Despite reporting the fourth consecutive month of growth, the UK’s automotive recovery is threatened by increasing costs.
Figures released today by the Society of Motor Manufacturers and Traders (SMMT) revealed that 49,901 units were built in August – 34 per cent up year-on-year but 45.9 per cent down on pre-pandemic levels.
Overall output remains 13.3 per cent down on the first eight months of 2021 at 511,106 units.
“While another month of rising UK car production is good news, and testament to sectoral efforts to overcome supply chain shortages, it overshadows what is an extremely tough and uncertain environment for manufacturers.
“Volumes are down dramatically and firms are having to take drastic steps to safeguard their businesses in the face of myriad challenges,” said SMMT chief executive Mike Hawes.
Soaring energy costs are now the single biggest concern for UK automotive makers, as 70 per cent of SMMT members are worried about the impact on operations.
According to experts, inflation and a weakened pound could threaten businesses even further.
“In the new vehicle market, the weakness of the pound will step up pressure on importers and manufacturers reliant on stock and parts from overseas,” said Lisa Watson from Close Brothers Motor Finance while KPMG’s UK head of automotive Richard Peberdy said “passing costs to the consumer is becoming increasingly challenging.”
Manufacturers and analysts alike believe that the government’s six-month energy price cap for businesses will provide some respite, but long-term action is needed.
“Reform of business rates, enhanced capital allowances, an affordable and secure supply of low carbon energy, and investment in new skills can enable this critical sector to deliver the economic growth, productivity improvements, balance of trade benefits and job security the UK sorely needs,” Hawes added.