The UK car industry is at a crunch point

Theo LeggettInternational Enterprise CorrespondentBBCA gleaming white Vivaro van drove slowly off the manufacturing line at Vauxhall’s manufacturing facility in Luton, beeping its horn, whereas employees cheered and crowded round taking images. Behind it, the manufacturing line got here to a halt – ceaselessly.The Luton plant started constructing vehicles in 1905. It saved working for the subsequent 120 years, taking day trip to construct tanks and plane engines throughout World Conflict Two. However on 28 March, that got here to an finish. The manufacturing facility shut down, a sufferer of cutbacks at Vauxhall’s mum or dad firm, Stellantis.Justin Nicholls, a manufacturing shift supervisor, was one of many 1,100 employees there – he had labored on the plant for 38 years. “It was devastating, as a result of it got here out of the blue”, he says. “It was an entire shock.”It adopted the closure of Honda’s automotive manufacturing facility in Swindon in 2021, and Ford’s engine plant in Bridgend the yr earlier than. Collectively, they’ve come to symbolise an obvious long-term decline within the UK motor business.Day by day Herald/Mirrorpix through Getty ImagesVauxhall’s Luton plant has been constructing vehicles since 1905 till manufacturing stopped earlier this yearIn all, simply 417,000 new vehicles and vans have been constructed within the UK within the first six months of 2025, in line with the Society of Motor Producers and Merchants (SMMT) – the bottom for that interval since 1953.Output for the yr is anticipated to be round 755,000 autos — decrease even than throughout the Covid-19 pandemic.The SMMT’s chief government, Mike Hawes, described the state of affairs as “miserable”.The sector contributes some £22bn a yr to the financial system, in line with the SMMT, and as not too long ago as 2023 automotive manufacturing employed some 198,000 individuals within the UK.Andy Palmer, who was beforehand chief government of Aston Martin, believes the ecosystem – and the sum it contributes to the financial system – can solely survive if the business maintains its present scale.”There’s a vital mass of employment,” he explains. “When you go beneath that, you see all of it crumble. “You do not have the college programs, you do not have individuals coming throughout from the aero business, you do not have the pipeline of expert engineers that permit the luxurious corporations to exist, and so forth.”And the knock-on impact of this might have an effect on areas already going through challenges. “If we take into consideration elements of the UK which have automotive crops, they’re usually deprived areas,” says David Bailey, professor of enterprise economics at Birmingham Enterprise College. “Shedding these good high quality jobs would have a big effect by way of wages for employees and likewise a knock-on impact by way of the multiplier on the native financial system.”He’s involved about what has already been misplaced. “I might argue that truly we have let an excessive amount of of this go already. I feel as soon as it is gone, it is actually gone.”The query is, can the business recuperate – or is it too late?A hid deeper problemThe UK automotive business is sprawling. Alongside giant factories run by the likes of JLR, Nissan, BMW MINI and Toyota, there’s a community of suppliers and high-tech specialist engineering corporations, together with various smaller, luxurious automotive corporations, equivalent to Aston Martin, Bentley, Rolls-Royce and McLaren, plus bus and truck producers.In 2016, the UK produced 1.82m new autos – greater than at any level since 1999. But even at that time, storm clouds have been already gathering. And the business has suffered additional over the previous decade.Manufacturing unit closures have had an influence, however different components have been at play as properly, together with uncertainty over US commerce coverage, which has hit exports to a significant market.Then there was the function of Brexit.Adam Vaughan/EPA/Bloomberg through Getty ImagesOne of the UK’s main producers, Jaguar Land Rover (JLR), has intentionally moved upmarket lately, that means it now sells fewer vehicles – additionally contributing to the decrease determine of UK automotive manufacturing”Clearly, Brexit had a big effect”, says Santiago Arieu, senior autos analysis analyst at Fitch Options. “It created uncertainty and complex future visibility.”Consequently, consultants say new funding suffered – simply because the business was gearing up for the large adjustments being introduced by the transition to electrical autos.The settlement with the EU to ensure continued tariff-free commerce soothed the business’s considerations when it got here. However by then, there was one other problem to take care of.The pandemic induced havoc throughout the business