Report on Government support for auto industry

17 July 2009

The Business and Enterprise Committee today expresses serious concern about Government support for the automotive sector, warning that "without a clear government strategy, and sufficient support, valuable skills and capacity will be lost to countries which more clearly demonstrate their readiness to support the industry."

In its ninth report of the 2008-9 Session the Committee says that the long term future of the automotive industry "depends on the Government taking the right actions now to ensure that the industry is sustained through this period of crisis."

It says "the Government must not only support individual companies, but be seen to support the industry as a whole, and act with more urgency and consistency than it has done so far."

The Committee highlights a series of shortcomings in the Automotive Assistance Programme (AAP)

  • The emphasis on low carbon technology is appropriate. This approach is a key part of the package. However, it is not all that is required; other innovative technologies, such as those relating to safety, should also be eligible for support.
  • The loan guarantee threshold for the Automotive Assistance Programme should be lowered urgently to £1 million.
  • Help needs to be swift, and it needs to deal with current problems. The AAP should be flexible enough to support industry in other ways than simply through guaranteeing loans to support investment in low carbon technology.
  • Jaguar Land Rover has already secured funding for its future technology investments; all that is under discussion is the Government’s guarantee. As at 7 July 2009 there has been no indication that there will be such a guarantee: we are astounded that it has taken so long to arrange this, particularly since the support needed is so limited.
  • We cannot discount the industry’s complaints about the delays in agreeing support measures and we are profoundly disappointed that to date not one single penny has been advanced through the scheme. We hope that this will change rapidly.

The report examines other aspects of Government support for the automotive industry amidst the difficulties posed by the economic crisis and concludes that "despite its relatively late introduction, there are encouraging signs that the Scrappage Scheme has been effective, and we welcome its success."

Regarding proposals to set in place a scheme to support automotive finance, the report concludes that "once again the Government has held out the possibility of action but has not yet delivered. We seek clarification of the Government’s intentions."

The Committee also expresses concern about the coherence of Government policy towards the sector, saying "it is important that the entire Government shares a strategic approach to the UK automotive industry. This means that matters such as taxation, environmental targets and support measures should be considered together to ensure they do not inadvertently conflict."

The Committee makes its criticisms in the context of underlying optimism about the automotive sector’s prospects, saying "UK industry could and should flourish. As well as the reliability, high productivity and good labour relations … the UK industry is diverse, has globally competitive vehicle and power train research and development, and strong premium brands."

Peter Luff, the Committee Chairman, said:

"The UK has the second largest premium car industry in the world, after Germany. It exports a huge proportion of its production. It has a large and diverse supply chain. But that supply chain is at great risk.

"If the industry dwindles further, it will not only be employment which suffers; automotive companies are responsible for high levels of United Kingdom research and development, which in turn supports other United Kingdom industries. Though we welcome the intention behind many of the Government’s measures to support the industry, there must be more sense of urgency, and a greater demonstration of support."

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