John Redwood is an incisive commentator on economics and politics, writing his daily blog on www.johnredwoodsdiary.com. He has led two UK-based international industrial businesses, set up and sold on an investment management company and is a fellow of All Souls College, Oxford.
Car output in the UK over the last century has been subject to two major crashes. One was in the 1970s, the high point of the public ownership model that Andy Burnham and others have recently argued for. The other is happening this decade. Output peaked at 1.92m cars during 1972, our last year before entering the European Economic Community (EEC). Many UK brands and past success stories were concentrated in the conglomerate British Leyland (BL). During our first decade in the EEC and its Customs Union, output slumped to 868,000 by 1982. BL was taken into government control in 1975 and kept afloat by public money. It struggled to survive with its output plunging from 916,000 cars produced in 1972 to just 405,000 in 1982, a fall of 56%.
The 1980s and early 1990s saw a rebuild of the industry, with the Government helping attract major Japanese investment as Nissan, Honda and Toyota added substantial new capacity alongside Ford and Vauxhall. Rover Group, BL’s successor, was sold in 1994 to BMW, which in the end kept only the Mini. Industry output recovered from the 1982 low to reach 1.78m in 1999. In 2005, when the residual Rover Group left over from BL got into financial trouble, the Government only offered temporary relief, so the brands were subsequently sold off to a Chinese company. The new owner decided to make cars under the MG brand in China. By 2009 output had slumped to just under 1 million as the economy battled the banking crash and recession of 2008.
By 2016 output had recovered to 1.72m. As net-zero policies were rolled out, the industry started to lose ground, and lost substantial output over the covid lockdowns, taking it back down to 920,000 in 2020. Instead of recovering after covid, the industry has suffered a major slide under successive governments. Manufacturers are preparing to close or convert factories making petrol and diesel cars ahead of the 2030 ban on selling new ones in the UK. Output was just 717,000 in 2025.
Why did the industry fail?
The big falls in the 1970s occurred for three main reasons. The first was the removal of tariffs on cars and the easing of trade barriers against European competition. The UK market saw imports account for just 5% of the total in 1965. This leapt to 56% in 1979, with most of the gains occurring after entry of the UK into the EEC. Continental producers in Germany, France and Italy were good at exploiting the market opportunities whilst the UK failed to stay competitive with product or prices as the tariffs were removed. Leading international groups took advantage of market opening to shift production from UK factories to continental ones to get economies of scale. They integrated their UK production and amalgamated their models with their continental businesses. They no longer thought they needed different designs for the UK from the EEC.
The second was the chaotic labour relations in a strife-torn UK. Managers were unable to win over employees and get them to accept positive leadership. Unions wanted to drive wages higher in an inflation-ridden economy and were willing to strike often to do so.
The third was the decision of the Government in 1975 to buy up 95% of the shares of BL, to direct the business, appoint the Chief Executive and finance the investment. By doing this they acquired control of the largest part of the UK car industry. They, with their chosen managers, failed to design and produce a streamlined and profitable car range as they played around with the large number of brands and plants they inherited.
Where BL had a good-selling product like the Mini they did not charge enough for it to make a sensible profit. They badge-engineered the vehicle so they were selling an Austin, a Morris, a Wolseley and a Riley version, adding to production and sales costs and competing against themselves with brand promotions. Where they had ageing product, as with the main Austin and Morris saloon cars, they failed to develop products that could outsell the new popular Ford, Vauxhall, VW and other European competitors.
The end result is that no one makes and sells cars under most of the brands they once held: Austin, Morris, Triumph, Wolseley, Riley, Vanden Plas and Rover are all gone. Jaguar survived but has not produced a single car for sale over the last year. Mini survived under BMW ownership and launched new models but is now mainly made abroad. Land Rover has survived. MG has changed from making UK-built sports cars to making family cars in China.
Why has the industry plunged to even lower depths this decade?
The 2020s started badly with covid lockdowns hitting all European producers. Although we should now be well into a sustained recovery, the UK industry has continued to decline. The main reason is government decisions to force the pace of transition from selling diesel and petrol cars to selling only battery vehicles. The industry’s warnings that the timetable was too demanding went unheeded. The main players accepted the unrealistic targets set, only to discover there were not nearly enough willing buyers of battery cars. The Government tipped in some modest subsidies for the new electric vehicles and made it dearer and more difficult to buy petrol or diesel. Electric cars are spared high taxes on fuel, unlike the fossil-fuel-based alternatives. They have favourable tax treatment when bought by companies. Still, they remain a minority choice of the public. At the same time diesels in particular have experienced a very sharp decline, adding to the difficulties of car makers. They must rush to write off their investments and move to close plants.
The main players accepted the unrealistic targets set, only to discover there were not nearly enough willing buyers of battery cars.
On the other side of the account the manufacturers have failed to put in much new electric capacity. Jaguar is only just getting round to offering a single choice of vehicle with battery propulsion at a much higher price than many of the older petrol and diesel cars that sold well. Its parent company, Tata, is building a large battery plant, but Jaguar will be launching dear new vehicles which will not be affordable in the mass market. Range Rover is planning new all-electric products. BMW is making most of its all-electric Minis outside the UK. A major investment plan to make larger car batteries in the UK was dropped. Nissan is the one large manufacturer that has committed to switching production to new electric cars with UK-made batteries. Over the last seven years, both the Government and car companies have watched as China has cornered the market in materials and components needed to make batteries, and has launched big ranges of battery cars at very competitive prices.
How much of the UK car industry can recover?
The Government is determined to end sales of new petrol and diesel cars in the UK in three years’ time, with hybrids following in 2035. Without a home market, few manufacturers will keep petrol and diesel lines running for export alone, so many of these production lines and factories look set to close. Vauxhall and Ford are not planning to make battery cars in the UK, and Honda has already left. Toyota imports its EVs but has said it might later start to produce a battery car in the UK. There is no firm project or timetable. The industry will be a lot smaller than in its heyday. Many jobs making petrol and diesel cars will go, much capital will be written off and the UK will be importing far more from China.
The industry is keen to see the UK adopt Made in Europe rules and standards and to impose a high tariff on Chinese imports. This is unlikely to make much difference to the many plans for leading manufacturers to cease making cars in the UK or to avoid returning to UK manufacture. The higher the Chinese tariff wall imposed, the more of our imports might switch from China to EU factories. This would come at the cost of a slower transition to battery cars and would give the UK consumer a worse deal.