21 Jun 2024
The voice of the independent garage sector

Autumn Statement 2023: Automotive sector reacts

Chancellor of the Exchequer Jeremy Hunt’s Autumn Statement received a mixed reaction from the automotive sector yesterday (Wednesday 22 November).

A number of measures were announced that will affect businesses. This included Full Expensing, where companies are able to reduce tax by up to 25p for every £1 they spend on machinery, being made a permanent fixture. Meanwhile, an additional £50 million was earmarked for a two-year pilot scheme for apprenticeships, and the National Living Wage will be increased to £11.44 for those 23 and over from April 2024, with 21- and 22-year-olds now included as well. Corporation tax remained at 25% however, although a business rates support package worth £4.3 billion over the next five years to support small businesses was announced.

Andy Hamilton, Group Chief Executive Officer at LKQ Euro Car Parts, said: “There were some helpful announcements for garages and bodyshops in today’s Autumn Statement but also some missed opportunities.

“We’ve long been vocal about the challenges they will face preparing their businesses for the future without government support, particularly in areas like the repair and maintenance of electric vehicles. So the decision to make full expensing permanent is very welcome as it should allow them to offset at least part of their investment into the equipment needed to handle both EVs and ADAS-equipped vehicles.

“With the aftermarket facing a skills crisis we’ll always be supportive of more funding for apprenticeship places too. But the extra £50m announced today is specifically focussed on growth sectors and, though we’re yet to see the detail on what these will be, it’s not hard to imagine they will be the more hyped industries like tech and AI than our sector.

“Freezing the small business multiplier for business rates will help garages and bodyshops to keep costs under control so is of course welcome. But it feels like another chance has been missed to reform a rates system that continues to penalise bricks and mortar-based businesses, with the risk that the freeze could be lifted at the whim of whomever is the Chancellor next year.”

Mike Hawes, SMMT Chief Executive, said: “Last Friday’s announcement of £2 billion for zero emission advanced automotive manufacturing was an unequivocal vote of confidence in the sector. The Chancellor’s statement, with its focus on business growth, responds to our industry’s need for measures that allow UK automotive to compete for investment. The attractiveness of the UK will be bolstered by permanent full expensing and, given the importance of decarbonising the market and manufacturing, speeding up grid access.

“The UK proposition is enhanced by these measures but it is equally important that they can be accessed. The implementation of the Harrington Review on foreign direct investment must help simplify and speed up the process.

“We now look forward to the government’s advanced manufacturing plan, its battery strategy and how it will support consumers in making the switch to zero emission motoring, as we must not only make these vehicles locally but sell them.”

James Lett, Technical Editor at Autodata, observed: “Like many in the industry, we had high hopes that the Autumn Statement would recognise the critical investment and support needed in the transition to EVs. The expensive tools and widening skills gap to repair EVs is alarming, and without government support, garages and auto technicians are being left behind in the electric revolution.

“Whilst the ban on combustion engine vehicles has been extended to 2035, thousands of EVs are already on the roads and this will grow exponentially as manufacturers continue to pump an ever-increasing number of EVs into the market. But, they can only be serviced or repaired by technicians with specialist training and tools. Neither of these are cheap and there is no government investment to change that. Not only does this mean garages are losing money by turning down business, EV drivers can’t access the services they need to safely be on the road.

“Though the backbone of the automotive industry has been forgotten about today, I do hope that the message is being heard loud and clear at Downing Street. The EV revolution cannot happen until garages receive the support they need.”

NFDA Chief Executive Sue Robinson said: “In the midst of a cost-of-living crisis, and as we approach a general election year, the Autumn Statement 2023 is highly anticipated and comes at a critical time for the economy. For the automotive sector more specifically, challenging trading conditions remain. Today’s fiscal budget was the Government’s opportunity to outline a clear and strategic vision to support the automotive sector in its transition to net-zero, and it has been an opportunity which has largely been squandered.

“The decision today to make full expensing a permanent measure is one which the NFDA welcomes. The increase in the Corporation tax rate earlier this year, coupled with the rather late announcement of full expensing as a temporary measure, has led to a knock to the UK’s attractiveness as an international investment location. The clarity provided by the Chancellor around the issue is a positive step in helping UK dealers, looking to invest capital in the UK, be it through constructing new sites or purchasing new equipment.”

On the additional money for apprenticeships, Sue noted: “Added funding is a step in the right direction to supporting automotive businesses, stimulating growth for the sector and closing the skills gap. However, the Chancellor has missed a great opportunity to address the Apprenticeship Levy in his statement. The current system does not fulfil the potential needs of the automotive industry, especially in the transition to electric. NFDA has urged the Chancellor for the claw-back cap to be removed and for the application process to be simplified.”

Sue added: “The Chancellor missed the opportunity to provide incentives for prospective EV buyers and to address wider employment concerns within the industry.”

Martyn Rowley, Executive Director of the National Body Repairer Association (NBRA) observed: “We welcome the Government’s commitment to allocating a further £50 million for a two-year apprenticeship pilot, exploring new ways to stimulate training in key growth sectors. While we appreciate this as an initial step, we highlight the urgent need for comprehensive action in response to the industry’s unanimous plea for the reform or elimination of the Apprenticeship Levy.

On small businesses support, he said: “The small business multiplier will be frozen for a fourth consecutive year. NBRA welcomes this announcement as small businesses which are at the heart of the UKs economy, need access to capital to grow and invest. This move will significantly assist our members who have already been burdened by financial crises in the past years.

“Maintaining the current Corporation Tax rate at 25% is acknowledged, but ongoing reviews are essential to ensure the competitiveness of businesses within the automotive repair sector. The small profits rate, for companies with profits under £50,000, also remains at 19%.”