Green agenda slows UK growth – car industry warns net zero is holding it back

Britain’s net zero drive is creating a significant drag on economic growth, The Mail on Sunday can reveal.

The economy is being hampered by the disruption caused by the shift to electric vehicles, which has set the car industry back as manufacturers desperately try to meet government targets.

The change has caused vehicle production to fall drastically. An analysis of official figures shows that the drop is on track to subtract 0.2 percentage points from this year’s growth. That trend could continue well into next year.

The car manufacturing industry, which employs almost 200,000 people in the UK, is pinning its hopes on increased demand for electric vehicles to help it eventually recover, but that demand is currently stagnating, compounding the problems.

The latest figures published by the Office for National Statistics show that transport equipment manufacturing fell by 3.1 per cent in the second quarter of the year, after six consecutive quarters of growth.

Sector data suggests that the switch from gasoline to electric vehicles is to blame.

Manufacturers are racing to comply with new rules that mean an increasing proportion of the cars they sell have to be electric or face fines.

By 2035, sales of new petrol and diesel vehicles will be banned, and Labor wants to bring the date forward to 2030.

Analysis of ONS data by Paul Dales, chief economist at Capital Economics in the UK, showed that from a peak in car production earlier this year, it had fallen by more than 10 per cent this summer. .

If output remains at the same reduced level for the rest of the year, it will reduce growth by 0.2 percentage points, Dales calculated.

This is an important part at a time when the International Monetary Fund expects the country’s GDP to grow just 0.7 percent in 2024.

Professor David Bailey, an expert on the car industry at the University of Birmingham, said: “Recent falls in production are largely due to disruptions in production both from the retrofitting of new models, especially electric vehicles, and from persistent supply chain disruptions, combined with declines in exports.”

“However, just as companies are investing heavily in the UK to switch to electric vehicles, demand growth for such cars has slowed due to the high starting price of cars and concerns over rollout. of charging infrastructure.

“The government’s radical change in deadlines for banning internal combustion engine cars has also led some consumers to postpone the switch to electric vehicles.

“What is clear is that the Government needs to do more to encourage the adoption of electric vehicles, giving clear direction to both the industry and consumers, to encourage faster deployment of charging infrastructure and to implement a more Supportive industrial policy to boost the sector.’

On Friday, the motor industry urged the chancellor, Rachel Reeves, to reduce VAT on new electric vehicles and public charging points to stem the decline in the electric vehicle market.

In an open letter to the Chancellor, the Society of Automobile Manufacturers and Traders said market share for electric vehicles was “barely moving” and carmakers were likely to miss sales targets for zero-emission vehicles. established by the previous Government.

SMMT chief executive Mike Hawes said separately that more than £20bn of investment was committed to the sector last year, mainly for the development of batteries and electric vehicles.

But moving from making combustion engine vehicles to “fundamentally different” electric vehicles has a “more significant impact on production” than model changes would have had in the past.

Jaguar, Mini, Vauxhall and Nissan are among those that have made or are in the process of making changes.

Hawes warned that production could decline further next year.

“Behind the scenes there is a really difficult market,” he said.

“What we’re seeing across Europe is weakened demand for electric vehicles; it’s basically stagnating.”