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Garages could actually see their fortunes rise, despite the fact that the UK is in recession for the first time in 11 years, and experiencing the biggest recession on record. It was widely assumed that the suppression of economic activity resulting from lockdown would lead to a recession, but figures released by the Office for National Statistics (ONS) in August confirmed this. According to the statistics, GDP shrank by 20.4% between April and June, compared with a 2.2% drop between January and March. The picture did improve during the quarter however, as lockdown was gradually eased. May saw GDP up 2.4% and in June it went up another up 8.7% on a month-by-month basis. Despite this, by the end of June, the UK economy was still 17.2% smaller than it was in February, prior to the COVID-19 crisis. The last UK recession took place between 2008 and 2009, resulting from the financial crisis. In the same week, it was also revealed that employment saw its biggest fall in over a decade during Q2, while data for July showed that 730,000 fewer people were employed than before lockdown. While the economic slowdown associated with a recession will have a myriad of negative consequences, during previous recessions, the independent sector has flourished as motorists opted to keep existing cars, and continued to use an independent instead of being drawn back to the dealerships. The Block Exemption Regulation also means that those with newer cars who would tend to use franchised dealers for servicing can instead look to their local garage for support. Commenting on the figures, IGA CEO Stuart James observed: "It is understandable that we saw the economy shrink throughout lockdown.“ He said there was some cause for optimism for the garage sector as well: “With ONS data showing the economy starting to recover from May, there has been talk of a V-shaped recovery, and we feel this will vary from industry to industry. However, the services of the independent garage sector were essential throughout lockdown and remain vital at a time where UK workers are being encouraged to go back to work, avoiding public transport where possible. “Garages have a backlog of MOTs to work through due to the end of the six-month MOT exemption, and sales of used vehicles are increasing which may result in a growth in demand for servicing and repairs. With this in mind we are confident that independent garages can survive the recession and continue their crucial role in keeping communities mobile.” IMI CEO Steve Nash added: “It is of course disappointing – but not really surprising – that the UK economy is in recession. However, while there are tough decisions being made by businesses in all sectors, in automotive we are also seeing a ‘keep calm and carry on’ attitude. As of the end of July, 97% of automotive businesses were trading, with around 72,000 jobs returned to work from furlough in the second half of July and an additional 49,000 planned to have returned by the second week of August.” Steve concluded: “The fact is our sector plays a crucial role in the underlying infrastructure of the UK economy. The key now is for automotive employers large and small to ensure they can keep one eye on the future – including preparing for the road to zero – while maintaining business for the here and now.” NEWS 4 AFTERMARKET SEPTEMBER 2020 www.aftermarketonline.net UK in biggest recession on record Furlough: The 10% Solution From Tuesday 1 September, garages that have taken advantage of the Coronavirus Job Retention Scheme will need to pay 10% of wages so employees receive 80% of their pay under furlough. As part of a progressive withdrawal of the furlough, the government’s salary contribution is dropping from 80% to 70%. Since Saturday 1 August, businesses that have put staff on furlough have been required to pay National Insurance and pension contributions for their workers. Up until then, the government had been paying up to 80% of wages, up to a maximum of £2,500 per month. From Thursday 1 October, the government will pay 60% of wages up to £1,875, with employers topping up the national insurance, pension contributions and 20% of wages to make sure staff still get 80%. At present, the scheme is set to end on Saturday 31 October.