Tax rises threaten future of car industry, warn manufacturers
Tax rises threaten future of car industry, warn manufacturers
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Matt OliverThu, November 12, 2026 at 6:00 AM UTC
The British car industry has struggled after a cyber-attack halted the Range Rover production line at the Jaguar Land Rover plant in Solihull, West Midlands - EPA/Bloomberg/Adam Vaughan
Tax rises are threatening the future of Britain’s car industry as costs surge and companies go bust, a new report has warned.
Analysis published on Thursday from the Society for Motor Manufacturers and Traders (SMMT) showed that the number of motor businesses declaring insolvency almost trebled between 2016 and 2025, as firms were squeezed by rising costs.
Some are also only using half of their factory capacity but have seen their profit margins wiped out by surging energy prices and Labour’s employer National Insurance raid.
The SMMT warned that the trend threatened to torpedo investment and undermine the industry’s switch to electric car manufacturing, as the threatened suppliers are “integral to UK production”.
It is calling on the Government to provide £130m of finance support, including £100m to help companies retool their factory floors.
Mike Hawes, the SMMT’s chief executive, said: “Britain cannot afford to lose the suppliers that make vehicle manufacturing here possible. Once their skills, tooling and expertise are gone, investment becomes harder to win – and far harder to bring back.
He added: “The opportunity to reshore component spending in Britain is real, but we cannot take it for granted.
“Backing suppliers is not just about protecting today’s jobs, it is about securing Britain’s place in the next generation of vehicle manufacturing.”
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The warning comes after a difficult period for domestic automotive suppliers after a cyber-attack shut down Jaguar Land Rover’s production lines last year.
In the report, the SMMT warned that car production in the UK has plummeted from nearly 1.8 million vehicles in 2018 to barely 700,000 in the past year.
This hit suppliers hard, as many had invested between 2016 and 2019 in anticipation of rising orders – only for the Covid pandemic, semiconductor shortages and lacklustre car sales to leave them with far fewer orders than they had hoped.
Some were now operating at “around a 50pc utilisation rate”, the SMMT said, meaning the payback period on their equipment had become far longer and they had less cash available for new investments.
At the same time, the lobby group warned that the industry’s contraction was being “compounded by the rising cost of manufacturing in the UK,” most notably through rising energy prices.
Separate data from the International Energy Agency shows that the average electricity spot price has surged from £40 per megawatt hour to £110 per megawatt hour – an increase that has massively outstripped general inflation.
The SMMT said firms had also been hurt by the increase to employer National Insurance contributions, which had “reduced or, in some cases, entirely eroded profit margins” for suppliers.
It said the net effect was that most firms had less money to spend on equipment or software that could help to make them more competitive, while some were becoming “untenable” and collapsing.
Insolvencies among UK vehicle and component manufacturers jumped by approximately 180pc between 2016 and 2025, against around 63pc across all UK businesses, the SMMT noted.
Source: “AOL Money”
