NAA Member News: Brabners – 2026 Automotive Outlook, Preparing for the Road Ahead
Caroline Litchfield, partner and head of manufacturing & supply chain at independent law firm Brabners, explores the key themes, challenges and opportunities facing the automotive industry in 2026.
The UK automotive industry enters 2026 in a state of flux. Regulatory changes, technological advances and geopolitical tensions have shaped the sector over the past year – with businesses now facing a critical moment of transition. Yet within this disruption lies a clear opportunity for those who act early, adapt with confidence and plan for resilience.
Supply chain resilience
Disruption to supply chains is now a persistent feature of the global automotive landscape. While many businesses have adapted to pandemic-era challenges, new threats – from trade volatility to cyberattacks – are testing resilience in different ways.
High-profile incidents such as the 2025 cyberattack on JLR have served as a warning: operational threats are no longer just logistical, they’re also digital. For manufacturers dependent on just-in-time systems and synchronised parts delivery, any breakdown can have a far-reaching impact.
In 2026, risk allocation and contractual clarity will be key. Strengthening terms with suppliers and customers – including around digital threats – is becoming essential, as is keeping pace with incoming legislation like the Cyber Security and Resilience Bill. Once enacted, the Bill is expected to broaden the scope of regulated entities and tighten expectations around response and reporting. Even for organisations not directly in scope, the regulatory pressure will likely pass through the chain, with increased scrutiny on third-party resilience.
Digital transformation
The rapid advancement of Advanced Driver Assistance Systems (ADAS) and autonomous technologies continues to reshape the industry. In 2026, we expect to see further evolution of regulatory frameworks for Level 2 and Level 3 autonomy, particularly in light of OEM decisions to pause or refocus rollout strategies.
For example, Mercedes-Benz recently adjusted its course – pausing its rollout of Level 3 “eyes-off” systems in favour of advancing its Level 2++ offering, citing usability and safety considerations. It’s a reminder that ambition must be matched with legal and regulatory readiness.
As these technologies mature, businesses must prepare for a more complex liability landscape. That includes understanding product safety rules, managing evolving insurance requirements, and addressing new employment considerations as roles shift alongside automation.
Fleet operators and manufacturers alike should be planning for a phased transition – building in legal frameworks that support innovation without exposing the business to unmanaged risk.
Embedding new employment rights
With key elements of the Employment Rights Act 2025 now moving into effect, 2026 is a year in which employers must take proactive steps to prepare. The April 2026 changes – covering new day‑one rights to paternity and unpaid parental leave, strengthened whistleblowing protections, reforms to Statutory Sick Pay and a simplified union recognition process – require immediate review of contracts, policies and workforce planning.
The government has also confirmed that the six‑month unfair dismissal qualifying period will come into force on 1 January 2027, and that employees who already have six months’ service on that date will gain protection immediately, with all other employees becoming protected once they reach six months’ service. Although this is a 2027 development, employers should start improving recruitment, probation and performance processes now so they are fit for purpose when the new threshold applies.
For the automotive sector, it’s clear that 2026 demands action. Employers who prepare early – anticipating the labour-relations impact by updating documentation and strengthening managerial capability – will be better placed to manage risk and maintain operational stability as the new framework comes into force.
The EV conundrum
The transition to electric vehicles is accelerating – but not entirely smoothly. While the government reaffirmed the ZEV mandate and reinstated the EV purchase grant, it also introduced a pay-per-mile tax for EV owners. The result is a mixed message for manufacturers, fleet operators and consumers alike.
For business buyers, the economics of EVs remain finely balanced. Battery longevity, resale values and tax treatment all play into total cost of ownership, while infrastructure access and energy pricing continue to shape fleet decisions.
The legal implications of the EV transition are also complex. Manufacturers and suppliers must remain alert to rules on sourcing, ESG reporting and battery compliance. Meanwhile, fleet operators will need to update procurement and HR policies to support EV uptake – including access to home and workplace charging.
2026 may not bring complete clarity, but businesses that prepare for both policy support and disincentives will be best placed to adapt.
Building resilience
As we look ahead to the rest of 2026, it’s clear that transformation in the automotive sector is no longer optional. Businesses must anticipate legal, operational and strategic shifts to remain compliant and also to compete effectively.
Those that succeed will be the ones who embed resilience across supply chains, stay ahead of regulatory curves in digital and autonomy, support their workforces through employment change, and plan for an EV future marked by complexity as much as opportunity.
For legal and strategic insight on navigating these changes, you can contact Brabners’ manufacturing and supply chain team: caroline.litchfield@brabners.com
