Automotive industry body, the SMMT, has launched a new Safe Harbour Scheme to help save jobs across the UK automotive sector, including its critical supply chain.
As companies struggle to ramp up production while battling the effects of the coronavirus pandemic and ongoing industry uncertainty, the scheme, which is supported by the Automotive Council and government, provides a mechanism for automotive businesses to engage with their customers, lenders, creditors and other stakeholders to find ways to minimise the risk of insolvencies.
The impact of the pandemic and subsequent challenging market conditions has had a devastating effect on the UK automotive sector, the industry body says.
Car producers are struggling to ramp up operations, with output down 40.2% in the first eight months, representing a year-on-year loss of 348,821 cars and £9.5 billion to the sector.
Commercial vehicle production is also down 20.0% in the year to date, equivalent to more than 9,000 units worth almost £730 million.
This has led to a loss of at least 9,000 jobs across the sector as a whole with an additional 5,000 in the UK supply chain. Yet this is thought to be just the tip of the iceberg, so the industry is doing all it can to safeguard jobs.
Mike Hawes, SMMT chief executive, said: “Inevitably, these pressures are going to take their toll on businesses, so the Safe Harbour Scheme has been created to help any suppliers in trouble. It should provide valuable breathing space as the sector restarts and business and consumer confidence recovers. Ultimately, however, the industry must maintain its competitiveness to grow and for that we still look to the Government to deliver an ambitious trade deal with the EU.”
Given the integrated nature of automotive supply chains and reliance on just-in-time manufacturing techniques, if one link in a chain hits trouble it can undermine all the companies involved, including vehicle manufacturers, threatening an entire sector.
The Safe Harbour scheme seeks to provide a legally compliant structure through which collaborative solutions can be found to support companies at risk and the entire production supply chain safeguarded.
The automotive industry has worked hard with governments over recent decades to make the UK a location of choice for automotive investment and production. Much has been done to reshore elements of the supply chain after a decade of ‘hollowing out’ following the last global recession.
These efforts have resulted in the creation of a competitive national supply base, world-class R&D and engineering, and a strong skills pool.
With the twin challenge of a worsening global pandemic and the threat of trade barriers and tariffs implemented simultaneously, sectorial progress could be derailed with an erosion of the domestic supply chain just one potentially devastating consequence.
Judith Richardson, global purchasing director at Jaguar Land Rover and chair of the Automotive Council Supply Chain Group, said: “The nationwide UK automotive supply chain has been built over many years thanks to huge business investment and support from successive governments. It remains highly competitive, with world-class facilities and a productive and highly skilled workforce. This cannot be taken for granted, however, and the Safe Harbour Scheme, combined with appropriate government support, will be essential to ensure automotive businesses can continue during these extremely challenging times and help drive a green recovery for Britain.”