The automotive industry was quick to react to the Budget today (Mar 3) with the freeze on fuel duty welcomed but the forthcoming rise in corporation tax unsurprisingly not going down well.
RAC head of policy Nicholas Lyes said: ‘Drivers will breathe a sigh of relieve that the chancellor has decided not to “rock the fuel duty boat”.
‘We feared this would only pile further misery on drivers at a time when pump prices are on the rise and many household incomes are being squeezed as a result of the pandemic.
‘If the chancellor had raised fuel duty, he could have risked choking any economic recovery as it would have led to increased costs for consumers and businesses.’
Alex Buttle, director of Motorway.co.uk, said: ‘Despite the ban on new fossil fuel cars being brought forward to 2030, the government has delivered an olive branch to petrol and diesel drivers in the Budget today by not increasing the fuel duty.
‘With the economic background being challenging for most households, this is a welcome move’
However, he added: ‘Businesses meanwhile are not getting off so lightly, with the corporation tax hike [from 19 per cent] to 25 per cent announced.
‘While the Small Profits Rate means only 10 per cent of all companies will pay the full higher rate, this increase won’t help non-essential businesses with any short-term economic recovery, and the worry is this increase could well be passed on to their customers.’
Stuart James, chief executive of the Independent Garage Association, said: ‘We are pleased that financial support for small businesses has been extended in today’s Budget, and thank the chancellor for responding to our request to continue the Retail Business Rate Relief Scheme into the 2021/22 tax year,.
‘There are hard times ahead for independent garages. A significant decline in MOT work is expected from April to June, where motorists took advantage of the MOT extension last year.
‘Garages have also experienced lower volumes of servicing and repair work over the past year due to motorists making fewer journeys.
‘Extending the furlough and business rate relief schemes will provide the financial assistance needed to help independent garages through this upcoming difficult period, so they can continue their essential work keeping vehicles in their local communities safe and roadworthy.’
Philip Nothard, chairman of the Vehicle Remarketing Association, commented: ‘What the remarketing sector probably wanted to see more than anything from this Budget was a continuation of the kind of support needed to sustain the economy as we come out of the coronavirus crisis and it seems that the chancellor has delivered on that front.
‘Especially once showrooms reopen in the spring, we want to see a situation where individuals and businesses can feel confident in making used car and van purchases, and factors such as the extension to the furloughing scheme should play an important part in this.
‘The downsides for business were few, such as the increase in corporation tax, and the super-deduction is an interesting idea that could genuinely power a degree of growth.
‘We also welcome the new measures to encourage apprenticeships, which could be of interest to companies right across the remarketing sector.’
SMMT chief executive Mike Hawes said: ‘Today’s Budget provides some encouragement to an automotive sector hit hard by the pandemic and additional trading costs.
‘But it falls short of the support needed to transform the industry and market to the net zero future to which both the government and industry aspire.
‘Measures to support investment and upskilling are of vital importance to the sector but more is needed if the government’s green recovery plan is to be a success.’
He added: ‘Anything that encourages the recruitment of apprentices would have our full support.
‘It is encouraging to see the accompanying “Build back Better: Our Plan for Growth” commits to upskilling and the need to address some of the weaknesses of the Apprenticeship Levy, which does not work for many employers.’
Epyx commercial director Debbie Fox reflected on how the industry had adapted to the economic problems caused by the pandemic, helped by the government’s ‘high degree of spending’ on financial support.
She added:’The Budget was all about extending that help through to a point in the autumn when, hopefully, our lives have returned to something resembling normality, whatever that looks like in the future.
‘On that basis, with measures such as discounted business rates and the extended furlough scheme, it was a Budget that has done its job.
‘Future difficulties may be encountered should taxes have to rise to account for the almost unprecedented spending. However, the consensus seems to be we can wait a little longer until this comes into effect and even the planned corporation tax increase has been deferred to 2023.’
Sepi Arani, commercial lead at Carwow, said: ‘The announcement from the chancellor of the exchequer today that fuel duty will once again not increase marks the eleventh year that fuel duty remains frozen.
‘While fuel has decreased in necessity over the past 12 months, with lockdown set to lift over the coming months, does this indicate that the government sees increasing this tax a far less lucrative option as we witness the rise of EVs?
‘Either way, it’s positive to see that British motorists are not, at least for now, bearing the weight of Budget challenges.’
Seán Kemple, managing director at Close Brothers Motor Finance, said: ‘Car dealers across the UK will be impacted by the chancellor’s decision to raise corporation tax from 19 per cent to 25 per cent from 2023.
‘Increased tax will put more pressure on bottom lines, so the government will need to provide proper support and communication for those struggling.
‘Continuing the business rates holiday will help, and go some way to supporting car dealers across the country who have been worried about the impact of Covid-19 on their businesses.
‘The pandemic brought the UK economy to its knees and the car industry was no exception. But the industry is vital to the economy more broadly, and as the backbone of the car industry, getting dealers back up and running must be front and centre of the government’s plans.’
Autocar editorial director Jim Holder commented: ‘Freezing the fuel duty for the eleventh year in a row is welcome news to the country’s 33 million drivers.
‘To ensure the UK stays at the forefront of car manufacturing and development, the government needs to back its promise of investing in electric vehicle infrastructure and manufacturing.
‘With Jaguar, Ford and Volvo recently announcing plans to go electric by 2025 and 2030, respectively, the country needs to establish itself as a leading manufacturer of electric vehicles.
‘This means getting to grips with the new rules of origin framework, which seeks to increase the UK and EU parts content of cars by 2027.’
Paul Burgess, chief executive of Startline Motor Finance, said: ‘Extending the furloughing scheme and continuing to reduce business rates will provide financial stability for businesses and for individuals, allowing them to plan for the rest of 2021 with a high degree of certainty.
‘Ultimately, moves such as these should also protect the viability of jobs and employers.
‘While we’ll all have to start paying the bill for this enormous spending at some point in the future, that time appears to have been largely postponed with the corporation tax rise not coming into effect until 2023.’
Institute of the Motor Industry CEO Steve Nash wasn’t impressed with the £3,000 being offered to businesses for each new apprentice they hired, though.
He said: ‘With the government still refusing to waive the apprenticeship levy clawback, if funds are not used within two years, the picture for the apprenticeship route in automotive still looks bleak.’
Apprenticeship starts across the automotive industry last November were a third lower than in 2019, he said, while some sectors such as vehicle maintenance and repair even saw a decline of nearly 100 per cent versus the year before.
‘The IMI will continue to ask the government to rethink its stance on the apprenticeship levy clawback,’ he added.
‘It seems utterly counter-intuitive to urge employers to take on apprentices, yet not give them the flexibility and understanding that in the past 12 months the ability to start new apprentices and therefore use the levy fund has been limited.’
James Tew, iVendi chief executive, said: ‘We know that what dealers fundamentally wanted from this Budget was a stable economic background that allowed them to plan for the rest of the year with a high degree of certainty.
‘By and large, this has been delivered. Businesses and individuals are being given a high degree of support and this should help to project jobs and reduce any potential business difficulties.
‘All of this should help to maintain and build consumer confidence, which should feed through into sustained – and even possibly buoyant – used car, van and motorcycle sales.’
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