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IMI identifies car retail sector's ‘green shoots of recovery’ in ONS data

Steve Nash, IMI chief executive

The Institute of the Motor Industry (IMI) has identified the car retail sector’s “green shoots of recovery” in newly-published Office of National Statistics (ONS) data, but says the marketplace remains “pretty fragile”.

The IMI aimed to take the temperature of a sector which in 2019 comprised 620,000 jobs in 95,000 establishments covering 167 occupations following the COVID-19 coronavirus lockdown through analysis the latest ONS data on UK business performance. 

It found that 88% of automotive businesses are now trading, with 5.9% of businesses having been reopened in the past two weeks and a further 6.2% planning to reopen in the next fortnight.

The Scottish Government's announcement on car showroom re-openings yesterday (June 18) means that their re-start will not happen until June 29 - almost a month after English dealerships' June 1 return.

Some business reported improved resilience, with 31% of automotive business stating that their cash reserves would last more than six months, meanwhile – an increase of 2% since last reporting.

However, 6.3% of automotive business said that they either had no cash reserves or less than a month’s back-up – potentially putting 5,300 businesses at risk.

IMI chief executive, Steve Nash, said: “There are definite signs of green shoots of recovery – but it’s clear the marketplace is still pretty fragile.

“The ONS data reflects the first two weeks when car showrooms re-opened so it’s not surprising that many businesses have only taken tentative steps with more than a quarter still reporting significant decreases in turnover.

“However, continued government advice to avoid public transport could be a boost for new and used car sellers alike – and their associated aftermarket services.”

The ONS’s data revealed that 28% of automotive businesses who are continuing to trade had reported turnover down by more than 50% in the period analysed.

Approximately 44,000 jobs have returned to work from furlough in the past two weeks, with an additional 13,000 planned in the next fortnight, the IMI said, however approximately 240,000 jobs remain on furlough with 81% of automotive businesses having accessed the coronavirus job retention scheme.

Nash said: “What really concerns us is the long-term impact on the skill-set of the sector.

“We know that many employers, large and small, are pausing or even cancelling apprentice recruitment.

“It is also too early to tell how the end of the furlough scheme will work and what further impact that could have on the range of skills in any one business.

“It’s a bit like picking a football team, with those who don't get selected inevitably wondering what it means for their future. A difficult time for employers and employees alike.

“The IMI will therefore continue to lobby government to do what it cans to underpin the apprentice cohort; we will also continue to encourage a review of the six-month MOT extension. 

“It really isn’t needed any more – the garages are open and observing all the right safety measures and the longer it continues the greater the risk of unsafe cars on the roads.”

Last week Arnold Clark chief executive, Eddie Hawthorne, told AM that the car retail group’s apprentices will see their training “set back by a year” as a result of the COVID-19 crisis.

The top AM100 group, the UK’s largest family-owned motor retailer, currently employs over 900 apprentices and operates its own academy GTC Training Centres in Glasgow and Wolverhampton.

“How do you social distance with an apprentice?” asked Hawthorne, who is currently managing the return to work of the business’s workforce of around 11,500 people.

“We’ve had no choice but to refer our first- and second-year apprentices back to the GTC training centres for a couple of months.

“Unfortunately, they are all going to have to repeat a year because we simply haven’t been able to continue their training.”

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