With the general election just weeks away, all major parties have now laid out their offers to voters in one of the most highly charged campaigns in decades. Rarely in recent history have the major parties presented the electorate with such polar opposite offerings and, indeed, been so polarising.

But while party strategists may be focusing most of their policy pledges on ‘Workington Man’ there are still some important takeaways for the automotive industry. Our corporate communications experts have studied each of the major parties’ manifestos to see what the new government could have in store for the automotive sector.

Brexit

This election has been dubbed the ‘Brexit election’, and for many voters the Brexit policies of each party will be the key deciding factor in how they vote. Therefore, it is not surprising that for most parties this is their headline policy. The Liberal Democrats have been adamantly pursuing the mantle of being the remain party. Their policy to revoke article 50 if they win a majority is meant to make it crystal clear to voters where they stand. Should they not win a majority, as seems likely, the party has suggested it will support Labour in its pursuit of a second referendum.

The Labour Party position is more nuanced. The party has committed to holding a second referendum after negotiating a new trade agreement, with most of the shadow cabinet, including shadow Brexit secretary, Keir Starmer, publicly declaring they will campaign for remain. Until the recent Question Time debate Jeremy Corbyn’s position was less clear, but in answer to a member of the public he made it clear he will negotiate a new deal and then remain neutral in the referendum, implementing the result whatever it is.

The Conservatives’ Brexit policy is to pass the deal recently negotiated by Boris Johnson. If the Conservatives win a majority, they will bring legislation back to the House before Christmas, with Britain legally leaving the EU before the end of January. The manifesto also commits the party to not extending the transition period, meaning Johnson is planning on negotiating the future trade relationship between the UK and the EU by the end of 2020. However, trade experts suggest this is something that could, in reality, take many years.

The Brexit Party’s position has evolved with the release of its manifesto. Earlier in the campaign, it was calling for ‘a clean exit’ – in other words a no-deal Brexit. However, its manifesto simply rules out an extension to the transition period, implying it now supports the deal negotiated by Boris Johnson that it previously opposed.

Between immediate revocation of Article 50, leaving with a deal, and holding a second referendum, immediate revocation would be the least disruptive option for the automotive sector. Both a second referendum and leaving the EU with a deal will extend uncertainty into 2020 and potentially beyond. In either case, the Society of Motor Manufacturers and Traders (SMMT) has called for an ‘ambitious’ Brexit deal to be struck by the new government, to safeguard the future of the UK automotive sector.

Tax

While a number of parties have announced various radical reforms to personal taxation, our focus is on how policies will impact businesses in the automotive sector. While it is only euphemistically mentioned in the Conservative Party manifesto, Boris Johnson recently announced that he would hold off cutting corporation tax any further, and will maintain the current level of 19%. However, the party has pledged to increase the R&D tax credit rate to 13% and review the definition of R&D, to ensure it benefits the most innovative businesses. It has also promised to reduce business rates, although it doesn’t detail by how much, or who the main beneficiaries will be.

The Labour Party has pledged to reverse cuts to corporation tax, while keeping it lower than 28%, which it was in 2010 when the Conservatives came to power. It has also said it will waive business rates on new capital – but seemingly only for the steel industry, which it considers to being key to its ‘Green Industrial Revolution’.

Like Labour, the Liberal Democrats will raise corporation tax, but only by one percentage point, to 20%. The party also says it will replace business rates in England with a commercial landowner levy. This would focus on the value of the land, rather than the value of the property, which the party says will stimulate investment and shift the burden of taxation onto landowners, rather than tenants.

 

The Brexit Party plans to reform corporation tax, with the main beneficiaries being small businesses. It says it will introduce a zero rate of corporation tax on the first £10,000 of pre-tax profit a company makes. However, it doesn’t indicate what the tax rate will be on subsequent profits. It also says it will replace business rates with a simpler system, but doesn’t detail what this system might be.

Whatever the outcome of the election, it seems that larger businesses are likely to pay more tax in 2020/21 than they expected at the start of the year. However, proposed reforms to rates by some parties would hopefully benefit a number of businesses in the automotive supply chain.

Transport

The Liberal Democrats have a section of their manifesto titled, ‘reducing the need for car travel’, which focuses on making it easier and more reliable to use public transport, walk or cycle. The party has also proposed a local sustainable transport fund, which will aim to reduce the number of single-occupancy car journeys by developing car sharing schemes, car clubs and ‘autonomous vehicles for public use’. It also wants to increase the rate of installation of public EV charging points, as well as extending ultra-low emission zones to ten more towns and cities in England, and shift more freight from road to rail.

Labour’s transportation policy includes bringing bus networks under public ownership, which will see it reinstate 3,000 routes that have been cut in recent years. It has also pledged to invest in improving the road network and will review all tolled crossings. It, too, wants to promote the use of rail freight, with services also coming under public ownership.

