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8/20/2025, 8:36:24 AM
Workers at Vauxhall's Luton factory celebrated as a white Vivaro van drove off the assembly line; since then, it marked the 120-year history of the production line behind it.
Remarkably, the factory, which began car production in 1905 and expanded to tanks and aircraft engines during World War Two, closed on March 28th due to financial constraints at Vauxhall's parent company, Stellantis.
An Overview of the UK Car Industry
The UK car industry is diverse, with large factories like JLR, Nissan, BMW MINI, and Toyota, as well as suppliers, high-tech engineering firms, smaller luxury car firms like Aston Martin, Bentley, Rolls-Royce, and McLaren, and bus and truck manufacturers.
In 2016, the UK produced 1.82 million new vehicles, the highest since 1999. However, the industry has faced further challenges over the past decade, including factory closures and uncertainty over US trade policy, which has affected exports to a major market.
Moreover, the UK industry has become an expensive place to build cars due to high labour costs, which are twice the level in Central European countries like Poland, Slovakia, and Hungary, and high energy costs, with British manufacturers currently paying some of the highest electricity prices in the world. This has caused short-term disruption but hidden a deeper structural problem.
The Ripple Effect on Local Industries
Last year, Stellantis' Luton plant closed, estimated to cost the regional economy £300m per year. A small part of the workforce relocated to Stellantis' Ellesmere Port plant in Cheshire, where the company is investing £50m in production expansion. The Unite union representative at the plant stated that some workers had retired and others are taking wage reductions.
Likewise, smaller businesses in the automotive sector, such as Burnett's Manufacturing in Northampton, can mitigate the impact of the motor industry by diversifying their business.
The company, which primarily manufactures rubber and plastic parts, relies on the motor industry for 40% of its business but also supplies components for shipbuilders and oil and gas firms.
Long-Term Effects of Manufacturing Losses
Some senior executives highlight the significant impact of factories and supplier shutdowns on local communities, productivity, exports, and research and development. They believe that excessive manufacturing has led to poor productivity performance in the UK, as it has allowed too much manufacturing to go.
Further, Steve Fowler, EV editor for The Independent, argues that Britain differs from European countries in supporting homegrown industries. The loss of national prestige, such as the 2005 MG Rover collapse, is harder to assess. The collapse was seen as a symbol of the wider decline of British industry, causing thousands of job losses.
Besides, upmarket brands like Rolls-Royce, Bentley, McLaren, and Lotus, as well as BMW-Mini, are intentionally promoting their British identity. If these cars were no longer produced in Britain, it could be seen as a national humiliation, and the auto industry's decline could be seen as a sign of a wider loss. This is a common practice among mass-market manufacturers.
Anticipated Recovery: SMMT's 2026 Forecast
The UK automotive industry seems to experience a 15% decrease in vehicle production in 2025, with 755,000 units, marking a significant drop from 2024's output.
However, the sector experienced a positive shift as electrified vehicle output reached a record high in the first half of 2022.
The UK-US agreement may stabilise trade flows by reducing car tariffs, potentially resuming exports for premium brands, while agreements with the EU and other markets may recover lost volume.
Furthermore, the government's DRIVE35 plan aims to reduce energy costs, invest in EV charging, and boost domestic engineering competitiveness, while AESC's second gigafactory in Sunderland may ease production constraints.
Eventually, SMMT predicts a 6.4% recovery in 2026, bringing output to over 800,000 units, but this is below past goals. Annual production may remain 850,000-930,000 units until the end of the decade.
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