Closed car showrooms cost the Treasury £61 million every day - industry calls for reopening

Closed car showrooms cost the Treasury £61 million every day - industry calls for reopening
The UK automotive industry is calling on the government to allow car showrooms to reopen urgently, as calculations from the Society of Motor Manufacturers and Traders (SMMT) reveal the £61 million daily cost to the Treasury of keeping dealerships closed.

The annual tax-take from VAT, VED and other taxes on new car sales to private buyers alone amounts to some £5.4 billion. However, lockdown restrictions that forced showrooms to shut up shop will, by the end of the month, have cut this figure by almost a quarter (23%), with every additional day of closure costing £20 million.1

In addition, furloughing the retail sector’s 590,000 workers under the Job Retention Scheme, which has provided a lifeline to many during the crisis, is costing an estimated £41 million a day2 – a bill that could be reduced if retailers were able to start bringing staff back to work.

The news comes as SMMT launches a new 10 reasons to #unlockukauto campaign, which sets out the benefits of allowing UK dealerships to reopen to kick-start the market, which fell by a devastating -97.3% in April.3

smmt-new-car-reg-chart-apr20
Source: SMMT

 

SMMT claim car showrooms, which are generally large spaces, lend themselves more readily to social distancing, and manufacturers and retailers have been working hard to implement comprehensive measures to ensure the safety of customers and staff during every interaction, from browsing and vehicle demos, to test drives and transactions.

As the UK returns to work, getting the new car market moving again will help take pressure off public transport, kick-start the economy and boost the UK’s £82 billion automotive manufacturing sector, which has already been hit by losses of more than £8 billion.4

Although production lines are gradually beginning to roll again, with almost half of the country’s car and engine plants set to be operating by the end of May, output is at a much slower pace as manufacturers enforce strict social distancing measures and market demand remains subdued.

Mike Hawes, SMMT Chief Executive, said:

"Government measures to support the critical automotive industry during the crisis have provided an essential lifeline, and the sector is now ready to return to work to help the UK rebuild. Car showrooms, just like garden centres, are spacious and can accommodate social distancing easily, making them some of the UK’s safest retail premises.

"Allowing dealers to get back to business will help stimulate consumer confidence and unlock recovery of the wider industry, boosting tax revenue and reducing the burden on government spending. Unlike many other retail sectors, car sales act as the engine for manufacturing and reopening showrooms is an easy and relatively safe next step to help get the economy restarted. With every day of closure another day of lost income for the industry and Treasury, we see no reason for delay.

"UK Automotive has already signalled its readiness to restart vehicle sales, with the publication last week of best practice guidance to ensure showrooms are safe spaces for customers and staff.5 Compiled by SMMT in partnership with the National Franchised Retailers Association (NFDA) and with input from major manufacturers and dealer groups, the advice is designed to complement government rules on social distancing and hygiene measures for the overall retail sector.

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The SMMT have given their 10 reasons to #unlockukauto

1. SAFE SPACES - Car showrooms are some of the easier retail premises to accommodate social distancing. They are generally spacious with outdoor areas, and can easily allow measures such as one-way walkways, shielding, and contactless transactions.

2. RETAILERS ARE READY - Dealers have been preparing to reopen for weeks, with many already offering ‘click and collect’. New cleaning and test-drive processes, appointment systems and showroom layouts will keep customers and staff safe, helping get Britain back on the move.

3. SUPPORTING JOBS - UK automotive retail employs 590,000, who together work to drive a sector worth £200 billion. Opening dealerships now will accelerate the market’s recovery, help return the sector to profitability more quickly and reduce the risk of redundancies.

4. BOOSTING THE ECONOMY - Automotive retail, including aftersales, contributes an annual £36bn to the public purse, and with new car sales to private buyers alone generating £5.4bn in VAT and VED, getting the market re-started to stimulate consumer confidence will give the economy a vital cash injection at this critical time.

5. HELPING PEOPLE BACK TO WORK SAFELY - Government is encouraging people who cannot do their jobs from home to return to work if they can, and, where possible, to travel by private transport if they cannot walk or cycle, to avoid overcrowding on buses and trains. For many, this makes access to a car more important than ever.

6. REDUCING THE BURDEN ON GOVERNMENT - The Government’s Coronavirus Job Retention Scheme has provided a lifeline to automotive businesses and their employees, safeguarding thousands of livelihoods. However, reopening showrooms will allow many to get back to work, saving the tax payer up to £41m a day.

7. CUSTOMER DEMAND - Many people were unable to take delivery of new vehicles or shop around as their finance and lease deals came to an end before lockdown, and re-opening showrooms will allow this demand to be fulfilled.

8. ACCELERATING FLEET RENEWAL - Allowing buyers to return to showrooms will speed up the replacement of older, more polluting vehicles with the latest, cleanest technology. With every new model to market emitting on average 8.3% less CO2 than those they replace, boosting fleet renewal will support a greener recovery for the UK.

9. SUPPORTING UK MANUFACTURING - Vehicle sales drive manufacturing and reopening markets – including the UK’s – is essential to boost productivity. British car manufacturing delivers £18.6bn to the economy every year, supports 168,000 highly skilled and well paid jobs across all regions, and, as our biggest exporter of goods, is critical to the UK’s international trade.

10. TECHNOLOGY AND CHOICE - There are more than 440 car models to choose from in the UK in shapes, sizes and fuel types to suit all driving needs, with almost a quarter (23%) alternatively fuelled. Re-opening showrooms will help people make the switch to these leaner, greener vehicles, while also benefitting from the latest cutting-edge safety and infotainment tech.

 

Do you think car showrooms should reopen, or do you think the risks are still too great? Leave a comment below.

 


1 Calculation based on VAT, first year VED and IPT on new cars registered to private buyers in the UK using average vehicle price, applied to year-on-year market losses during lockdown period
2 Estimate based on assumed 80% of UK auto retail workforce furloughed under the CJRS at 80% of wages, and average sector wage (ONS data)
3 SMMT data: new car registrations for April
4 Independent forecast by Auto Analysis April 2020 – £8.2bn value of lost production at OEMs between March shut downs and plants re-opening in mid-May.
5 The NFDA and SMMT automotive retail guidance and best practice is designed to complement official advice and will be updated to reflect any changes over time

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