Car industry warns UK jobs 'at risk' due to semiconductor crisis

Car industry bosses have called on the government to extend some of the financial support measures introduced during the coronavirus pandemic to protect jobs that are at risk due to the ongoing production crisis caused by the shortage of semiconductors.

The limited supply of chips, exacerbated by increasing demand for consumer electronics during lockdowns, has impacted car production globally, prompting some firms to halt manufacturing and even develop versions of cars containing fewer semiconductors.

Speaking during an Autocar Business webinar on the crisis, Mike Hawes, the head of the Society of Motor Manufacturers and Traders (SMMT), warned that the car industry has “not yet met the middle of the crisis”, predicting that the turbulence will continue throughout 2022.

Asked if jobs could be threatened by the production disruption, Hawes said: “Absolutely. We've written to government ministers about this in the last few days. Things are coming to a head now, because the impact of some of these production stops not only has an impact on the vehicle manufacturer, but goes upstream into the supply chain.

“OEMs [car makers] are having to tell their supplier: ‘No, I don't want delivery of those parts that I had forecast in my production plan.’ The chances are that supplier has made those parts so they’ve got cash sitting there that they can't get out the door.

“When you think about what's happened to all businesses in the last 18 months, the demands on cash have been particularly stretched because of lockdowns and everything else and unpredictable levels of demand. I am worried about the supply chain, because they are exposed to this and they don't have as deep pockets as a large OEM.”

Noting that the roots of the semiconductor crisis were related to the pandemic, Hawes called for the government to consider extending some of the support measures introduced to help mitigate the economic impact of Covid to be extended.

“There are things that government could do [to reduce the impact of the semiconductor crisis], and we need a degree of urgency around this,” said Hawes. “The government has thrown its arms around the economy over the last 18 months. As a sector, we've benefited from the furlough scheme, but that's coming to a close. I think we need to look very closely whether you can extend that for specific needs, because this is a Covid-related issue.

“Not all the economy is affected in the same way about Covid and we've seen that. We're seeing a particularly acute problem in the car industry now. There are similar issues in aviation: certainly elements of high and highly advanced manufacturing are particularly prone at the moment.

“We'd like to see a continuation of that sort of support, because we need to maintain and retain the supply chain we have in the UK because the OEMs – not just here but elsewhere – depend on it. We'd like to see the continuation of some of the measures that government has currently in place that are due to expire, because this is a short term measure and it's a Covid-related issue that we're trying to resolve.”