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The Independent Automotive Aftermarket Federation

Key points from the October 2021 Budget Statement

Date: Thursday 28 October 2021

The 2021 budget key points were:

On the supply chain, Daniel Windaus, working capital restructuring partner at PwC, said.

“As we go through autumn and beyond, the drain on cash and liquidity is likely to increase. Lead times and replenishment strategies are being stretched even for regional supply chains, meaning safety, stock and inventory policies are being adapted - or need to be adapted- regularly. The lag between the cash outflows from sourcing materials and producing inventories ready to sell, and the cash collected from sales is widening.
“Our research has found that consumer- facing UK businesses including department stores and computer and electronics retailers were already holding stock on shelves for an average of five weeks before being converted into sales at the end of June 2021. Recent market conditions would suggest that those working capital demands will have increased significantly, putting further pressure on businesses.”

On HGV issues, Zena Gridley, restructuring partner at PwC, said:

“The Chancellor has recognised the continuing issues for companies receiving and delivering goods by extending the suspension of the HGV levy until 2023, while freezing vehicle excise duty for heavy goods vehicles.
“However, as fuel, driver and supply chain issues continue to swirl, ‘empty’- or partially ‘empty legs’ where trailers carry no, or significantly reduced stock means companies still incur costs such as fuel, driver wages and wear and tear on vehicles but dent vital margins at a critical time. Anecdotally between 10-40% of routes are either empty or partially empty and this issue will be front and centre during a period of driver shortages. The key focus for clients we are advising rests on how they can use technology to improve route planning and reduce fuel consumption and improve their profitability.”

Tony Danker, CBI Director-General, said:

“The Government’s commitment to innovation will be a central cog to the UK’s prospects to leading in the industries of the future. This will be essential to be globally competitive so the Government must stick to these targets in the coming years.
“Meanwhile, businesses will welcome the new skills bootcamps. This agile approach must now be the watchword when it comes to revolutionising the skills landscape, including for apprenticeships.
“This Budget alone won’t seize the moment and transform the UK economy for a post-Brexit post-Covid world. Businesses remain in a high tax, low productivity economy with concerns about inflation. But the Budget will have a positive impact across the economy and makes several changes that will be welcomed by UK businesses.”

Mike Hawes, SMMT Chief Executive, said:

“The effects of the pandemic continue to hurt businesses across the sector – supply chain disruption, skills shortages and punitive energy costs. The Budget included some significant steps, most notably in adjusting business rates to allow relief on renewable energy and the extension of the super-deduction. Together with the Global Britain Investment Fund which provides £817m to support the transition of automotive manufacturing and the £620m announced last week for incentives, as well as investment in charging infrastructure, these are a recognition of the importance of the automotive sector and its ability to drive innovation and exports, and to create well-paid, highly skilled, green jobs across the country.
“The Budget was also a missed opportunity to support the many supply chain businesses which are suffering cash flow shortages due to stoppages arising from the semiconductor shortages.”