6,000 automotive businesses on the brink, but vast majority demonstrating resilience

Published:  22 July, 2020

6,000 automotive businesses on the brink, but vast majority demonstrating resilience 6,000 automotive businesses could be at risk of closing within the next few weeks, according to the IMI’s analysis of the latest Office for National Statistics (ONS) data.

According the ONS Data, which covered 29 June to 12 July, 6.4% of automotive business either had no cash reserves or only enough to cover less than a month, an increase of 0.3% since last reporting.

Fortunately, the bulk of the sector is showing a high degree of resilience. 95% of automotive businesses are now trading with a further 2.5% planning likely to have re-opened by mid-July The sector had the highest percentage of businesses reporting an increase in turnover by early July - 23% - roughly equivalent to 20,000 businesses. 34% went on to say that their cash reserves would last more than six months.

Approximately 81,000 jobs returned to work from furlough, but there are still 177,000 jobs on furlough 30,500 jobs returned to their usual working location, with a further 31,000 planned to return by mid-July

IMI CEO Steve Nash observed:  “The resilience of our sector is admirable – many businesses stayed open during lockdown to provide motorists with vital support to ensure their vehicles were roadworthy. And once the government allowed showrooms to open up at the beginning of June, automotive businesses moved quickly to ensure they could bring their staff back to work – and support their customers safely. Now, with a month’s trading under their belts employers are starting to plan ahead and work out strategies for recouping some of the lost income from the lockdown period. And we are sure they will be encouraged by the Prime Minister’s recent call for businesses to bring workers back to offices which, in turn, is likely to increase vehicle usage.

“Our analysis does however, also show that some hard decisions are now being made. Automotive businesses are, on average, advertising external vacancies at much lower levels than many other industries. And although still relatively small numbers, redundancies are now being reported in the sector.

“Clearly, the Chancellor wanted to stave off job losses with his job creation plans announced earlier this month. But the lack of any direct support for the sector through a VAT reduction or a scrappage scheme was disappointing.”

Steve added: A VAT cut on car sales would have made a big difference in encouraging consumers to get back into the showrooms – virtual or physical – and that would have in turn helped with the government’s ‘road to zero’ objectives, as would a scrappage scheme.”

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