Government right to refuse JLR public funds despite 4,000 job cuts

A default reaction to news of job losses in the UK car industry is to ask what the government is going to do about it. So, well done business secretary Jonathan Reynolds for giving the correct response to the question of whether public money will be used to support Jaguar Land Rover, which on Monday confirmed 4,000 job cuts over two years. His answer was no.

It is the right stance because JLR’s cost-cutting cannot be compared to a Volkswagen-like existential corporate crisis. In common with most European carmakers, JLR has had a rotten 12 months thanks to Donald Trump’s tariffs, luxury taxes in China, inflation in the cost of raw materials and, in its case, a big cyber-attack. Yet the company continues to talk bullishly about double-digit growth around the next corner as it prepares to launch five new models.

Here, for example, was the big-picture outlook assessment in May’s full-year results: “Looking ahead, JLR remains resilient and well placed to address the geopolitical, inflationary and regulatory challenges the industry faces. Investment spend is planned to remain at £18bn over the five-year period from FY24 [full year 2024].

Monday’s job losses were characterised as a major – but not exceptional – programme to keep a lid on costs by finding £1.7bn worth of annual savings. Instead of breaking even, cash-wise, when it has sold 350,000 units, JLR wants to get back to 300,000, which was the level in 2024. That seems a reasonable ambition in a trickier market, especially after a period of heavy investment. As Reynolds said, car manufacturers have always flexed the size of their workforce at different points in the business and product cycle.

Note, too, that the 4,000 job losses – out of 44,000 people globally and 34,000 in the UK – will be heavily skewed towards what JLR calls “salaried and management” roles, or white-collar workers in old lingo. In other words, there will be relatively little impact on factory workers who are paid hourly. An outsider may wonder if JLR isn’t simply overpopulated with managers.

Either way, the appropriate role of government is the normal one of assisting with retraining and re-employment and so on. One assumes action on that front will follow after talks with unions on Tuesday. State financial assistance might be a different matter if we were talking about new battery factories or other big capital programmes, or schemes to take the edge off the UK’s horrendous industrial electricity costs. But the job cuts, as JLR presents them, are simply about staying competitive – and there’s no reason for government to interfere in that process.

The big corporate test ahead is chasing the US “luxury” market (and a starting price of £154,070 for the new electric Range Rover means the vehicle definitely qualifies as a luxury item) and avoiding what the chief financial officer calls “the killing fields of mass automotive”, a reasonable shorthand for Volkswagen’s predicament under competition from China. The next couple of years will be critical for JLR.

By the same token, one cannot call the job losses a blow to Andy Burnham’s ambitions for “reindustrialising” the country. They’re unwelcome, obviously, but were signalled in May and are part of a specific corporate story.