Giles Bolton, Grosvenor Leasing’s Sales Director shares his thoughts
A recent survey by the Office for National Statistics (ONS) has revealed that most people who took up homeworking during the pandemic plan to hybrid work in the future.
The proportion of workers wishing to combine home working with visits to the office has risen from 13% in early February 2022 to 24% in May 2022. The percentage working exclusively from home has fallen from 22% to 14% in the same period.
It means there is a rise in the number of workers who recognise that the workplace, and being with colleagues in person, plays an important part in their working week. However, the proportion who plan to return to their place of work permanently fell from 11% in April 2021 to 8% in February 2022.
But what impact will this have on the provision of company cars?
Despite the continued popularity of hybrid working since the pandemic, we are currently seeing more drivers return to their company car scheme than leave it. Prior to COVID, rising company car taxation on higher emission cars had been causing some drivers to question whether a cash alternative would be better, and we were witnessing quite a steady shift away from car schemes.
Having forecast years ago that this was likely to happen, Grosvenor launched its personal leasing solution 3 years ago to offer personal contract hire (PCH) to those drivers who had opted for cash in lieu of car, enabling them to use their cash allowance to replicate all the benefits of fixed cost motoring and enjoy a new vehicle.
That’s good news for the employer who never intended for the monthly cash allowance exchanged for a company car to be spent on an unreliable, high emission, second hand model which would then become a grey fleet headache. By offering a high quality, competitive PCH scheme at the time the cash was offered helped resolve this.
As a result, our team has already quadrupled in size due to the demand for PCH, yet interestingly we are now seeing a return to the company car by many drivers who had previously left their scheme.
Why? Because those same drivers who left their scheme due to rising BIK on higher emission cars are now coming back due to the very low benefit in kind tax on plug-in hybrid and electric cars. It’s making having a company car financially beneficial again, and the ever expanding range of EVs on the market means there’s greater choice as well.
The hybrid working model also means less miles travelled each week due to more time being spent at home and, coupled with the popularity of online meetings, the battery range of EVs for some employees spending far less time on the road has become less of an issue.
But will the numbers of drivers returning to the company scheme continue, or is it short-lived?
Looking ahead, it’s widely expected that BIK will begin to rise again on EVs after the fixed period ends in 2025 and the level of taxation set by the Government will always have an influence over whether drivers remain in their car scheme or not.
However, I believe the Government will always wish to achieve a perfect balance between encouraging drivers into company cars while maximising the tax income for the Treasury and, for that reason, I suspect we’re only likely to see BIK rise in small increments.
If we also look at the importance of the company car market to the UK economy, approximately 50% of all new car registrations are from the fleet sector, and when you consider that there are 33 million cars on UK roads, of which only an estimated 2 million are classed as ‘fleet’, it shows that the business sector really packs a punch in its contribution to new car sales and the UK economy as a whole. Car manufacturers, dealerships, parts suppliers, repairers and a whole supply chain of other businesses rely on the fleet market, and the Government does very nicely from the tax it collects.
A downturn in company cars would result in a UK-wide downturn in new vehicle sales, so it’s highly unlikely that the Government will wish to tax it out of existence.
As already said, in recent years BIK, and the cost of driving higher emission cars, has made some company cars expensive, and most drivers who left their company scheme did so because they were paying too much tax but were not ready for an EV.
But once battery ranges and the charging infrastructure have improved, and electric vehicles become the ‘norm’, I believe the role of the company car will stabilise again.
My conclusion, therefore, is to see what happens once electric cars hit a critical mass. Until that time, the Government will continue to use taxation, and other financial penalties and incentives, as a carrot and stick to achieve its green targets. However, in my mind the long-term future of the company car is likely to be very stable once we get beyond these years of flux.