US tariffs threaten lay-offs at UK’s luxury car plants, industry warns

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Staff at the UK’s high-end car plants could lose their jobs unless the government steps in with financial assistance such as furlough schemes to offset Donald Trump’s tariffs, the automotive industry has warned.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, said the tariffs were having a “severe, significant and immediate” impact on luxury marques such as Aston Martin, Bentley, Jaguar Land Rover and McLaren that depend on wealthy American consumers.

Britain’s car industry is heavily reliant on exports to Europe but it is also exposed to the 25 per cent tariff the US president has imposed on imports of all foreign-made cars because the US is the largest market for the UK’s high-end brands.

Hawes told the House of Commons’ business select committee that some of the most expensive small-volume carmakers depend on the US for 30 per cent to 50 per cent of their exports.

The SMMT chief told MPs the people who bought luxury cars were sophisticated consumers, and would not necessarily pay the extra costs for the vehicles as a result of the tariffs.

“The assumption is that if you can afford £200,000 for a car, you can afford £250,000 for a car, but those high net-worth individuals are shrewd, they can see what’s happening,” he said.

“They see their vehicle potentially can be 25 per cent more expensive so they’ll hold off, they’ll pause, it’s a discretionary spend . . . you’ll see order books dry up immediately.”

Hawes said carmakers would try to get their existing inventory into the US as quickly as possible, but it would be “weeks rather than months” before they might have to make tough decisions even if lay-offs would be a “last resort”.

He told MPs it was vital for the UK to get a trade deal “very quickly” with the US that supported the automotive industry.

The alternative was for ministers to come up with a new “mechanism”, citing the kind of furlough scheme that was introduced during the coronavirus pandemic five years ago.

“There’s a number of things you could look at, any way of supporting employment,” he said.

Alternatives for ministers could be to introduce National Insurance or VAT holidays — or encourage more temporary flexibility from HM Revenue & Customs — for some carmakers, he said.

Liam Byrne, the Labour chair of the business committee, said after the meeting: “Ministers are right to throw everything at securing a US trade deal to hold off this real and present danger — but hope is not a plan.

“We must be ready with a big, bold lifeline for our world-class carmakers: incentives to boost UK sales, a blitz to slash energy costs and targeted support to keep our exporters in the race.”

JLR has suspended shipments to the US while Aston Martin has said it hopes to pass on some of the tariff cost to consumers. People close to the company said Aston Martin expected as much as a £30mn hit to its gross profit as a result of the US tariffs, potentially wiping out all of the profits analysts had been expecting for the year.

According to the Institute for Public Policy Research, more than 25,000 direct jobs in UK carmaking could be at risk if exports to the US fall.

Even before the US tariffs, carmakers had been struggling with the heavy investments they had made in electric vehicles and sluggish car sales in Europe. Ford last year said it would cut 800 jobs in the UK, while Vauxhall owner Stellantis announced plans to shut its van factory in Luton, putting about 1,100 jobs at risk.

Meanwhile Stephen Phipson, head of the manufacturing trade group Make UK, told the committee that companies were putting in place contingency plans to deal with the potential drop in trade caused by the Trump tariffs.

Phipson said the sectors facing the toughest challenges as a result of US tariffs were steel and cars.

“We don’t know from one day to the next . . . whether he’s going to suspend, whether he’s going to change [the tariffs], it makes planning your investments extremely challenging,” he said.

He said he supported ministers’ efforts to strike a trade deal.

“Many manufacturers are putting in temporary contingency plans hoping that in the next month or two we can get some sense and they don’t have to do the next level.”

When Byrne said that sounded “like people being laid off”, Phipson said: “That would be the end result of a dramatic reduction in volume, absolutely right, yes.”