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Brexit and the automotive industry

UK automotive companies are urging all politicians to do whatever it takes to avoid a ‘no deal’ Brexit as latest figures from the Society of Motor Manufacturers and Traders (SMMT) show British car production fell to its lowest level for five years in 2018. 1,519,440 new cars left UK factories, a decline of -9.1%, and the second consecutive annual fall as the sector faces multiple challenges.

The news came as SMMT also revealed that fresh inward investment in the sector plummeted in the year – down almost half (-46.5%) on 2017 to just £588.6 million, amid fears over the UK’s future trading prospects with the EU and other key global markets after 29 March.

In 2018, production for the UK fell -16.3% as regulatory changes and ongoing uncertainty over future diesel policy and taxation were exacerbated by declining consumer and business confidence. Exports were also down, with output for overseas markets dropping -7.3% as slowdowns in important European and Asian markets took effect. UK car exports to China slumped -24.5%, while EU demand fell by -9.6%, less steep than the decline at home, with registrations of British-built cars in the UK down -20.9% in the year. Overall, EU27 countries still accounted for most UK exports (52.6%) – amounting to 650,628 cars.

Elsewhere, consumers responded to increased availability of several new premium models currently built only in the UK. Exports to the US grew +5.3%, cementing the country’s position as the UK’s second biggest customer after EU and underlining the risk to output if tariffs are imposed. Meanwhile, exports to Japan rose +26.0% and South Korea also showed growth (+23.5%).

Both countries, along with other key markets, including Canada and Turkey, are (or will imminently become) subject to preferential EU trade agreements, from which the UK benefits – together representing 15.7% of UK car exports. Time has almost run out to guarantee continuity of any of these arrangements before Brexit, and ‘no deal’ could, therefore, put more than two-thirds of UK Automotive’s global trade under threat.

Mike Hawes, SMMT Chief Executive, said:

“UK Automotive is on red alert. Brexit uncertainty has already done enormous damage to output, investment and jobs.

“Yet this is nothing compared with the permanent devastation caused by severing our frictionless trade links overnight, not just with the EU but with the many other global markets with which we currently trade freely.

“Given the global headwinds, the challenges to the sector are immense. Brexit is the clear and present danger and, with thousands of jobs on the line, we urge all parties to do whatever it takes to save us from ‘no deal’.”

The decline in UK car manufacturing in 2017 and 2018 follows seven years of unprecedented growth for the sector as it emerged from recession faster than any other major EU market, with output rising more than 70% in that time.

Today, UK Automotive is globally respected. It is Britain’s biggest exporter in goods, and one of the country’s most important economic pillars, employing 186,000 people directly in vehicle and component factories and delivering an annual £20.2 billion direct to the Treasury.

View original piece on SMMT.

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