The Society of Motor Manufacturers and Traders (SMMT) said today a relocation of car manufacturing back to the UK would be “good news” for the sector.
“If supply chain resilience provides the opportunity to reshore more of the supply chain in the UK, we would certainly support and encourage that,” SMMT’s chief executive Mike Hawes told City A.M.
Automotive makers started moving production away from eastern Europe following Russia’s decision to invade Ukraine and the consequent set of sanctions imposed on Moscow.
According to Hawes, a successful reshoring of automotive production back to Britain depends on whether there is a strong and healthy car production as well as the level of competitiveness.
“Being competitive is about making the right products that are in demand and being able to make them as cheaply as possible, but to high levels of quality and flexibility,” he added.
The chief executive explained that the UK has some structural disadvantages that put its competitiveness behind that of other countries.
Despite managing to reach a free-trade agreement with the EU, the impact of Brexit on administrative and logistical issues added a cost that plants in Europe don’t face.
“The broader question is if you have got additional costs arising from trade, you need to compensate by reducing costs elsewhere,” Hawes said.
Following the recent spike in fuel prices, energy costs have emerged as the main obstacle for the UK automotive industry.
“Our energy prices were already more expensive than the rest of Europe,” the chief executive explained. “So this price volatility is making that differential worse.”
A few hours before the Chancellor presented the Spring Budget, the SMMT had called for the government to focus on energy cost reduction to make sure the industry could go back to being competitive.
“We wanted to see more in that area, then maybe it comes later in the year with the budget and we would look forward to that because it’s needed.”