The end-of-year sales figures have confirmed what had been becoming clear through 2017 for the UK’s car industry: its austerity-defying, unique-in-Europe, five-year boom has well and truly ended. By December, a whopping 14% fewer cars were being sold than at the same time a year ago.
As a barometer of economic and consumer confidence, as well as a pointer to the fortunes of one of the UK’s major manufacturing industries, the dip in sales would be troubling news for any government – let alone one set on a Brexit course that the motor industry views as potentially calamitous. Furthermore, the Society of Motor Manufacturers and Traders (SMMT) makes it clear that it also blames ministers for one particular trend: the 17% drop in diesel cars sold, 200,000 fewer in 2017 than the previous year.
Yet neither the overall fall, nor diesel’s accelerated plunge, should be laid at the door of government. The preceding boom owed much to cheap credit, with 90% of private car sales coming via the personal contract purchases (PCPs) that have caused concern at the Bank of England. If consumer confidence in such deals has been knocked by the prospect of higher interest rates, a dose of reality could avert the greater worry of growing, unsustainable debt sparking a second crash.
Meanwhile, it is hard to play anything but the tiniest violin for the industry as it whinges about the “demonisation of diesel”. The minor tax incentives announced by the chancellor in his November budget went only a small way to addressing a public health crisis in air quality. When tens of thousands of premature deaths are being directly attributed by health experts to burgeoning levels of NOx pollution from diesel cars, a little perspective is needed.
The direct, deliberate cheating exposed in the Volkswagen scandal has led to prosecutions, massive corporate fines and jail sentences in the US, yet virtual inaction in Europe. The motor industry has still a long way to go to make the public believe its claims that new diesel engines are clean; indeed, independent tests have shown that even those manufactured to the latest Euro 6 standards continue to fall short. Instead of showing their determination to clean up, car bosses have preferred to finger-point at wood-burning stoves, and resist the mild nudges of the Treasury. Years of issuing lab test figures – whether for petrol consumption or NOx emissions – that bore little relation to the real world have earned the industry the public’s distrust.
Despite all that, and given the recent history of diesel, the SMMT should be heard when it talks about unintended consequences. It was, after all, the government’s desire to cut CO2 emissions that saw tax breaks given to diesel over petrol, bringing diesel from the margins to become the most popular fuel for new cars in little over a decade from 2001.
Now, the SMMT says, the government risks deterring people from buying cleaner, newer cars because consumers are reluctant to invest in diesel – even though diesel may, in certain circumstances, be the preferred environmental alternative. Potential buyers are sitting on their hands, the industry claims, rather than switching to alternative fuels; older engines chug on and spew out NOx rather than get replaced.
This is all too plausible, if uncomfortable, territory for the motor industry, which can only ever hope to limit its negatives in the environmental debate: even if electric cars have zero emissions at the tailpipe, there is still the environmental cost of power generation and their batteries to consider.
The SMMT praised Angela Merkel for backing diesel manufacture, as Germany pursues an awkward path between protecting industry and public health by simultaneously promoting clean air zones.
If the British industry really believes in cleaner diesel, it needs to embrace transparency and push solutions to tackle the errors of the recent past and the highly polluting cars on our roads – and not simply denounce attempts to force change. Otherwise, the public will indeed see only demons in diesel.
UK productivity is rising – but not always for the right reasons
British workers are renowned for putting in extra hours at the office to no great effect while their counterparts in France, Germany and the US clock off at 5pm with the job done.
The relative productivity of workers across the developed world is a matter of huge debate, but if the figures from the OECD are taken as a guide, a US worker produces $68 each hour worked, compared with the $52 that a UK worker can generate. In France and Germany the figure is around $67 an hour. That means the average UK worker must slave away for a third more hours to achieve the same level of output as his or her rivals.
So it is encouraging that the latest estimate of labour productivity by the Office for National Statistics shows a 0.9% increase in the three months to September 2017. Britain needs to play catch-up.
Since the 2008 financial crisis, the UK’s average output per hour worked has remained flat. If, as most economists believe, productivity is the key that unlocks more generous pay, then it is easy to see why some number-crunchers believe pay rises are about to become more generous.
Almost zero productivity gains over the past 10 years has restricted pay rises to an average between 2% and 2.5%. Before 2008 the average increase in productivity was 2%, with wage rises of between 3% and 4%.
Sadly, the jump in productivity is not due only to expansion by the manufacturing industry. Weaker jobs growth in the services and construction sectors is another reason why, since the Brexit vote, the UK economy has generated broadly the same amount of output for fewer hours worked.
Producing the same output with fewer workers is not most people’s idea of a healthy rise in productivity. But if higher investment in machinery and technology is the knock-on effect as EU workers become more scarce, that at least will rebalance the economy away from unskilled jobs to higher-paying roles.
Dark side for Disney if Star Wars fails to take off in China
Star Wars: The Last Jedi has been a force to be reckoned with at the global box office since its release, comfortably reaching $1.1bn (£810m) before its arrival in China this weekend.
But there are early signs that it has been unable to clone its success in the world’s second-largest film market, with domestic comedy The Ex-File 3 outperforming the sci-fi epic, according to preliminary figures.
If The Last Jedi fails to replicate its stellar worldwide performance in China, it represents a further cautionary tale for a Hollywood studio system that is grappling with waning powers. Successive Star Wars films have struggled in the Middle Kingdom but there were hopes that Walt Disney Studios, the all-conquering Disney division behind the franchise, would reverse that with a big marketing campaign.
Hollywood needs success in China to shore up its long-term future. If Star Wars fails to crack that market, it does not bode well for the US film industry.
