Saturday, September 25, 2021
HomeNews‘Going green’ risks destroying the British car industry – for a whim

‘Going green’ risks destroying the British car industry – for a whim

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To my mind, Boris Johnson’s announcement of the ban on sale of all new petrol and diesel cars from 2030 – just ten years off ­– is one of the most significant political decisions in modern times. It says much of the way this Government thinks, how it acts and how it treats business and people. This clearly is not a Government that trusts the people to decide what is best but one where the people must be told what is right for them.  

The implications of this ban are immense in terms of manufacture, supply chains, investment, sunk capital, employment, infrastructure, consumer choice, value of existing stock and so much more. So please forgive the statistics that follow, for I think them important. But let us also look at the impact of this decision from an economic, political and social perspective.  

Firstly, currently well over 99 per cent of all cars on the road in the UK use the traditional combustion engine. The UK’s manufacturing profile in automotive is almost entirely geared towards combustion technology with the sole exception of Nissan’s manufacturing of the Leafat its Sunderland plant. Other manufacturers based in Britain are announcing investment programmes for electric assembly, such as Jaguar Land-Rover’s plans for new models coming out of its various Midlands plants, but there is a very long way to go before new electric car sales approach even a fraction of what British people drive. 

China dominates the global top ten of electric car manufacturers, with the US, Germany, Japan, South Korea and France bringing up the rear – and that is not a position that is likely to be relinquished. 

Thus to claim, as the Government do, that this policy will result in leadership in new technology demonstrates how little they understand about business. Simply banning one successful business and telling consumers to buy something else does not mean the UK will be successful at the new industry. That is an obvious fallacy. 

The government risks destroying a successful British industry for a marginal place in a new one. Certainly if this Government believe that banning manufacture of combustion engines within a decade, rather than letting consumer choice make the market, will lead to the UK’s achieving leadership in electric cars, they are deluded. Worse, if they think they can direct investment, government ministers are about as likely to succeed as the British Leyland management in the 1970s. Have they learned nothing? 

As if to demonstrate this, BMW has announced it is moving the manufacture of its eight and twelve cylinder internal combustion engines to Britain so it can focus on manufacturing its electric power trains in Germany. While it’s good news in the short to medium term for job opportunities in Birmingham, the lead in electric for BMW will be taken in Bavaria, as might be expected. 

The British automotive sector is big. Last year it had a turnover of £78.9billion, one fifth of the entire manufacturing base of the UK. Of the 1.3million cars manufactured, more than 80 per cent were exported. This generated some £42.4billion of exports, 13 per cent of the entire export output of the UK. This is a great British success story of renaissance given the problems the industry faced only 25 years ago. 

UK automotive employs 180,300 directly in manufacturing and hundreds of thousands indirectly. Over £3.1billion of new capital was employed in facilities last year alone. The list goes on.  

Technologies change and most rational people would wholeheartedly welcome competition of ideas. May the best technology win! Just as the combustion engine has evolved and improved, let us celebrate the growth of hybrid and electric. But never before has a Government dared to close down an entire and critical industry almost overnight by diktat.  

Cars replaced the horse because consumers preferred the car. The same thing happened with the transition from the aircraft propeller to the jet engine (although the British Government sold the technology to the Americans and Soviets for sweeties): the market chose. The same thing may very well happen with the electric car, but that should be the call of us, the consumers, not the Government. It is for you and me to choose what sort of car we wish to drive, be it big or small, blue or red, electric or combustion.

To legislate from an arbitrary date (and one not far off) that the sale of all new combustion cars must cease is frankly one of the most illiberal and economically destructive policies ever to come from Whitehall. It risks hundreds of thousands of livelihoods and much-needed exports for the most marginal benefit.  

Moreover, this virtue signalling whim will make hardly a jot of difference for the environment. Automotive is a long-term, capital-intensive industry. New models take years to design, tooling up costs tens of millions and more, and families invest a large proportion of their hard-earned cash in the car of their choice.  

Now, just as the Government at the stroke of a pen wiped thousands of pounds off the value of diesel cars, they will do exactly the same thing again, deliberately driving down the value of traditional cars. Worse, the new technology is still in its infancy. Technological outcome is suboptimal in terms of infrastructure, range, battery technology, relative cost and the like.  

The private sector would find a way – it always does. Take the mobile phone network. While the cellular phone came out of military developments by private British company RACAL, if it had been left to Government we would probably still be waiting on a monopoly supplier providing a service for public use. Instead, enterprise organically built a highly effective and relatively inexpensive network. The same will happen with electric cars if left to personal choice. But if the Government directs you can be sure of the result: incompetence, inefficiency and expense.   

What gives the Government the right to interfere in such a manner? It will claim ‘the environment, stupid’. Really? Ninety-four per cent of carbon dioxide occurs naturally and Britain accounts for under 2 per cent of the man-made output of the remaining 6 per cent – and automotive perhaps 30 per cent of that. This is a tiny percentage of already small percentages (0.06 x 0.02 x 0.3 = 0.000036 per cent). Does this really justify such illiberal action and enormous upheaval, forced job loss and cost? We may well choose to drive electric cars if we judge they are better, cleaner and more efficient, but I’m sorry, that’s my business, not the Government’s.  

A fuller version of this article, which is republished by kind permission, appears here. 

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Ewen Stewart
Ewen Stewart is a City economist who runs the consultancy Walbrook Economics. He is director of the think tank Global Britain and his work is widely published in economics and political journals.

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