The Chancellor of the exchequer, Philip Hammond MP, delivered his first Autumn statement, axing the salary sacrifice scheme, incentivising Ultra Low Emissions cars, and increasing spending on transport infrastructure spending.
At the top level the Chancellor’s statement aimed to tackle the economy’s long-term weaknesses in preparation for the uncertain Brexit realities. In this he targeted: the productivity gap, the housing challenge, and the “damaging imbalance in economic growth and prosperity across our country.”
The automotive sector as a whole will welcome the commitment to drop Corporation tax will fall to 17%, the introduction of a new National Productivity Investment Fund of £23 billion, and an extra £2 billion per year by 20-21 of spending on RD. Also good news for the sector as a whole is the continuation of the freeze on Fuel Duty, and the additional £1.1 billion of investment in English local transport networks and £220 million to address traffic pinch points on strategic roads.
The statement also pledged “£390 million to build on our competitive advantage in low emission vehicles and the development of connected autonomous vehicles; plus a 100% first year capital allowance for the installation of electric vehicle charging infrastructure.”
Mike Hawes, SMMT Chief Executive, welcomed these pledged investments: “SMMT welcomes the government’s commitment to improving infrastructure and investment in R&D, an area in which UK automotive punches above its weight.“One of the main areas in which UK Automotive is playing a leading role is the development and introduction of low emission and connected and autonomous vehicles. The Chancellor’s announcement of £390 million will help promote our competitive advantage in these fields. We welcome the investment to enhance the charging network for electric vehicles, as well as further support to boost uptake of low emission buses and taxis. He was also quick to champion the sector’s productivity record
“While the Chancellor’s focus on improving UK productivity is needed, the automotive industry bucks the national trend with the most productive workforce in Europe. What is required, however, are further measures to support competitiveness in the supply chain of both automotive and other key sectors.”
Sue Robinson National Franchised Dealers Association Director drew attention to the double edged sword of the pledge to increase the National Living Wage to £7.50 an hour from £7.20, from April 2017: “The National Living Wage rise encourages disposable income growth, which in turn plays a key role in supporting consumers’ confidence. It is vital for NFDA members and other big retailers that households continue to feel safe in committing to purchase high value goods. Nevertheless, this will bring more costs for businesses which are already facing extra costs due to the apprenticeship levy and increase in employers’ national insurance contribution.”
The Chancellor’s decision to close the salary sacrifice scheme, for all but Ultra Low Emissions cars drew fire from the industry, as LeasePlan UK’s Managing Director, Matt Dyer’s comments illustrate: “The Chancellor’s decision to target cars gained through salary sacrifice is both destructive and disappointing for the motoring industry. We must also remember that going forward, HMRC have been clear that they will make no distinction between Salary Sacrifice and the practice of offering a cash allowance in lieu of a company car meaning this could affect up to 600K drivers. The vehicle rental and leasing industry contributes £24.9 billion a year to the UK economy, and company car leasing schemes are a large part of that success story – with over half of new car sales alone last year going into fleets.”
The LeasePlan director concluded: “We should also stress that these drivers are the hard working essential car users such as tradesman and nurses, most of whom will be the JAMs that the government is so keen to provide for. Whilst we should take some solace from the fact that Ultra Low Emission Vehicles will remain unaffected and any existing arrangements will be protected until 2021, this is complicated by the fact that a new definition has been given for ‘Ultra Low’ and we will have to wait for the Finance Bill on the 5th December to see exactly what this means.”
Many industry figures looked past the individual measures contained in the statement to the turbulent economic climate that these measures are proposed to counter: James Tew, CEO at iVendi commented: “Mr Hammond made it clear that we are looking at increased borrowing, higher inflation and weaker growth. This cannot help but have an impact on the UK new and used car markets. The question is one of degree.”
Ian Simpson, European Managing Director – Automotive, The Warranty Group went further with this take on the statement:“The general message from today is that we are undoubtedly heading into choppier economic waters. While the situation is not a cause for panic – the underlying strength of the economy looks sound – we entering a period where inflation will be higher than in recent years, public borrowing will increase, spending will come under pressure, and life will generally be a little less predictable.
“What does this mean for motor dealers? Well, used car buyers are likely to start feeling the effect of these changes over the next few months, if they are not already, and this will have a direct impact on their levels of confidence and their buying decisions.
“Our experience over many decades is that, during periods such as this, customers are very much looking for reassurance. Therefore, demand for products that offer a high degree of peace of mind and budgetary certainty – such as enhanced warranties and service plans – see higher levels of penetration.
A new relief for rural business rates announced in today’s Statement will have an impact on many points in the automotive sector’s retail newtwork. James Broadhead, CEO of Close Brothers Motor Finance, commented: “We work with many car-dealerships in rural regions across the country and we understand the challenges they face on a day to day basis from changes to regulation. Today they can feel positive about a change that should improve local business confidence and inspire growth in the economy.”
Rupert Pontin, Glass’s director of valuations, said that the commitment to the EV segments was likely to drive some sales, and also drew attention to some minor points: “for the motorist using their car today, the Fuel Duty freeze is good news, as are the measures designed to minimise false whiplash claims that are pushing up motor insurance premiums. For people whose personal budgets are under some pressure, these measures are worthwhile if unspectacular.”
