The Spring Budget offered few surprises for the motor industry, and presented a number of missed opportunities around EVs 

The chaotic events surrounding the abortive mini-Budget of September 2022, and the rapid change-in-direction that led to Rishi Sunak becoming Prime Minister found their equal and opposite reaction in Jeremy Hunt’s sedate Spring Budget this week.

Points relevant to the automotive sector included the extension of the 5 pence fuel duty reduction, with overall fuel duty frozen for 12 months, while an additional £200m per years has been added onto the £500 million allocated to deal with potholes in UK roads.

On the overall business front, the scheduled Corporation Tax increase to 25%, up from 19% went ahead. Looking at investment, businesses will be able to write off the cost of investment in equipment to reduce taxable profits from until 31 March 2026. This replaces the Super-Deduction. Tax relief worth £600 million on energy efficiency measures, intended to help reduce energy usage by 15% was also announced. Looking at the overall economy, it was announced that the Office for Budget Responsibility expects that the UK will avoid recession in 2023, despite the economy being expected to shrink by 0.2%. For next year, 1.8% growth is predicted, which will rise to 2.5% in 2025 and 2.1% in 2026. Inflation should also be down to 2.9% by the end of 2023. In the last three months of 2022 it was 10.7%.

 Industrial strategy
SMMT Chief Executive Mike Hawes said: “We face fierce international competition so it was pleasing to hear the Chancellor directly reference industrial strategy and measures to attract investment. Tax breaks for capital expenditure, which the industry has long called for, extensions to climate change agreements plus action to alleviate the high cost of living and encourage more people into work are all much-needed. Investment zones which focus on advanced manufacturing, of which automotive is an exemplar, R&D and technology are also positive steps.

“There is little, however, that enables the UK to compete with the massive packages of support to power a green transition that are available elsewhere. Indeed, the announced fuel duty freeze contrasts with an absence of measures to boost uptake of zero emission vehicles, such as reducing VAT on public charging. We, therefore, look forward to additional policy announcements that support advanced manufacturing sectors, as the right conditions will enable the investment that drives growth across the country.”

Pivotal moment
NFDA CEO Sue Robinson observed: “It's positive to see that government has addressed some key areas which impact the automotive sector, including maintaining the fuel duty freeze and the replacement of the super deduction tax with a new investment allowance scheme. However, it is clear that government still does not entirely understand the significance of incentivising motorists’ transition to electric and investing into charging infrastructure. NFDA urges government to place more emphasis on financing and levelling up the electric vehicle landscape, matching the efforts and investments franchised dealers have made, and continue to make, if they want to meet their ambitious 2030 deadlines and 2050 net-zero targets.”
On the Corporation Tax rise, she said: “Ultimately, we are disappointed that the Chancellor has not reversed the corporation tax rise to 25%. Keeping corporation tax at 19% would have helped franchised dealers to maintain the high levels of investment required to support the electrification of their vehicle stock, another example of franchised dealers supporting government’s net-zero targets. This transition has forced dealers into levels of investment which has not been seen in the industry in decades.
Sue continued: “NFDA cautiously welcomes the replacement of the super-deduction with a new investment allowance scheme. This involves a 100% write-off of capital expenditure expenses immediately from profits. In some circumstances, the deduction may facilitate greater investment by dealerships, but this does not make up for the disincentive to invest as a result of the rise in corporation tax.”

Moving onto the skills shortage, Sue said: “We have continuously called on the Government to rethink the apprenticeship levy scheme and it is a disappointment that nothing has been announced on this, or for apprenticeships for young people in general. Businesses need help to source talent and promote employment into such a vital sector for the UK economy.”
It was what was not said that was the biggest cause for concern though: “We are extremely disappointed that not a single mention of electric vehicles or charging infrastructure was mentioned in today’s budget announcement. If the UK government’s goal is to stop the sale of new petrol and diesel cars and have 300,000 charge points in place as a minimum by 2030, there needs to be much more significant investment – and this has to be incentivised by the Chancellor in future Budgets.

"The recent announcement to introduce Vehicle Exercises Duty (VED) for electric vehicles in 2025 has reduced the appeal of buying a new electric car as motorists will no longer benefit from a tax-free purchase that differentiated it from its ICE counterpart. This sent the wrong message at the wrong time and the Chancellor still has not established a policy on electric vehicles that sends the right message. This, NFDA believes, was a missed opportunity to create a comprehensive road tax scheme.
“Going forward, government support will be critical to the success of the electrification of the vehicle parc in the UK. Government’s neglect to support the less affluent from purchasing an EV, a product which remains a price premium and a significant barrier to adoption, risks undermining the movement and their net-zero targets and destabilising the EV market.”

