The UK’s struggling car industry could add a massive £50 billion to the economy over the next decade if a new recovery plan gets the green light. The plan, backed by government investment under Labour’s new Industrial Strategy, was revealed at the Society of Motor Manufacturers and Traders' (SMMT) International Automotive Summit.
At the heart of it is the ‘Competitive Edge’ report, which lays out what needs to change for the UK to become one of the top 15 countries for car manufacturing. Think of it as a 10-point comeback plan – with the biggest priorities being:
- Cutting the insane energy costs (which are killing profits and making EV production expensive)
- Boosting demand for electric cars
- Attracting big investment from overseas
The SMMT is also calling for stronger government support. One major ask? Cut VAT on new electric cars and public charging, making EVs more affordable for buyers. But when asked if that’s likely to happen soon, SMMT boss Mike Hawes admitted it’s a bit of a long shot, calling it "rather optimistic”.
Why? Because demand for EVs in the UK is still lagging behind what’s required by law. Hawes pointed to Europe, where incentives have proven to boost sales, and suggested we might not see meaningful changes until the Autumn Budget.
That said, Labour has already announced some helpful changes. A big one: lowering energy costs. Right now, car makers pay £200 million a year in energy taxes, and UK electricity costs are double the EU average. The government plans to drop some green levies and speed up how quickly new factories can plug into the power grid – potentially cutting manufacturing costs by up to 20%.
So far, the SMMT seems broadly supportive of Labour’s approach. They’ve praised the government for quickly signing new trade deals, but say there’s more to be done. For example, battery production gets tax relief, but the SMMT wants all car manufacturing to benefit, to keep things fair with other countries.
On that note, attracting foreign investment is crucial too. The SMMT says the UK needs better trade ties (especially with the EU), stronger supply chains, and to remain open to new global car makers setting up shop here.
Another key move is changing how apprenticeship funding works – allowing up to half of it to go toward retraining staff, which is a huge win for future skills in the sector.
If all these ideas are put into action, the SMMT believes the UK car industry could explode in growth, with over 2 million new cars sold per year and £50 billion added to the economy by 2035.
As Hawes put it: “Do [all of] this, and the automotive sector will repay that investment in full, delivering the economic, social and environmental benefits the UK deserves.”
