CEO Update

Brexit represents a clear and present danger to UK car industry

01 February 2019 #CEO Update

With less than two months to go until the Article 50 Brexit deadline, the industry still has no certainty as to our long term relationship with our biggest trading partner or, indeed, what that relationship will be in only 55 days.

Manufacturing figures released this week for 2018 showed a -9.1% drop in British car production, to a five-year low of 1.52 million units. The drop in demand in key overseas markets – China was down -24.5% and the European Union down -9.6% – is a major reason but so too is the -16.3% decrease in cars produced for the UK market as political uncertainty undermines business and consumer confidence.

Also worrying is the significant drop in industry investment announcements to £0.59 billion in 2018, nearly half the previous year’s total and barely a fifth of the five-year average. Investment is, by nature cyclical, often coming in “lumps” but such a sharp fall is very concerning as it indicates that regular and ongoing investment in plant and machinery has stalled; evidence that companies are hesitant to commit any new money to the UK while uncertainty hangs in the air.

Furthermore, companies are having to spend significant sums into Brexit contingency planning, preparing for a worst-case scenario. This is not targeted investment for the future but money that would undoubtedly be better spent elsewhere, in new technology to enable companies to compete on an equal footing in the future. Gallingly, it could turn out to be totally unnecessary expenditure if we get a transition period and ultimately leave the EU in an orderly way.

The UK automotive industry is respected worldwide for its technological expertise, skilled workforce and flexibility. Built on the frictionless trade principles of the single market, UK-made cars are exported across the globe and, importantly, to the rest of Europe: 52.6% of the cars we export went to EU markets last year.

Brexit uncertainty has already done enormous damage to output, investment and jobs, but 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 markets with which we currently have preferential trade agreements as a result of our EU membership. They too look likely to crease in less than two months.

There are many challenges facing the automotive industry across the world, but Brexit represents the most imminent danger for us here in the UK. With thousands of jobs on the line, we urge all parties to do whatever it takes to save us from ‘no deal’.

 

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