The Chancellor has received a warning from the automotive industry about the impact of proposed tax changes in the upcoming Budget.
Rachel Reeves is expected to announce the end of the ECOS employee car ownership scheme in the Budget on November 26th, a move which the motor industry fears could further damage the sector, already reeling from the cyber attack on Jaguar Land Rover (JLR).
Latest figures released by the Society of Motor Manufacturers and Traders (SMMT) reveal that car production fell over 27% in September, with JLR’s production shutdown almost entirely responsible. In terms of its impact on the economy, it is the most damaging cyber attack ever in the UK, costing £1.88bn and affecting over 5,000 organisations.
ECOS is a scheme for motor industry employees to purchase cars at substantially discounted prices, but the government announced in last year’s Budget that it will be reclassifying ECOS vehicles so that they qualify for company car tax, although the rules won’t be taking effect until April 2026.
The SMMT claims that 60,000 automotive industry workers will be affected, with the tax change meaning that those employees will effectively experience a pay cut and less able to afford a vehicle, which may be essential to their employment. 5,000 jobs may be at risk, say the SMMT, and a £1bn loss in revenue.
Mike Hawes, SMMT chief executive, said: “September’s performance comes as no surprise given the total loss of production at Britain’s biggest automotive employer following a cyber incident.
“While the situation has improved, the sector remains under immense pressure. The Industrial Strategy, launched by the Prime Minister, business secretary and Chancellor only in June, sought to align Government policies towards growth and restore UK vehicle output to 1.3 million units per annum.
“The move to scrap ECOS immediately puts that ambition in doubt and must be reversed given the damage it will inflict on the sector and exchequer revenues.”
