Closed Car Showrooms Cost the Treasury £61 Million Every Day
The UK automotive industry was calling on the government to allow car showrooms to reopen urgently, as calculations from the Society of Motor Manufacturers and Traders (SMMT) reveal the £61 million daily cost to the Treasury of keeping dealerships closed.
The annual tax-take from VAT, VED and other taxes on new car sales to private buyers alone amounts to some £5.4 billion. However, lockdown restrictions that forced showrooms to shut up shop will, by the end of the month, have cut this figure by almost a quarter (23%), with every additional day of closure costing £20 million.
In addition, furloughing the retail sector’s 590,000 workers under the Job Retention Scheme, which has provided a lifeline to many during the crisis, is costing an estimated £41 million a day – a bill that could be reduced if retailers were able to start bringing staff back to work.
The SMMT claim car showrooms, which are generally large spaces, lend themselves more readily to social distancing, and manufacturers and retailers have been working hard to implement comprehensive measures to ensure the safety of customers and staff during every interaction, from browsing and vehicle demos, to test drives and transactions.
As the UK returns to work, getting the new car market moving again will help take pressure off public transport, kick-start the economy and boost the UK’s £82 billion automotive manufacturing sector, which has already been hit by losses of more than £8 billion.
Although production lines are gradually beginning to roll again, with almost half of the country’s car and engine plants set to be operating by the end of May, output is at a much slower pace as manufacturers enforce strict social distancing measures and market demand remains subdued.
Mike Hawes, SMMT Chief Executive, said:
“Government measures to support the critical automotive industry during the crisis have provided an essential lifeline, and the sector is now ready to return to work to help the UK rebuild. Car showrooms, just like garden centres, are spacious and can accommodate social distancing easily, making them some of the UK’s safest retail premises.
“Allowing dealers to get back to business will help stimulate consumer confidence and unlock recovery of the wider industry, boosting tax revenue and reducing the burden on government spending. Unlike many other retail sectors, car sales act as the engine for manufacturing and reopening showrooms is an easy and relatively safe next step to help get the economy restarted. With every day of closure another day of lost income for the industry and Treasury, we see no reason for delay.
“UK Automotive has already signalled its readiness to restart vehicle sales, with the publication last week of best practice guidance to ensure showrooms are safe spaces for customers and staff. Compiled by SMMT in partnership with the National Franchised Retailers Association (NFDA) and with input from major manufacturers and dealer groups, the advice is designed to complement government rules on social distancing and hygiene measures for the overall retail sector.