Automotive Industry

Richard Thomson Excerpts

Wednesday 12th July 2023 Commons Chamber

[Richard Thomson (Gordon) (SNP)]

I had ample cause to reflect as I listened to the Minister’s speech, replete with positivity as it was, that there are probably not all that many electric vehicles on the market that could not have been charged up to about 80% in the time the Minister was on her feet. I wondered whether she was looking to give her name to a standard unit of measurement that we might adopt for such an infusion of charge into a vehicle.

The debate is of course about an industrial strategy, or the lack thereof. While I was preparing for the debate, I had the opportunity to stumble over a few of the various iterations of industrial strategy we have had under Conservative Governments past and present. We had one called “Industrial Strategy: building a Britain fit for the future” dating from 2017, which in most respects seemed to be a pretty conventional industrial strategy in what it set out to achieve and the sectors it sought to develop to do that. That was of course replaced by something called “Build Back Better” under the unlamented premiership of the former Member for Uxbridge and South Ruislip, which notably promised an “open and dynamic economy” and “World-class knowledge and research”, all the while the Government seemed determined to cut us off from our largest competitors and closest market. It promised

“A stable framework for growth and strong institutions”

and boasted of “low, stable inflation”, which sounds somewhat risible after the experience of the past few months. It also promised levelling-up in terms of people and places, despite the fact that we have seen a significant lack of transparency in the allocations made through that funding stream. I suggest that those allocations will do nothing to recalibrate the grossly disproportionate imbalances of wealth and life opportunities across the nations and regions of these islands.

That takes us to the automotive industry. In many ways, it is something of a surprise that there still is one. Part of the deeply held mythology of the Conservatives in terms of the shape of the post-1979 UK is a tale they like to tell of industrial dysfunction and poor industrial relations. While that certainly took its toll on the automotive industry, I think it is the general lack of care that we have shown for manufacturing and the economic vandalism inflicted over that period as services were esteemed over manufacturing that makes the continued existence of our mass automotive sector in the UK a near miracle. That is not just as a result of the general lack of respect for manufacturing; there was also the general economic policy.

Since being elected to this place, I have always tried to talk more about the future of the North sea oil and gas fields than about their past mismanagement. Successive Governments, Conservative and Labour, were desperate to get the oil and gas pumping as quickly as they could, to reduce the crippling balance of payments deficit. The result was to push up the value of sterling beyond anything sustainable, which made manufacturing exports uncompetitive. Together with what we might call the policy of sado-monetarism that was imposed with high interest rates, manufacturing was driven down even further and unemployment was allowed to spiral later in the decade to above 3 million, leaving scars in the form of decades of lost opportunities and diminished life chances.

Although automotive production rallied later in the decade thanks to significant overseas investment, in recent years those concerns have re-emerged. The Society of Motor Manufacturers and Traders has reported that manufacturing decreased every year from 2016 to 2022. I hear what the Minister says about the positive trend of the past four months, but there is a longer-term trend over the past six years that cannot simply be wished away because of the past few weeks. In that time, a number of UK-based manufacturers have announced UK plant closures or reductions in capacity.

Greening the automotive industry will be a key element in the green transition. Personal transportation will be here for good, so it is imperative that we seize fully the industrialising of our green opportunities. We have touched on the importance of gigafactories. Batteries are heavy things by their nature, because of the materials that go into their production. There are lots of regulations on their transport, particularly cross-border. They are hazardous to transport over long distances due to their flammability. That means that there will be a strong incentive to ensure that EV manufacturing is located relatively close to where batteries are manufactured—probably in the same country and region.

For all the promises of factories, Britishvolt and the potential of gigafactories here, the UK is at risk of falling even further behind Europe in battery manufacturing. Capacity in continental Europe is expected to reach nearly 450 GWh by 2030. That is simply dwarfing the scale of the ambition, never mind the scale of delivery, that we are likely to see over the next few years. If those batteries are made in Europe or Asia, there is a simple decision that vehicle manufacturers can take about where to build the electric vehicles of the future.

All that is compounded by rules of origin. The new post-Brexit rules that come into effect in January 2024 will place 10% tariffs on exports of electric cars between the UK and the EU, if at least 45% of their value does not originate in the UK or the EU. We have heard about Stellantis, the world’s fourth largest car manufacturer, which has warned that the commitment to make electric vehicles in the UK is in serious jeopardy unless the Government can negotiate a deal to maintain existing trade rules until at least 2027, to give them a chance to adapt.

[Gavin Newlands (Paisley and Renfrewshire North) (SNP)]

I looked at Labour’s Opposition day motion; is my hon. Friend as surprised as me that it does not mention Brexit anywhere?

[Richard Thomson]

I was very surprised about that. It seems to be the elephant in the room, and of this discussion. If my hon. Friend is patient, I will come to that towards the end of my speech.

