UK in biggest recession on record: Interesting times ahead for garages

Published:  12 August, 2020

Garages face interesting times going forward, as it announced that the UK is in recession for the first time in 11 years, and experiencing the biggest recession on record.

It was widely assumed that the suppression of economic activity resulting from lockdown would lead to a recession, but figures released today (Wednesday 12 August) by the Office for National Statistics (ONS) have confirmed this.  According to the statistics, GDP shrank by 20.4% between April and June, compared with a 2.2% drop between  January and March.

The picture did improve during the quarter however, as lockdown was gradually eased. May saw GDP up 2.4% and in June it  went up another up 8.7% on a month-by-month basis. Despite this, by the end of June, the UK economy was still 17.2% smaller than it was in February, prior to the COVID-19 crisis.

The last UK recession took place between 2008 and 2009, resulting from the financial crisis.

Earlier in the week, it was also revealed that employment saw its biggest fall in over a decade during the same quarter, while data for July showed that 730,000 fewer people were employed than before lockdown.

While the economic slowdown associated with a recession will have a myriad of negative consequences, in the past independent garages have seen some benefit as motorists opt to keep existing cars, and continue to use an independent instead of being drawn back to the dealerships. Block Exemption regulations also mean that those with newer cars who would tend to use franchised dealers for servicing can instead look to their local garage for support. However, spending tends to reduce overall, so some customers will also be less inclined to seek help with their car until the problem is critical.

Commenting on the figures, IGA CEO Stuart James observed: "It is understandable that we saw the economy shrink throughout lockdown. “

He said there was some cause for optimism for the garage sector as well: “With ONS data showing the economy starting to recover from May, there has been talk of a V-shaped recovery, and we feel this will vary from industry to industry. However, the services of the independent garage sector were essential throughout lockdown and remain vital at a time where UK workers are being encouraged to go back to work, avoiding public transport where possible.

“Garages have a backlog of MOTs to work through due to the end of the six-month MOT exemption, and sales of used vehicles are increasing which may result in a growth in demand for servicing and repairs. With this in mind we are confident that independent garages can survive the recession and continue their crucial role in keeping communities mobile.”

IMI CEO Steve Nash added: “It is of course disappointing – but not really surprising – that the UK economy is in recession. However, while there are tough decisions being made by businesses in all sectors, in automotive we are also seeing a ‘keep calm and carry on’ attitude. As of the end of July, 97% of automotive businesses were trading, with around 72,000 jobs returned to work from furlough in the second half of July and an additional 49,000 planned to have returned by the second week of August.”

Steve concluded: “The fact is our sector plays a crucial role in the underlying infrastructure of the UK economy. The key now is for automotive employers large and small to ensure they can keep one eye on the future – including preparing for the road to zero – while maintaining business for the here and now.”

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