UK Automotive Industry Faces £1bn Blow as Government Moves to End ECOS

The UK car industry is warning of serious consequences following the government’s decision to end Employee Car Ownership Schemes (ECOS) — a move expected to strip over £1 billion from industry revenues, suppress used car sales, and put around 5,000 manufacturing jobs at risk.

A Popular Scheme Driving Industry Growth

Employee Car Ownership Schemes have long been a key incentive within the UK automotive sector. Operated mainly by car manufacturers and dealerships, ECOS allows employees to purchase brand-new cars at heavily discounted prices, with low monthly payments and minimal interest.

Typically, after six months or around 6,000 miles, the vehicles are sold back and replaced with new ones under the same arrangement — creating a steady supply of nearly-new vehicles for the used market. The scheme currently accounts for around 100,000 new registrations each year, representing roughly 5% of total UK new car sales.

Government Justification and Industry Pushback

From 6 April 2026, the Treasury plans to abolish ECOS, arguing that employees avoid paying benefit-in-kind tax and national insurance on these vehicles. Chancellor Rachel Reeves labelled the programme a “contrived car ownership scheme,” claiming its removal could generate an additional £275 million in the 2026–27 tax year and nearly £600 million more over the following three years.

A Critical Time for the Market

The debate comes as the UK new car market continues to show modest recovery, with registrations up 0.5% in October and total sales expected to reach 2.03 million units in 2025. Yet the SMMT warns this growth could be short-lived if ECOS is scrapped, as the scheme plays a crucial role in boosting consumer confidence and accelerating electric vehicle adoption.

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