Not just Stellantis makes such warnings; they have been echoed by Jaguar Land Rover and Ford, which have said that if the cost of EV manufacturing in the UK becomes uncompetitive and unsustainable, operations will close. Mike Hawes, the chief executive of the SMMT, warned at a summit recently:

“We can’t afford to have a last minute, 31 December agreement, because business needs to plan its volumes.”

Andrew Graves, a car expert at the University of Bath has warned of dire consequences of the industry, noting:

“you will start to lose the whole of the UK industry, not just Vauxhall and a couple of other manufacturers…it really makes no industrial sense to locate in the United Kingdom.”

The UK Government’s lack of action to ensure that the UK has the capacity to build batteries necessary for EU production—coupled with Brexit, as my hon. Friend the Member for Paisley and Renfrewshire North (Gavin Newlands) rightly raised—has made it virtually impossible for domestic UK production to help us meet our targets on CO₂ emissions. As Mike Hawes said:

“We urgently need an industrial strategy that creates attractive investment conditions and positions the UK as one of the best places in the world for advanced automotive manufacturing.”

That must be a priority for the UK Government, but I do not see any indication beyond warm words that it is. To quote someone else who might know what they are talking about, Andy Palmer, former chief operating officer at Nissan and chairman of battery start-ups InoBat and Ionetic, has warned that

“we are running out of time”

to get battery manufacturing up and running in the UK, and that the failure to address the issues also caused by Brexit could lead to 800,000 jobs lost in the UK—basically those associated with the car industry.

[Gavin Newlands]

On job losses, Madam Deputy Speaker you will remember as well as I do the impact of the closure of Linwood car plant on the town. Many would say that Linwood has still not fully recovered from that closure, when thousands of workers were put on the scrapheap. Is my hon. Friend worried about what will happen to places such as Sunderland and Ellesmere Port if the Government do not get a grip?

[Richard Thomson]

I share my hon. Friend’s concern. [Interruption.] There is some sedentary chuntering—if the hon. Member for Bosworth (Dr Evans) gives me a chance to respond to the intervention, I will gladly give way to him if he has a substantive point to make. We can still see the industrial scars of the devastation reaped by the sudden closure of the Linwood factory in 1981. What we do not see quite so readily but is still every bit as debilitating is the impact on families who lose opportunities to participate fully in the economy. There is a very high price associated with getting this wrong, which goes far beyond simply not seeing factories on greenfield sites.

The motion speaks about a lack of a meaningful UK industrial strategy, which is a fair accusation. It calls for the need to

“urgently resolve the rules of origin changes”

that are looming in 2024. At this point, I am bound to observe that both Labour and the Conservatives make grandiloquent promises about how each would seek to harness the power of the British state to transform the economy and, with it, the lives and opportunities that follow. For the two years in every three over the last century that the Conservatives have had power, or the one year in every three that Labour has had power, neither has done that.

I mentioned the various iterations of Conservative industrial strategy; I have read Labour’s industrial strategy, which carries the signature and many photographs of the hon. Member for Stalybridge and Hyde (Jonathan Reynolds). In many ways it is a very fine document, but when it comes to the impact of rules of origin, as with much else, a position promising to make Brexit work means absolutely nothing. I say this as gently as possible: Brexit can never be made to work, either in its current form or in any conceivable variant. As long as making Brexit work is part of the strategy, no matter which party it belongs to—Labour or the Conservatives—it will be left with a slow puncture.

[Jonathan Reynolds]

Will the hon. Member give way on that point?

[Richard Thomson]

I was coming to the end of my remarks, but I will give way since I mentioned the hon. Member.

[Jonathan Reynolds]

I understand the strength of feeling on that point and how, when we have this conversation, many will revert to that Brexit argument. However, I ask the hon. Gentleman to recognise not the political case but the economic one: we have the lowest business investment in the G7 under this Conservative Government. We want to provide a stable platform for that investment to increase in gigafactories, R&D, hydrogen and all the things we want to see, but reopening that debate—and the independence debate—is not the stable way to realise those opportunities in future. If we spend all our time doing that, we will find that other countries get to a point that we will never be able to catch up with, because we did not focus on the real opportunities at hand.

[Richard Thomson]

I thank the hon. Gentleman for that intervention, but I could not disagree more. This is not a stable platform. The Conservatives are offering us the stability of decline, and it seems that Labour is embracing that for fear of frightening its former voters in the red wall. It seeks to get them back not with honesty, but by telling people what it thinks they want to hear. It should have the intellectual honesty to recognise that the real debilitating impact on securing future growth opportunities is not from the issue he mentions, but from the barriers that have been imposed. To hear that Labour intends to further padlock them in place will depress a great many people the length and breadth not just of Scotland but, looking at opinion polling, far beyond.

I regret to say that although the motion contains many fine words—it is certainly a fine document in many respects from Labour—while it remains saddled to the Brexit the Conservatives have given us, it will not do anything to tackle the fundamental problems it diagnoses.