globally. In 2020, output dropped by practically a 3rd, hitting ranges not seen because the mid-Eighties. It additionally threw finely tuned international provide chains out of kilter and created shortages of significant elements. Though demand for brand new vehicles was spiking, producers merely could not construct them rapidly sufficient.Reuters/ Chris Radburn’Shedding these good high quality jobs would have a big effect by way of wages for employees and likewise a knock-on impact by way of the multiplier on the native financial system,’ says one expertAll of this induced short-term disruption – however the influence hid a deeper, structural downside for the UK business. Fairly merely, it has develop into an costly place to construct vehicles.A part of that is to do with labour prices. Though decrease than in another Western European nations, notably Germany, they’re round twice the extent seen in Central European nations equivalent to Poland, Slovakia and Hungary.Then, there are power prices. British producers at the moment pay a few of the highest electrical energy costs on this planet.”Automobile makers working within the UK even have factories in Europe and elsewhere, so it is not onerous for them to discover a alternative for his or her UK manufacturing,” explains Felipe Munoz of JATO Dynamics.The previous chief government of Stellantis, Carlos Tavares, has beforehand criticised the price of manufacturing vehicles within the UK and northern Europe – whereas holding up the corporate’s Kenitra manufacturing facility in Morocco as a mannequin of effectivity.The investments beginning to bear fruitWhen the Luton plant shut final yr, it was estimated by Luton Borough Council that the transfer might price the regional financial system £300m per yr.A small a part of the workforce relocated to Stellantis’ different UK plant, at Ellesmere Port in Cheshire, the place the corporate is within the means of investing £50m in increasing manufacturing.Of those that haven’t relocated, some retired. “[Others] are taking fairly a discount in pay”, says Gary Reay, who was a consultant of the Unite union on the plant.The manufacturing facility web site has been purchased by a property agency, Goodman – it plans to create greater than 1,700 jobs at a brand new industrial park.Mr Reay is unimpressed. “The issue for the workforce… is that is years down the street… It is too distant for many of our employees.”Toby Melville/PA WireJust 417,000 new vehicles and vans have been constructed within the UK within the first six months of 2025Yet there’s hope in some quarters: it’s doable this yr’s output might turn into a low level, as latest investments begin to bear fruit.In 2024, for instance, Nissan stopped constructing its ageing electrical Leaf mannequin at its Sunderland plant — having beforehand been constructing about 30,000 a yr. However it is because of start making a brand new model this yr and can begin constructing an electrical model of the Juke in 2026.Nissan can be one of many producers set to profit from investments in gigafactories. Nissan’s battery associate AESC is constructing one in Sunderland, which can be capable to make energy packs for 100,000 electrical autos a yr. JLR’s mum or dad firm, Tata, in the meantime, is investing in its personal plant in Somerset, via its subsidiary Agratas.The federal government says it desires to extend the variety of vehicles and business autos constructed yearly to 1.3m by 2035. The SMMT believes 803,000 autos will go away the manufacturing strains subsequent yr however bringing that as much as 1.3m seems like a really tall order, in line with Mike Hawes. Greg McDonald, the CEO of Goodfish Group, can be circumspect. “I do not suppose many individuals suppose there’s going to be a resurgence,” he says.His enterprise makes injection moulded elements for carmakers and has 4 websites throughout the UK. It additionally has a base in Slovakia.”Suppliers like us are used to being continually bid at for worth and value reductions, and there is a restrict to how a lot you are able to do.”Diversifying or Chinese language funding?A method of mitigating that is for companies to diversify – one thing extra viable for smaller companies within the sector.Burnett’s Manufacturing, based mostly in Northampton, is certainly one of many automotive suppliers clustered across the Midlands Hall. A producer of specialist rubber and plastic elements, it depends on the motor business for about 40% of its enterprise. However it additionally offers elements for shipbuilders and oil and gasoline corporations.In accordance with technical gross sales supervisor, Wealthy Dixon, smaller corporations are extra versatile and in a position to adapt to altering circumstances.”I feel we’re fortunate in some methods, as a result of 60% of our enterprise is diversified throughout many various