The UK automotive sector needs a renewed focus on investment, not government handouts – said industry executive Mike Hawes.
According to Hawes – chief executive of the Society of Motor Manufacturers and Traders (SMMT) – car makers need a “competitive framework that is as competitive as many other countries with whom we trade and with whom we compete for investment.”
“Improved R&D tax credit, investments in skills, grants for capital expenditure, that’s where the [government’s] focus should be,” he told City A.M. “For most manufacturers, corporation tax is an irrelevance.
“It isn’t a driver of investment, never has been and never will be.”
Chancellor Kwasi Kwarteng recently scrapped the six percentage point hike in corporation tax.
Announced on 23 September as part of Kwarteng’s mini-budget, the move aims at boosting the country’s growth and productivity by ensuring the UK has the lowest levels amidst G20 countries.
But first the government needs to tackle energy prices, which is considered the main challenge to the industry’s post-Covid recovery.
Recent SMMT data showed that 70 per cent of members are worried about the impact of energy prices on operations.
Prime Minister Liz Truss has introduced a £2,500 two-year energy cap for households, while businesses received tax relieves for six months.
“The government’s package of measures to support businesses is really welcome,” Hawes added.
“What we need is a long-term set of measures that reduce the cost of energy not just for businesses but for households as well.”
Inflation, on the other hand, has yet to impact output as pent-up demand will insulate the industry for the time being.
“We’ve got such large order banks that’s almost insulating the industry for a period of time from the worst immediate effects of that [inflation and the pound’s depreciation],” Hawes said.
Due to the last two years being plagued by supply chain issues, the waiting time for a new car is between six months and a year.
Semiconductor shortages, Hawes said, will last “through this year and next and potentially into 2024.”
“It’s that sort of 18 month horizon that we’re looking at to try and resolve some of these issues,” he said.