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UK car industry's 2,000 job cuts underline gloomy prospects

Joanna Partridge
Photograph: Peter Byrne/PA

The gloomy prospects facing the UK car industry have been underlined by 2,000 new job losses and the worst May car sales since 1952.

Only 20,000 new cars were registered in May compared with 184,000 during the same month in 2019, the Society of Motor Manufacturers and Traders said. Just over half a million new cars have been sold in the first five months of 2020, compared with more than 1 million at the same point last year.

The car dealership chain Lookers said it plans to cut 1,500 jobs and close 12 dealerships just days after car showrooms were allowed to reopen in England, although they remain closed in Scotland, Wales and Northern Ireland.

The group, which operates 164 car dealerships, said the redundancies were needed to protect the long-term future of the business and it hopes to save £50m a year from the job cuts. It currently employs 8,100 staff and two thirds are on the government’s furlough scheme.

Related: UK car sales slump as 2,000 workers lose their jobs in Covid-19 crisis – business live

The firm will begin consultations on the redundancies shortly, which will reduce its workforce by almost 20%.

Warwickshire-based luxury car manufacturer Aston Martin Lagonda also announced 500 redundancies.

Mike Hawes, chief executive of the SMMT, said the second month of the car industry shutdown had had a “devastating impact” on the market and described this week’s dealership reopenings as “a pivotal moment for the entire industry and the thousands of people whose jobs depend on it.” Car sales in April were down 97% on 2019 levels.

The new job losses come just days after McLaren announced it was axing 1,200 jobs.

The dealerships closing down at Lookers, which sells vehicles for large manufacturers including Toyota, Ford and Volkswagen, as well as luxury brands including Aston Martin, Bentley and Ferrari, are in addition to 15 closures announced in November 2019. It will be left with 136 outlets.

Lookers said it had taken orders for 2,865 new and used cars in the last fortnight – half the number of sales compared with the same period in 2019.

Hawes said early reports from dealers was encouraging, but that it is too early to tell how demand would hold up over the coming weeks and months. He added: “Restarting this market is a crucial first step in driving the recovery of Britain’s critical car manufacturers and supply chain, and to supporting the wider economy.”

Aston Martin recently came close to going bust for the eighth time in its 107-year history. The coronavirus pandemic forced it to close 90% of its global dealerships, and in May it reported a loss of £119m for the first three month of the year.

The company has since been bailed out by billionaire Lawrence Stroll, who led a £536m rescue deal in March, and then injected another £75m  to enable the company to fight off a cash crunch.

The jobs announcement comes just days after Aston Martin sacked its chief executive, Andy Palmer, as part of a wider board overhaul. A Mercedes executive, Tobias Moers, will replace Palmer.

The sports carmaker has a total workforce of some 2,600, but the trade union Unite said the threatened losses would fall almost entirely on the Warwickshire plant in Gaydon, which employs about 1,600 people.

Unite’s regional officer Tim Parker said the job losses would be “a massive hit” to the West Midlands economy and the supply chain.

“We can ill-afford to lose such highly skilled, world-class manufacturing workers,” he added.

He urged the company to seek only voluntary redundancies and the government to provide financial support, and added: “Aston Martin has been making use of the taxpayer-funded job retention scheme to furlough the majority of the workforce, it is now planning to throw a third of the Gaydon workforce onto the scrapheap – we think that is repugnant.”

Mark Raban, Looker’s chief executive, said: “We have taken the decision to restructure the size of the group’s dealership estate to position the business for a sustainable future, which regrettably means redundancy consultation with a number of our colleagues. This has been a very difficult decision.”

The company has received the initial results of an investigation into a potential fraud in one operating division of the business, which delayed the publication of its 2019 results.

The group said an investigation conducted by accountants from Grant Thornton had shown the need for it to strengthen some “behavioural and cultural aspects relating to its control environment” and it was taking action to remedy this.