By Amara Osei

The SMMT is seeking £125 million in grants and skills funding amid a roughly 180% rise in insolvencies among UK vehicle and component manufacturers from 2016 to 2025. The Society of Motor Manufacturers and Traders (SMMT), the UK automotive trade association, has asked the UK Government to back a national Automotive Productivity Accelerator and protect the supplier base underpinning vehicle production.

Its commissioned report, From supply chain risk to industrial growth, finds that lower and unpredictable demand, together with high UK labour and energy costs, squeeze cash flow. Programme uncertainty compounds those pressures on businesses supporting UK vehicle manufacturing, threatening existing capability and future growth.

The report links weak cash flow directly to reduced investment in equipment, skills and productivity. It therefore makes external capital central to the case for coordinated support.

Mike Hawes, SMMT chief executive, said: “Britain cannot afford to lose the suppliers that make vehicle manufacturing here possible. Once their skills, tooling and expertise are gone, investment becomes harder to win – and far harder to bring back.”

What policy package is the SMMT seeking?

The proposed accelerator would build on DRIVE35-funded Supplier Readiness and Transformation pilots in the West Midlands and North East, the association said. The SMMT presents those pilots as the starting point for nationwide productivity support.

• £100 million in capital grants: The funding would target productivity, automation, robotics, artificial intelligence and digitalisation across automotive suppliers.
• £25 million for skills: This allocation would support skills development within the proposed automotive productivity programme.
• Dedicated tooling finance: The finance would ease the upfront cost of tooling required for new vehicle programmes.
• £5 million match-funded programme: Match funding requires matching finance. The Auto to Aerospace and Defence Readiness Programme would support diversification, retain skills and preserve sovereign industrial capability, or domestic control of critical production capacity.
• Broader DRIVE35 eligibility: The SMMT wants support extended to components used in all powertrains, the systems that generate and transmit vehicle power. Plastic mouldings and steel pressings fall within the proposed scope.

The two grant allocations total £125 million. The SMMT presents the dedicated tooling finance and £5 million aerospace and defence programme as additional proposals, rather than components of the stated £125 million.

Why do supplier failures threaten manufacturing capacity?

The report found that insolvencies among UK vehicle and component manufacturers rose approximately 180% from 2016 to 2025, against about 63% across all UK businesses. The automotive increase therefore ran well ahead of the economy-wide trend, reinforcing the SMMT’s case for coordinated support.

Some suppliers reported running at around half capacity in parts of their businesses. The study links this underutilisation, and the broader pressure on cash flow, to higher costs for every component and weaker competitiveness.

Reduced cash flow leaves suppliers less able to invest in equipment, worker skills and productivity improvements. That weakness reduces their capacity to compete for future business, according to the SMMT’s analysis.

What is at stake for UK automotive industry?

More than 2,500 automotive supply chain businesses and 188,000 jobs form the industrial base that the SMMT says the proposals seek to protect. Preserving viable suppliers now would help retain critical capability, compete for future business and capture more value from each vehicle built in Britain.

Reshoring, meaning returning component spending to Britain, offers a route to that additional value. “The opportunity to reshore component spending in Britain is real, but we cannot take it for granted,” Hawes said. “Industry must improve productivity and work to secure critical capability, matched by government action on energy costs, market access and targeted investment support.”

Hawes framed supplier backing as protection for current jobs and Britain’s place in next-generation vehicle manufacturing. The immediate test for the UK Government is whether the proposed grants, skills funding and finance can preserve viable capacity before lost skills, tooling and expertise make investment harder to rebuild.