The green agenda is slowing British growth, the car industry warns

Britain’s net zero push is putting a significant brake on economic growth, The Mail on Sunday can reveal.

The economy has been hampered by disruption caused by the switch to electric vehicles, which has pushed the car industry into recession as manufacturers desperately try to meet government targets.

This change caused car production to drop sharply. An analysis of official figures shows the decline is on track to undermine growth by 0.2 percentage points this year. That trend could continue well into next year.

The car industry, which employs almost 200,000 people in Britain, is pinning its hopes on increased demand for electric vehicles to eventually recover – but that demand is currently stagnant, adding to the misery.

The latest figures from the Office for National Statistics show that transport equipment production fell by 3.1 percent in the second quarter of the year, after six straight quarters of growth.

Industry evidence suggests that the switch from petrol to electric vehicles is to blame.

Manufacturers are racing to meet new ZEV rules that mean an increasing proportion of the cars they sell must be electric or face fines.

By 2035, the sale of new petrol and diesel vehicles will be banned – and Labor wants to bring the date forward to 2030.

Analysis of ONS data by Paul Dales, the UK’s chief economist at Capital Economics, showed that since a peak in car production earlier this year, it had fallen by more than 10 percent this summer.

If production remains at the same reduced level for the rest of the year, that will save 0.2 percentage points in growth, Dales calculated.

That’s a significant portion at a time when the International Monetary Fund expects the country’s GDP to grow by just 0.7 percent in 2024.

Professor David Bailey, an automotive industry expert at the University of Birmingham, said: ‘The recent declines in production are largely due to production disruptions due to both the adaptation to new models, particularly electric vehicles, and ongoing supply chain disruptions, combined with a decline in exports.

‘But just as companies are investing heavily in Britain for the EV shift, growth in demand for such cars is slowing due to the high initial price of the cars and concerns about the rollout of charging infrastructure.

‘The government’s change in target dates for banning cars with combustion engines has also prompted some consumers to postpone the switch to electric cars.

‘What is clear is that the government must do more to encourage the use of electric vehicles, by giving both industry and consumers a clear direction of travel, promoting faster roll-out of charging infrastructure and more supportive industrial policy to to give the sector a boost.’

On Friday, the car industry urged Chancellor Rachel Reeves to cut VAT on new electric vehicles and public charging points to halt the downturn in the electric vehicle market.

In an open letter to the chancellor, the Society of Motor Manufacturers and Traders said the EV share of the market was “barely moving” and that carmakers were likely to miss the zero-emission vehicle sales targets set by the previous government.

SMMT chief executive Mike Hawes said separately that more than £20 billion of investment was committed to the sector last year, mainly for the development of batteries and electric vehicles.

But the switch from making combustion engine vehicles to “fundamentally different” electric vehicles will have a “more significant impact on production” than model changes would have done in the past.

Jaguar, Mini, Vauxhall and Nissan are among those that have made or are in the process of making changes.

Hawes warned that production could fall further next year.

“Behind the scenes, it’s a very, very difficult market,” he said.

“What you’re seeing across Europe is weakened demand for electric vehicles – it’s actually stagnating.”