Automotive sector demonstrating resilience

Analysis of new ONS data by @The_IMI reveals June opening of showrooms provided vital boost, although hard decisions still being made

The Institute of the Motor Industry (IMI), which represents the interests of those working in the automotive sector – which in 2019 comprised 790,000 jobs in 98,000 establishments covering 196 occupations – has analysed the latest ONS data on UK business performance. 

Key data:

• 95% of automotive businesses are now trading with a further 2.5% planning to re-open by mid-July
• The automotive sector had the highest percentage of businesses reporting an increase in turnover by early July – 23% which is the approximate equivalent of 20,000 businesses
• Just over a third (34%) of automotive businesses said their cash reserves would last more than 6 months
• But 6.4% of automotive business said that they either had no cash reserves or less than a month – an increase of 0.3% since last reporting potentially putting 6,000 businesses at risk
• Approximately 81,000 jobs returned to work from furlough, but there are still 177,000 jobs on furlough
• 30,500 jobs returned to their usual working location, with a further 31,000 planned to return by mid July

Steve Nash, CEO of the IMI comments:  “The resilience of our sector is admirable – many businesses stayed open during lockdown to provide motorists with vital support to ensure their vehicles were roadworthy. And once the government allowed showrooms to open up at the beginning of June, automotive businesses moved quickly to ensure they could bring their staff back to work – and support their customers safely. Now, with a month’s trading under their belts employers are starting to plan ahead and work out strategies for recouping some of the lost income from the lockdown period. And we are sure they will be encouraged by the Prime Minister’s recent call for businesses to bring workers back to offices which, in turn, is likely to increase vehicle usage.

“Our analysis does however, also show that some hard decisions are now being made. Automotive businesses are, on average, advertising external vacancies at much lower levels than many other industries. And although still relatively small numbers, redundancies are now being reported in the sector.

“Clearly the Chancellor wanted to stave off job losses with his job creation plans announced earlier this month. But the lack of any direct support for the sector through a VAT reduction or a scrappage scheme was disappointing. A VAT cut on car sales would have made a big difference in encouraging consumers to get back into the showrooms – virtual or physical – and that would have in turn helped with the government’s ‘road to zero’ objectives, as would a scrappage scheme.”