industries,” he says. “The very last thing you wish to be is 100% automotive. “The issue is that larger up the meals chain, there are some large corporations which are very reliant on automotive.”Yang Dong/VCG through Getty ImagesChinese giants equivalent to Dongfeng wish to broaden their worldwide operationsSome argue there’s one other manner ahead. Chinese language giants equivalent to Chery Group and Dongfeng wish to broaden their worldwide operations – and see the transition to electrical autos as a chance to do that within the European market.”When you embrace the transfer to electrical autos and develop into a number one gentle in attracting Chinese language funding, then you are able to do what China did to us previously, which is actually use collaboration to rebuild your business,” argues Andy Palmer, who now owns and invests in clear power corporations. This could, he provides, require vital authorities motion, together with negotiations with Beijing. The query is, is it already too late?One senior government, who has spent a long time within the European business, would not imagine the UK will develop into a significant participant within the EV market. “I do not suppose governments have spent the mandatory time and power getting ready for the shift to EVs.Chris J. Ratcliffe/Bloomberg through Getty ImagesThe UK is dwelling to various luxurious automotive corporations, equivalent to Bentley”I do not see a lot alternative for brand new gamers to return in,” says the manager, who requested to not be named. “It is all about encouraging those that are already right here to remain, and if doable to broaden.”An alternative choice, Felipe Munoz believes, is that the UK might double down on its place as a key participant available in the market for high-end vehicles.This might imply turning into a hub for the manufacturing of luxurious Chinese language designs, whereas permitting cheaper mass-market fashions to be constructed elsewhere.”I feel individuals globally are prepared to pay a premium for a British-made luxurious automotive,” provides Prof Bailey.The Nice British ‘mind drain’There’s a lot at stake right here, and it goes past the influence on native communities when factories are misplaced or suppliers cease buying and selling.”I additionally fear about it by way of impacts on productiveness, exports, and analysis and growth,” says Prof Bailey. “A part of the explanation why we have got poor productiveness efficiency within the UK is that we’ve got allowed an excessive amount of manufacturing to go.”That is the place we differ from our European counterparts, argues Steve Fowler, EV editor for The Unbiased. “We have a tendency to not assist our homegrown industries in the identical manner that different nations do”.What’s more durable to evaluate is the lack of nationwide status. When MG Rover collapsed in 2005, there was an outcry, not simply because hundreds misplaced their jobs, but additionally as a result of it was perceived as a logo of the broader decline of British business.This turned much more marked when MG – a basic British model – turned a boutique badge for vehicles made in China.Bloomberg through Getty Photos‘The UK is a good place to make vehicles, we’ve got unimaginable experience’Lots of the upmarket manufacturers that also construct vehicles on this nation intentionally commerce on their British id. Consider Rolls Royce, Bentley, McLaren and Lotus. Even BMW-Mini, a mass market producer, is greater than prepared to wave the Union Jack – or relatively, have it painted on door mirrors and roofs.If these vehicles have been now not in-built Britain, it’d properly be perceived as a nationwide humiliation. And for some, the decline of the auto business would virtually definitely be perceived as a symptom of a a lot wider loss.”I do suppose persons are [becoming] way more conscious of the place issues are made,” argues Mr Fowler. “This is not essentially a nationalistic factor, however extra a sustainability factor. Would you like your automotive to have travelled midway world wide to succeed in you?”In the end, he says, there’s already “a little bit of a mind drain of expertise, as a result of the alternatives, bluntly, aren’t right here within the UK.”[But] the UK is a good place to make vehicles, we’ve got unimaginable experience, we’ve got a few of the finest engineers and individuals who can construct them higher than anyone else.”High picture credit score: Chris Ratcliffe/Bloomberg through Getty ImagesBBC InDepth is the house on the web site and app for the most effective evaluation, with recent views that problem assumptions and deep reporting on the most important problems with the day. And we showcase thought-provoking content material from throughout BBC Sounds and iPlayer too. You may ship us your suggestions on the InDepth part by clicking on the button beneath.