Bright point
Paul Hollick, Chair at the Association of Fleet Professionals concurred: “This was a Budget more noteworthy for what it didn’t include rather than what it did. We’d have liked to have seen measures announced ranging from the creation of an EV charging regulator through to national co-ordination on Clean Air Zones, as outlined in our recent tax and regulation manifesto. However, there was little content that showed the government has been thinking about business road transport.

“The one bright point for fleets was the freeze in Fuel Duty. An increase in 11 pence per litre would have been extremely unwelcome at a point in time when the economy is struggling and removing that possibility is very much welcome. Further positives are difficult to identify but a recognition that more people need to be encouraged back into the workforce, through pension changes and childcare measures, could potentially help to a degree in a fleet sector where recruitment remains an issue.”

Relative strength
Philip Nothard, Chair at the Vehicle Remarketing Association, noted: “Really, what the remarketing sector is overwhelmingly looking for from the government after the events of the last few years – the pandemic, the war in Ukraine, the domestic economic chaos we saw late last year – is a stretch of stability that allows the relative strength that we have seen in the used car and van sector to continue. The Budget probably delivers on that. There is little drama in its contents but measures such as the retention of the £2,500 energy price guarantee should mean that the cost of living crisis will at least become no worse, if not improve. This should mean consumer confidence remains stable, something helped by the forecast of avoiding technical recession.

“For motorists in general, the freeze in Fuel Duty and additional help for potholes are both welcome while the childcare and pension measures designed to get people back into the workforce are good ideas which, given the labour shortages that we are seeing across remarketing, may have a positive effect.

“Finally, we have been highlighting the need for some form of support in the used market for electric vehicles and there was no news in that area, but we remain hopeful that the government are listening to the points we are making and will take action relatively soon. This is something that is very much needed to ensure the smooth electrification of the used EV sector.”

Measured approach
Paul Burgess, CEO at Startline Motor Finance, broadly welcomed the steady-as-she-goes approach of Jeremy Hunt’s Budget: “For the retail motor industry and motor finance specifically, this is a relatively benign Budget without any moves that will either noticeably boost or harm prospects. Really, it’s hallmark is an extremely measured approach, as seen in the decision to extend the energy price guarantee by three months in order to not worsen the cost of living crisis. The economy is performing just a little better than expected at the end of last year and there seems to be a mood of gently trying to ensure that trend continues, with great store placed on avoiding recession.

“It’s important to remember that it is only seven months since the fated mini-budget and this is a Budget very much about being seen to make no sudden, dramatic moves and convince onlookers that the Sunak administration is one that is, above all else, fiscally responsible. Recent news about bank collapses in the US and the plight of Credit Suisse does raise the possibility of more unanticipated shocks hitting the economy, so this cautious approach is perhaps understandable, even if there is a strong argument for a more strategic and proactive approach on growth than the measures the Chancellor revealed.”
Looking specifically at the ongoing fuel duty freeze, PRA Executive Director Gordon Balmer said: “Petrol and diesel prices are still extremely volatile due to the ongoing war in Ukraine. Many motorists will breathe a sigh of relief at the Chancellor’s decision to extend the fuel duty freeze and maintain the 5 pence per litre cut. We welcome the government’s commitment to keep fuel duty rates under review and hope that they will continue to do all they can to ease the burden of high energy prices on motorists. As always, our members are committed to keeping their communities fuelled and fed.”

Welcome news
Graham Conway, Managing Director at Select Car Leasing, also welcomed the continued freeze on fuel duty: “We wholly welcome the Chancellor’s announcement on fuel duty. The poorest families, as well as businesses operating a fleet of vehicles, would be hit the hardest by any rise in the price of fuel. For many people who are really feeling the effects of the cost of living crisis, such a price hike could have tipped them over the precipice in terms of their own budget.

“The Chancellor’s decision to extend the cut to Fuel Duty will come as extremely welcome news to motorists and businesses across the UK that rely on traditionally-fuelled vehicles for their essential travel. It’s interesting to note that the continued freeze on Fuel Duty actually goes against what some experts were forecasting. In November last year, the Office for Budget Responsibility (OBR) predicted a 23% rise in Fuel Duty, which would have increased the price of petrol and diesel by around 12 pence per litre. The extension to the cut means financial relief for millions of drivers.”

James Tew, CEO at iVendi added: “The key economic threat to the retail motor industry over the last year or so has been the possibility that the new and used car and van sectors would be badly hit by the cost of living crisis. So far, however, effects have been limited, and the main plus point from the Budget is that the government seems to recognise that it’s important personal finances are not allowed to get much worse, as seen in the three month extension to the energy price guarantee. While they may insist that today’s measures were largely about growth, the underlying message is one of stability. This, in itself, is welcome after the various economic and social storms we have all had to weather in recent years but there is also perhaps an absence of really big ideas to get the economy moving, despite a basket of smaller scale, targeted measures designed to promote growth.”