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Providing safe harbour in the automotive sector

The trends driving the challenging outlook for traditional automotive business models and market segments have been well documented. Increased costs from regulation, changing consumer mobility preferences and the increasing speed of the transition to electric vehicles has been behind a gradual, yet continued decline in UK car production since the March 2017 peak.


The impact of COVID-19

Demand for new personal vehicles took a significant hit in the first half of the year, as health and financial concerns interrupted traditional automotive shopping behaviors.

Fleet sales - which make up a substantial proportion of total new car sales - have stalled, as businesses pull back on major investments. The latest forecasts are for global light vehicle sales to recover to 2018 volumes by 2025, with the peak-to-trough drop caused by COVID-19 significantly greater than in the two year decline associated with the 2008-09 recession.

Whilst there has been a slight improvement of both new and used car sales throughout the summer and autumn off the back of pent up demand, the additional lockdown restrictions enforced across many European countries this winter is likely to cause further uncertainty. The current convergence of the financial pressures from COVID-19, the gradual unwind or transition of government support measures, allied to the end of the Brexit transition phase at the end of 2020 all provide significant challenges that the UK Automotive Sector needs to overcome collectively.

Safe Harbour Scheme

In response to the current uncertainty and increasing pressures facing the UK Automotive industry, the Society of Motor Manufacturers and Traders (SMMT) have launched the Safe Harbour Scheme. The scheme provides automotive suppliers impacted by COVID-19 with a mechanism to bring together various stakeholders to collaborate, address the key challenges facing their businesses and ultimately minimise the potential risk and impact of financial distress on their supply chains.

We are pleased to be a part of the SMMT’s Safe Harbour Scheme, supporting companies across the industry and providing their stakeholder groups with positive intervention, a critical step to securing successful strategies to underpin a sustainable and resilient supply chain for the future.

If you, or your clients would like to find out more information about the scheme please get in touch with your local contact, our Restructuring Services Automotive lead, Sandy Duncan (saduncan@deloitte.co.uk), or visit the SMMT Safe Harbour website (https://www.smmt.co.uk/member-services/safe-harbour/).

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