Read more: Brexit trade deal ‘won’t happen’ unless EU changes fisheries stance by June

This means a set of common rules and standards that prevent businesses in one country undercutting their rivals and gaining a competitive advantage over those operating in other countries.

A source close to the negotiating team told City A.M. that unless the EU shifted its position on the issues it was unlikely a deal would be done before the deadline.

City A.M. has contacted the Treasury for comment.