RIP: the UK motor industry

The British motor manufacturing industry is dying. Its death throes are accompanied by pleas to save its life by throwing financial lifelines from the taxpayer. Enough of these will postpone the end, but will not save it, and the case for throwing the lifelines is politically powerful, but economically foolish.

It is not many years since making motor cars was a triumph of British industrial revival. Starting with the arrival of Nissan, the Sunderland workforce proved that that bad old days of poor cars built by recalcitrant workers were over. Toyota and Honda followed, while the new spirit infected the employees at established manufacturers like Ford and Vauxhall.

In 2017, UK plants produced over 1.7m vehicles. In the latest 12-month period, the total was under 780,000, the lowest since the 1950s. In five years, the output has fallen by 55 per cent. The easing of supply problems has stopped the rot, but done little to raise output since lockdown ended.

In the last five years, Honda has closed, while Stelantis’ Vauxhall plant at Ellesmere Port, where 12,000 people once produced 250,000 cars a year, will need only 1,000 employees to make electric vans. BMW’s Oxford plant will stop making minis, and after 2030 will only be making cars it cannot sell in Britain. Ford’s Halewood site will be making parts not cars. Even Dunton, its highly-regarded design centre, will suffer redundancies.

Toyota is havering, so Nissan may soon be the only volume carmaker left in the UK. There is some consolation at the expensive end of the market, with Rolls-Royce, Bentley and Jaguar Land Rover all reporting strong sales. Aston Martins may be in demand, but each car is being sold at a loss almost as eye-watering as the ticket price. Despite shifting 6,412 vehicles, Aston lost £495m last year.

The reasons for this industrial disaster can be summarised in one word: energy. (Or perhaps two – Brexit, given Rishi Sunak’s demonstration that charm beats belligerence in negotiation). All the world knows that the industry is undergoing a revolution, a process that destroys the old order, creates chaos and misery, and eats its children.

Boris Johnson did not start this revolution, but so desperate was he to be seen to be leading the charge that he imposed a 2030 deadline for sales of non-electric cars that essentially marked the end of a thriving industry. That deadline is now only seven years away, almost the blink of an eye in automobile years. The German government, by contrast, is pushing back at the European Union proposal for a 2035 deadline.

The UK industry is fighting back, using the weapon it knows best, trying to strong-arm the UK government into writing large cheques. The demise of Britishvolt has at least saved the taxpayer from pouring £100m into a doomed enterprise. We wait to see how much it will cost us to support the Aussie buyer, Recharge, but the omens are not good, and its factory may not even make car batteries.

The need to make these is driving a kind of arms race of subsidies between the US and the EU, on a scale that the UK cannot match. Economically, there is no case for trying to do so. A politically expedient attempt would destroy wealth and make the task of achieving economic growth in the UK even harder.

Meanwhile, the suppliers of renewable energy are pleading the equivalent of the casino punter: “System working well, send more money”. The costs of offshore wind are not falling, as the best sites are filled up, and the major players are pressing for still more tax breaks in next month’s Budget.

Which brings us back to energy. President Putin has done his bit, but it is thanks to a disfunctional market and the cost of renewables which are hidden in every bill that British energy prices are among the highest in the world. Making motorcars will always be an energy-intensive business, however they are made, so construction will gravitate to where the costs are lowest. In the future, whatever bungs go to UK manufacturers or renewable generators, that will mean China. It plans to flood Europe’s roads with affordable cars – assembled using power from the coal-fired stations it is building every week.

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