The UK Car Industry is on the Verge of Bankruptcy

New car sales in the UK fell by 29.5% to its lowest level since July 1998. Although July 2020 was the first month in which car dealerships across the UK reopened and increased sales, the industry has faced a shortage of semiconductor chips and severe quarantine restrictions this year. As the incidence of coronavirus increased last month, hundreds of thousands were identified by the UK National Health Service (NHS) Covid-19 call tracking app and isolated for ten days.

Falling Car Sales in the UK

According to the Society of Motor Manufacturers and Traders (SMMT), a total of 123,296 vehicles were sold in July. The association has reduced its forecast for annual sales to about 1.82 million units. Mike Hawes, the Chief Executive of SMMT, said: “The next few weeks will see changes to self-isolation policies which will hopefully help those companies across the industry dealing with staff absences, but the semiconductor shortage is likely to remain an issue until at least the rest of the year.”

Covid-19 Hits British Carmakers

The latest figures from the British carmaker show that the level of production in the industry has fallen by 95.4% compared with the same period last year due to the prevalence of Covid-19, the worst performance of the British car industry since 1946.

According to statistics released by the Society of Motor Manufacturers and Traders (SMMT), with the closure and start-up of factories under capacity, only 5,314 vehicles have left the production lines of this industry. Of these, 4,260 units were exported and only 1,554 were sold to domestic customers. The performance was a slight improvement on April, when only 197 units were built, but with factories still closed or running at reduced capacity it marked the worst May since 1946. While some two thirds of the UK’s automotive plants started getting back to business during the month, capacity was severely held back by social distancing requirements and reduced demand, with key global markets only just beginning to reopen and the UK remaining in lockdown.

Car Production in the UK Fell to its Lowest Level in 70 Years

According to government Statistics, in addition to killing more than 131,000 people and infecting more than 6.3 million people, the coronavirus pandemic in the UK has also hit the body of the economy and workers. Many British citizens, expressing concern over continued economic woes, say they have lost their jobs and settled down for about two years due to the pandemic, and because many of them are self-employed. Government grants to employed staff have also not been beneficial.

Many formerly well-off citizens have been forced to spend their life’s savings. Of course, those who received government grants were not able to fully support themselves. According to the Office for National Statistics (ONS), the country’s GDP fell by 9.9%, the biggest loss in 300 years. The British car industry is one of the industries that suffered serious damage during the pandemic; as stated in the latest report, about 920,000 cars were produced in this country last year (2020), which is about 750,000 less than two years ago. At present, there is no way out of the crisis in the automotive industry.

Car factories are constantly talking about repurchasing shares and downsizing their workforce, but there is no clear vision. The latest report from the UK shows that car production in the country slumped to its lowest level in June in almost 70 years.

Losses and Car Factory Closures in the UK

The Society of Motor Manufacturers and Traders (SMMT) has announced that 69,097 fewer vehicles will be produced this year as compared to last year. Annual car production in the UK this year is down to -38.4% from a five-year average. A few days ago, Honda closed its car factory in Swindon after 35 years. Japan had chosen UK as a bridge to the European car market, which is no longer relevant after Brexit. The production capacity of this factory was 150,000 units per year. In addition to Honda, manufacturers and suppliers of parts are also leaving the UK. The closure of the Honda product line is considered a turning point in the British car industry.

Unemployment of 3,000 Britons Following Honda Dealership Closure

Three thousand workers at the production centre of the Japanese car company, Honda, in the city of Swindon in South West England, were laid off with the closure of this centre. Three thousand workers were laid off a week after the production process in this production line was completed.

Honda has been the most important economic source in Swindon for the past 35 years. Jim Brennan, who had not long started at the plant when its closure was announced, said: “I liked working at Honda, and I was halfway through an apprenticeship; so it was just like my world had collapsed”. It was a huge shock for me to hear about the closure of this production line, said another Honda production line employee in Swindon. The past two years have been very difficult and long for the staff who are now looking for new jobs. Some of these people have been hired by a new company who is active in recycling machinery production.

Honda, which makes about one-tenth of the 1.5 million cars produced in the UK, decided to sell the plant two years after it announced it would stop production in 2019. Honda, which is struggling financially in Europe, has said the plant closure is not related to UK leaving the EU, but it needs to focus on areas where car sales are expected to increase. The decision came as electronics companies, Sony and Panasonic, moved their plants from the UK to the EU.

Car production and car sales in the UK have plummeted since the outbreak of Covid-19, putting the industry on the brink of bankruptcy. The lack of a clear outlook for improving business conditions in the coming months has raised concerns among actors in the industry  who are losing their capital and savings. Boris Johnson’s government has so far taken no specific actions to improve the plight of British carmakers, and has added to the industry’s other problems by leaving the EU without a plan.

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