Car showroom closures cost UK £61 million a day

22 May 2020

Keeping dealerships closed is costing the UK Treasury £61 million (€68 million) a day, the Society of Motor Manufacturers and Traders (SMMT) has revealed. This cost comes through a loss of tax income and furlough funding.

On the back of this calculation, the SMMT called on the UK Government to allow the country’s 4,900-strong network of new-car showrooms to reopen as a matter of urgency. It said retailers are ready to get back to business, using social distancing and hygiene measures to keep customers and staff safe.

Calculating the costs

The industry body calculated that VAT, vehicle excise duty (VED) and other taxes on new-car sales to private buyers alone, amounts to roughly £5.4 billion (€6 billion) annually. However, as the coronavirus (COVID-19) lockdown forces showrooms to stay closed, this figure will have been cut by 23% by the end of the month, with every additional day costing £20 million.

Furloughing the retail sector’s 590,000 workers under the job retention scheme is also costing an estimated £41 million a day. The SMMT argues that this bill could be reduced if retailers were able to bring staff back to work.

Autovista Group estimates that dealers in Europe and the UK (EU28) lost €1.8 billion between the start of lockdowns and the end of April. This calculation accounted for losses in residual values, stock days and ageing of the individual vehicle.

#unlockukauto campaign

The SMMT is taking this time to launch its new ′10 reasons to #unlockukauto’ campaign. The lobbying group outlined the benefits of allowing UK dealerships to reopen, which would kick-start the new-car market, which suffered a 97.3% drop in April.

The 10 reasons outline how car showrooms can more easily accommodate social distancing and that retailers are ready to reopen as they have been preparing for weeks. The industry group states that the economy would benefit and the UK’s £82 billion automotive manufacturing sector would be boosted, also reducing the burden on the government as people return to work.

The lobbying group also points out that many people are unable to take delivery of new vehicles or shop around as their finance and lease deals came to an end before lockdown. The SMMT said that allowing buyers to return to showrooms will speed up the replacement of older, more-polluting vehicles with cleaner technology.

′Government measures to support the critical automotive industry during the crisis have provided an essential lifeline, and the sector is now ready to return to work to help the UK rebuild,’ Mike Hawes, SMMT chief executive, said. ′Car showrooms, just like garden centres, are spacious and can accommodate social distancing easily, making them some of the UK’s safest retail premises.’

′Allowing dealers to get back to business will help stimulate consumer confidence and unlock recovery of the wider industry, boosting tax revenue and reducing the burden on government spending. Unlike many other retail sectors, car sales act as the engine for manufacturing and reopening showrooms is an easy and relatively safe next step to help get the economy restarted. With every day of closure another day of lost income for the industry and Treasury, we see no reason for delay,’ Hawes concluded.