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September 12, 2022updated 09 Sep 2022 4:06pm

Fitch maintains forecasts under Truss but revisions may be needed

By Alejandro Gonzalez

New PM could accelerate development of UK’s local EV supply chain

Fitch Solutions has maintained its 2022-2031 vehicle sales and output forecasts for the UK after the nomination of Liz Truss as the new PM, on the expectation that there will be policy continuity for the auto industry under her administration.

The provider of country risk and industry research “currently forecasts 2022 vehicle sales and production in the UK to decline 7.2% and 5.2%, respectively, before rebounding by 7% and 14.3% in 2023.”

“That said, we could revise upwards UK’s vehicle manufacturing forecasts for 2022-2031 in the upcoming weeks, after assessing the newly-elected Prime Minister’s initial plans and economic measures amid the economy facing a cost of living crisis which includes two-digit inflation, soaring energy prices, and higher interest rates,” Fitch Solutions said in a statement. 

“This is because Truss has outlined over the past weeks that she aims to introduce tax cuts, supply-side reforms and pro-business regulation, as a means to stimulate economic growth and reinvigorate UK’s industries, especially autos which have been on a decline since 2017. 

Last week, the new PM unveiled parts of her economic rescue package for the economy which will limit all energy price rises for households for two years. The scheme, estimated to cost around £150bn (double the cost of the pandemic’s furlough scheme), will be funded with government borrowing. 

Businesses have so far been promised “equivalent support” for six months, but the precise details of the plan have yet to be announced, with more support offered to businesses, after six months, if they are in “vulnerable industries”.

In a statement before the package was announced, Fitch Solutions said: “We believe these measures, if implemented, would improve the local operating environment for automakers since they would benefit from lower operating costs and reduced taxes, which would likely lead to increased autos-related investments as well as plans to increase vehicle output in the country. If such measures are implemented, we expect vehicle output to increase in the UK and we would therefore revise upwards our vehicle output forecasts for the country.

Going green

In terms of the country’s green transition, "we expect Truss’s administration to broadly remain unchanged; we believe that the UK will remain committed to the decarbonisation of its transport sector, with 2030 as the date when the sale of internal combustion engine-powered cars is to be banned."

"Furthermore, we believe that Truss’s appointment as Prime Minister could accelerate the development of the UK’s local EV supply chain. This is because Truss considers the West Midlands region (deemed as the heart of the UK autos sector) as a key driver of domestic economic development and innovation."

Indeed, Truss has recently said that her administration would push for the construction of the battery Gigafactory at Coventry Airport (announced in 2021 but still unfunded and without an automaker on board), highlighting that it would secure thousands of jobs and provide opportunities to the region."

"On a similar note, we highlight that Truss tweeted in July 2021 backing Nissan and Envision AESCs plan to develop a Gigafactory at Nissan’s site in Sunderland, stating that it would ‘boost the UK’s net zero, greener future’."

Fitch concluded its statement by saying it would continue to monitor government policy "as new announcements regarding economic measures aiming to bolster economic growth and industrial activity could drive us to revise our 2022-2031 vehicle sales and production forecasts for the country."

"Specifically, we will focus on policies and strategies for the local EV supply chain given how crucial a developed EV supply chain will be for the long-term sustainability of the UK’s automotive industry."

What is a gigafactory and where are they being built?

West Midlands Gigafactory unveils further plans for UK site

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