CEO Update

Brexit damage repairable but immediate and decisive action required

31 May 2019 #CEO Update

This week we revealed manufacturing figures for April that seemed to take everyone – except the industry – by surprise, with a -44.5% drop in British-built cars compared with April 2018. The severity of the fall was primarily due to a number of volume manufacturers bringing forward and extending production stoppages that would normally have taken place during the summer months in anticipation of a 29 March Brexit.

Of course, that deadline has now been replaced with another, on 31 October, but the shutdown shift cannot now be repeated. This was just one of a raft of contingency measures put in place by manufacturers ahead of the expected Brexit deadline, including stockpiling, rationalisation, training for new customs procedures and rerouting of logistics – all designed to try to protect business when the UK leaves the customs union and single market. Costs that businesses will be incurring until certainty is restored.

April’s figures, however, mark the 11th straight month of decline for car production in the UK, a trend largely down to slowing demand in key international markets, including the EU, China and US, as well as at home. The impact isn’t confined to car production, but is also affecting the supply chain, as evidenced by the -23.4% decline in engine production. Provided the UK leaves the European Union with a favourable deal and substantial transition period and all other things being equal, we would expect to see the declines easing by the end of the year as new models arrive and production balances out over the summer. However, independent forecasts suggest that we can expect to finish 2019 around -10% down on last year’s production numbers, but the picture would obviously look considerably different in the event of a ‘no deal’ Brexit.

Brexit uncertainty has already had a significant impact on UK automotive businesses, which have incurred significant costs. The fear of ‘no deal’ is holding back progress, causing investment to stall, jobs to be lost and is undermining our global reputation. Despite some calling for ‘no deal’, this must be taken off the table immediately and permanently, so that the industry can get back to the business of delivering for the economy and keeping the UK at the forefront of the global technology race.

We are looking forward to hosting our next Open Forum at Automechanika Birmingham next Tuesday 4 June, including a networking drinks session mid-afternoon. Register here to come along.

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