The Conservatives have committed to investing £100 billion in additional spending on roads and rail services, including on Northern Powerhouse Rail. This project will see a new line built between Leeds and Manchester and a number of other connecting lines to the region’s largest cities. Like the other two parties, extra funding would be provided for local bus routes as well as tram and train services, with a focus on increased electrification and frequency of service. Alongside investing in public transport, the party has committed to investing £29 billion in strategic roads and the largest pothole programme yet seen in the UK, with £4 billion committed over four years, as part of attempts to improve the quality of UK roads.

Of the three parties, the Conservatives are offering the most investment in road improvements, expansion and maintenance and thus would probably offer the most benefit to the industry. Their commitment to filling in potholes, should it be effectively delivered, would be of particular benefit to long-haul truck and bus companies, which face considerable costs associated with damage caused by potholes.

Manufacturing

The Labour Party has committed to a ‘Green Industrial Revolution’, which will see the party seek to have 3% of GDP spent on research and development by 2030 and provide extensive support to the steel industry. This support will take the form of government contracts, reductions in industrial energy prices, exempting new capital from business rates, and building three new steel and recycling plants while upgrading production sites. Labour has laid out specific plans to support the UK’s automotive industry as it transitions to electric models by investing in three new Gigafactories and four metal reprocessing pants. Combined with Labour’s plans to phase out diesel and petrol models in the next two decades, there will be substantial government pressure on UK car manufacturers to shift to electric models.

The Liberal Democrats have committed to supporting companies in reducing emissions from industrial processes through carbon capture technology, which will be funded by an expansion of the Industrial Energy Transformation Fund. They would also seek to encourage businesses to be more aware of their environmental impact by increasing the environmental requirements for businesses qualifying for government contracts. The party would also end UK Export Finance support for fossil fuel-related activities and introduce legally binding targets for reducing the consumption of natural resources, presumably with financial penalties if they were breached. This would be combined with a statuary target in England for companies to recycle 70% of their waste. All of these requirements taken together would place serious legal and financial obligations on companies in all industries.

The Conservative Party has sought to address the fundamental changes that automation and computing will bring to the jobs market by requiring all major infrastructure projects to hire and train a significant number of UK apprentices. The party has also created a new National Skills Fund worth £3 billion which would be used to match the sum individuals or SMEs spend on education and training, facilitated by the creation of 20 new Institutes of Technology. R&D spending will also be increased across the parliament until it reaches the Conservatives’ goal of 2.4% of GDP. The party also claims it will use government contracts to support new companies with innovative ideas. In contrast to the other two parties, the Conservative proposals are focused heavily on smaller companies and encouraging the private sector to take action, with the government having a smaller role of creating the correct conditions for them to succeed.

Of the three parties, Labour is offering by far the most money to supporting existing manufacturing companies and helping them and their staff adapt to an increasingly tech-focused economy. The substantial financial support Labour is offering could seriously help struggling automotive manufacturers in the UK, as well as encouraging new companies to expand through government contracts and the exemption of new investment capital from business rates. By contrast, the Liberal Democrats would offer considerably less financial support while hitting businesses, including those in the automotive industry, with substantially increased regulatory and tax burdens.

Environment

All major parties have committed to some form of a ‘new green deal’ but the differences between them are quite stark.  

The Green Party is seeking to make the UK carbon neutral by 2030 and intends to spend £100 billion a year to make this happen. To achieve this target, the Greens not only want to remove all petrol and diesel cars from the road within a decade, but they are also calling for a reduction in the use of personal cars as a whole.

The Conservatives have committed to a net zero target by 2050, although it is worth remembering that interim emissions targets are already being missed. We also couldn’t find reference to a Conservative policy on increasing EV uptake, so the assumption is the previous government’s pledge to ensuring all news cars sold are ‘electric’ by 2040 still stands. The Conservative manifesto focuses instead on expanding renewable energy sources – such as offshore wind power.

The Labour Party has committed to achieving net zero in the 2030s and has announced a new clean air act. This includes a vehicle scrappage scheme to support the shift to ultra-low emission vehicles. The party will need incentives like this if it is to have a hope of achieving its objective of removing all diesel and petrol vehicles from UK roads by 2030. Like the Conservatives, Labour is also planning to increase renewable energy sources, such as offshore and onshore wind turbines, solar farms and nuclear power. Alongside these policies, Labour intends to bring all of the major energy companies into public ownership.

The Liberal Democrats have picked 2045 as the year by which the UK must be net-zero. Unlike the Greens and Labour, the Liberal Democrats ‘only’ want every new car sold by 2030 to be electric, rather than aiming for a fully electrified motorparc. Like the other parties, the main focus is on increasing renewable energy sources, with an ambition to double renewable energy to account for 80% of supply within the next parliament.

While the rate of change and scale of ambition to reach net zero varies widely across each party, it is also worth remembering that the advisory Committee on Climate Change ,which provides independent advice to the government, has said 2050 is the earliest credible date for achieving net zero for most sectors of the economy.

Conclusion

It is clear that whichever party, or coalition of parties, forms the next government, the effect of policy on the automotive sector will be significant. It is vital that automotive companies and stakeholders adopt a proactive approach and ready themselves for any eventuality. If there’s one thing we’ve learned about British politics over the last few years, it’s that the only thing that’s predictable is unpredictability.