Government support for employment in the automotive manufacturing sector

The full debate pack contains further background on industry issues, including press, parliamentary material, and additional research.

Economic contribution

In 2024, the motor vehicle manufacturing industry contributed £21 billion to the economy, 0.9% of all UK economic output. 139,000 employees worked in the industry in 2023 (the latest available data from the Office for National Statistics), around 0.4% of all employees.

Employment is concentrated in regions with large factories. For example, in the North East 1.6% of all employees work in the industry. In the West Midlands that proportion is 1.5%. All other regions and nations of the UK are at or below 0.5%.

A further 548,000 employees in the UK worked in the motor vehicle sales and repair sector, which includes vehicle parts, around 1.7% of all employees.

The sector is largely export-oriented. 77% of cars built in the UK in 2024, around 600,000, were exported. About half of them were exported to countries in the EU, with a further 17% exported to the US. In 2024, the UK’s cars exports totalled £28 billion. Exports to the US were £7.7 billion (27% of the total by value).

This briefing provides further statistics on the UK automotive industry, its production volume and an international comparison.

Tariffs

Since 3 April, the US has imposed a 25% tariff on imports of passenger vehicles and light trucks, with similar tariffs on automobile parts expected by 3 May. The Society of Motor Manufacturers and Traders (SMMT) has called the situation “extremely challenging,” and anticipates a drop in demand for UK cars. The UK government is negotiating an economic deal with the US aiming to avoid significant tariffs. The government has not ruled out tariffs on US imports if no deal is reached.

Zero Emission Vehicle (ZEV) mandate

In response to industry challenges, on 7 April, the government introduced certain flexibilities to the Zero Emission Vehicle (ZEV) mandate. The ZEV, effective from January 2024, aims to increase the sale of electric vehicles (EVs) in the UK. Supported by both Conservative and Labour governments, it is part of the Vehicle Emissions Trading Scheme (VETS), which includes a CO2 emissions standard for non-ZEV cars and vans. The mandate requires zero-emission vehicle sales to reach 100% by 2035.

The government has confirmed an end to the sale of new pure petrol-diesel cars in 2030, an end to new pure petrol-diesel vans in 2035, and that the sale of hybrid cars would be permitted between 2030 and 2035. On the ZEV mandate, the following flexibilities were confirmed:

• The ability for manufacturers to borrow ZEV allowances from future years would be extended from 2027 to 2029.
• The ability to transfer CO₂savings from non-ZEV to ZEVs would be extended to 2029.
• The introduction of a new bidirectional transfer mechanism to allow ‘excess’ ZEV cars and van sales to be transferred between car/van quotas, with an exchange rate forZEV car to ZEV van of 0.4; for ZEV van to ZEV car of 2.
• A reduction in compliance payments from £15,000 to £12,000 for every ZEV, car manufacturers fall short of the target.

Industrial strategy and current support

In October 2024, the government proposed an industrial strategy aimed at achieving the highest rate of sustainable economic growth in the G7. This strategy would target support for eight key sectors, including advanced manufacturing and clean energy industries. The final strategy is expected in June 2025, including support for the automotive industry.

In Budget 2024, the government confirmed £2 billion in funding for the automotive sector, including for zero-emission vehicle manufacturing and supply chain. This appears to be confirmation of funding that was originally announced under the previous government. An additional £300 million has been allocated to promote uptake of electric vehicles.

Automotive manufacturer representatives have said that the industrial strategy is important, and that manufacturing in the UK needs to be attractive – pointing to the need for innovation, green energy at affordable cost, reasonable labour costs, access to skills and reduced bureaucracy. They argue that the UK industry needs investment to grow, including to bring down the cost of vehicles, which is currently too high.

Due to US tariffs, the SMMT has suggested further government support may be needed. According to Unite the Union, UK plant utilisation is at its lowest since the 1950s, raising concerns about layoffs. Potential support measures suggested include a temporary furlough scheme and tax reliefs.