£34bn loss: car industry could ‘crash’ if EV investment stalled

“The UK’s automotive sector is a vital pillar of the UK economy. The shift to electric vehicles presents an opportunity for the sector in harnessing its ingenuity and innovation in an evolving global market; but, like in every country, the transition also presents challenges.

“The UK is competing in a global market for battery electric vehicles (BEVs), leveraging its rich automotive heritage, robust R&D capabilities, and high-skill manufacturing. The UK ranks third globally for research quality in industrial batteries, and its automotive manufacturing sector and battery start-up ecosystem are the second highest in Europe and fourth worldwide by value.

“Significant recent investments by major industry players in electric vehicle production and its supply chain in the UK highlight the sector’s potential. However, scaling the UK’s BEV supply will hinge on future demand, creating a conducive environment for investment, and maintaining a favourable trade environment, especially since nearly 80% of UK vehicle production is exported.

“Our analysis highlights the necessity for a proactive, ambitious strategy to support the sector’s evolution. In this transformative period, it is essential for government and industry to collaborate, ensuring the UK remains competitive globally while building on its rich automotive legacy.”

Colin Walker, Head of Transport at the Energy and Climate Intelligence Unit (ECIU), which commissioned the analysis, said: “Global competition for the investment that will build the factories that manufacture EVs is intense. If the UK attempts to stand still on the transition, it risks repeating the mistakes of the 70s and 80s, leading to a crash in economic output and jobs lost.

“The UK’s car industry has huge strengths and there is enthusiasm to modernise, but Government will need to create the right conditions with incentives and investments to ensure the UK is at the front of the queue to leverage private capital and make the transition to building the electric cars of the future. A huge number of jobs and income will be lost if the UK underinvests, clings to dying technologies, and continues to build cars that our major export markets are moving away from.”

The UK’s automotive sector currently contributes £46.8bn in GVA and supports over 552,000 FTE (Full-Time Equivalent) jobs. CBI Economics forecasted the size of the automotive sector and the BEV production sub-sector between 2024 to 2035, under four different scenarios ranging from a best-case scenario in which the transition to EV production moves rapidly, to a worst-case scenario in which we see no increase in the share of vehicles being built that are electric.

It found that not only does the financial (GVA) contribution of the sector vary significantly between the most and least optimistic scenarios, but FTE employment contributions were forecast to change by similar margins, with the industry estimated to support 167,000 more FTE jobs by 2035 and 404,000 fewer FTE jobs by 2035 in the most and least optimistic scenarios respectively. Stagnation of BEV production could therefore see the automotive sector lose up to three quarters of its jobs.

Compared to the £46.8bn the automotive sector generated in GVA in 2023, under the report’s most optimistic scenario the sector would grow by 35% from this year up to 2035, with the BEV growth within this time period 878%. This represents a 745% increase in GVA attributed to BEV production between 2024-2035, and an 82% decrease in GVA generated through non-BEV production.

With global competition set to intensify in the BEV market, the report highlights that expanding BEV production will be vital for both supporting domestic demand and for export demand, as historically the majority of UK-produced vehicles (79% in 2023) are exported.