IMI analysis predicts 7,000 automotive redundancies by September

The Institute of the Motor Industry’s (IMI) analysis of the latest ONS data predicts there will be approximately 7,000 redundancies by the end of August.

The Government’s coronavirus job retention scheme (CJRS) has assisted in keeping redundancies at a low rate so far - about 1% of the sector workforce – with 120,000 still furloughed.

Just 5% of businesses in the automotive sector are intending to permanently close business sites in the next three months, but 76% of these stated that this would lead to permanent redundancies.

The IMI looked at data from ONS for the period July 29 to August 9 this year, which also showed that by early August, 97.5% of automotive businesses were trading, with a further 1.5% planning to reopen by the middle of the month.

The ONS data polled 4,438 businesses from the wholesale and retail trade; repair of motor vehicles and motorcycles industries.

Of those 3,206 had a workforce under 250 employees and the remaining 1,232 polled were businesses larger than that.

The automotive sector is also performing well compared to other sectors, with the highest percentage of businesses (20%) reporting an increase in turnover in the last week of July and first week of August

Of the automotive businesses from the data, 36% said their cash reserves would last more than six months; 6% said they had no cash reserves or less than a month, which would potentially put 5,700 businesses at risk.

Almost three quarters of businesses (73%) said their operating costs have increased; 9% said costs had also significantly increased.

However, demonstrating resilience and flexibility, 13% of automotive businesses stated that they have diversified to provide new goods or services as a result of Covid-19.

Steve Nash, IMI chief executive, said: “There is a real mixed story from the latest ONS data – showing on the one hand the inventiveness and flexibility of the sector in the face of severe challenges.

“More than one in 10 automotive employers have diversified their range of services to ensure they can sustain their business long-term.

“The other big issue is, of course, the impending end of the furlough scheme – albeit there is much lobbying currently for this to be extended.

“The latest data shows there is no hiding from the fact that the hangover of lockdown – and the continued restrictions on movement – is hard to overcome for many.

“We have already seen several automotive employers announce significant redundancies and there is potential for even bigger numbers in the next month or so.”

Nash said the September plate change will be a key point in showing just how hard the sector has been hit by Covid-19 – and how quickly it can recover.

He said: “We would call on the Chancellor to move quickly now – rather than wait for his Autumn budget – to make a cut in VAT on car sales.

“Just as his ‘meal deal’ has done for the hospitality sector, it could make a big difference in encouraging consumers to get back into the showrooms – virtual or physical.”