The UK car industry is at a crunch point – can it be saved?

A gleaming white Vivaro van slowly drove off the production line at Vauxhall’s factory in Luton, beeping its horn as workers cheered and crowded around to take photographs.

Behind it, the production line came to a halt—forever. The Luton plant began producing automobiles in 1905.

It continued to operate for the next 120 years, pausing to build tanks and aircraft engines during World War II. But on March 28, that came to an end. The factory closed due to cost-cutting measures at Vauxhall’s parent company, Stellantis.

Justin Nicholls, a production shift manager, was one of the 1,100 employees at the plant, having worked there for 38 years. “It was devastating, because it came out of the blue”, he says. “It was a complete surprise.”

It followed the closures of Honda’s car factory in Swindon in 2021 and Ford’s engine plant in Bridgend the previous year.

Together, they have come to represent an apparent long-term decline in the UK automotive sector.

Mike Hawes, the SMMT’s CEO, described the situation as “depressing”. According to the SMMT, the sector contributes about £22 billion to the economy each year, and as of 2023, automotive manufacturing employed approximately 198,000 people in the UK.

Andy Palmer, the former CEO of Aston Martin, believes the ecosystem – and the money it generates for the economy – can only survive if the industry maintains its current size.

“There is a critical mass of employment,” he adds. “Once you get below that, you see everything fall apart.

“You don’t have the university courses, you don’t have people coming across from the aero industry, you don’t have the pipeline of skilled engineers that allow the luxury firms to exist, and so on.” This could have an impact on regions that are already facing challenges.

“If we think about parts of the UK that have automotive plants, they’re often disadvantaged regions,” says David Bailey, professor of business economics at Birmingham Business School.

“Losing these good quality jobs would have a big impact in terms of wages for workers and also a knock-on effect in terms of the multiplier on the local economy.”

He is concerned with what has already been lost. “I would argue that we have already let too much of this go.

I believe once it’s gone, it’s truly gone.” The question is: can the industry recover, or is it too late?

A concealed deeper problem

The UK automobile industry is sprawling. In addition to large factories run by JLR, Nissan, BMW MINI, and Toyota, there is a network of suppliers and high-tech specialist engineering firms, as well as a number of smaller, luxury car firms such as Aston Martin, Bentley, Rolls-Royce, and McLaren, as well as bus and truck manufacturers.

In 2016, the UK produced 1.82 million new vehicles, more than at any time since 1999. Even at that point, storm clouds were gathering. And the industry has deteriorated further over the last decade.

Factors such as factory closures and uncertainty over US trade policy have impacted exports to a major market. Additionally, Brexit has played a role.

“Obviously, Brexit had a significant impact,” says Santiago Arieu, senior automotive research analyst at Fitch Solutions.

“It created uncertainty and complicated future visibility.” As a result, experts say new investment has suffered, just as the industry prepares for the massive changes brought about by the transition to electric vehicles.

When the agreement with the EU to ensure continued tariff-free trade was reached, it alleviated the industry’s concerns. But by then, there was another obstacle to overcome.

The pandemic devastated the global industry. In 2020, output fell by nearly one-third, reaching levels not seen since the mid-1980s. It also threw finely tuned global supply chains out of sync, resulting in shortages of critical components.

Despite increased demand for new cars, manufacturers were unable to produce them quickly enough.

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