SMMT News UK Manufacturing

UK car production rises in August but fails to make back spring Brexit shutdown losses

26 September 2019 #SMMT News #UK Manufacturing
  • UK car production rises 3.3% in August, to 92,158 units, but growth can’t offset substantial April losses.
  • Monthly output for domestic market grows 15.2% while exports remain stable, rising 0.6%.
  • Year to date performance down -17.0% as output fails to reach one million units by August for first time in five years.
  • Industry repeats urgent call for Brexit deal to maintain competitiveness and safeguard jobs.

UK car manufacturing rose 3.3% last month, with 92,158 units produced, according to figures released today by the Society of Motor Manufacturers and Traders (SMMT). This was the first increase in 15 months due mainly to the fact that several key plants that had brought forward planned summer shutdowns to April to guard against the disruption of the then March 29 withdrawal date kept production lines rolling throughout August.1

Just 2,903 more cars were produced in August 2019 than in the same month last year, however, this was not enough to compensate for April’s 56,999-unit loss, resulting in a 17% (or 177,961-unit) deficit in the year to date. 866,918 cars were produced in the first eight months of the year – the first time output has dipped below one million units in the period since 2014, and the biggest year on year decline since 2011.2

In August, production for the domestic market was up 15.2% following a significant fall in the same month in 2018 when several factors, notably preparation for new EU-wide testing regulations, affected volumes. Exports, meanwhile, registered marginal 0.6% growth. This disguises ongoing weakness in major global markets with production for China down two fifths (-43.8%), exports to the US falling -9.1% and those to the EU -13.7% in the first eight months. However, exports still account for eight out of every 10 cars built in Britain – with the EU taking more than half (55.4%).

The news comes in the same week that industry representatives from 17 of the EU’s biggest car producing and buying countries, including Germany, Italy, France, Belgium and Spain, as well as Turkey, with which the UK enjoys beneficial trading terms thanks to the EU, joined forces in united opposition to a ‘no deal’ Brexit.3 The repercussions of a hard Brexit, the bloc warned, would be severe, with tariffs4 threatening consumer choice and affordability on both sides of the Channel and the end of barrier-free trade bringing disruption to the industry’s efficient just-in-time operating model. In the UK alone, just one minute of production stoppage caused by border delays would amount to £50,000 of lost value add – or £70 million a day.5

Mike Hawes, SMMT Chief Executive, said,

While growth is always welcome, today’s figures mask the underlying downward trend and strengthening global headwinds facing the sector, including international trade tensions, massive technological upheaval and, in the UK, political and economic uncertainty.

Softening of global demand is compounding the challenge to UK manufacturers for whom a ‘no deal’ Brexit would be a hammer blow. The mere threat of no deal has undermined investment and the potential imposition of tariffs, border delays and additional administrative burdens would damage competitiveness.

We now need parliament and government to redouble efforts to get a deal that maintains free and frictionless trade. Given the ongoing challenges and costs being incurred, there is not a moment to lose.

Notes to editors

1. https://www.smmt.co.uk/2019/05/uk-car-manufacturing-plummets-in-april-as-brexit-shutdowns-strike/
2. The last time UK car output fell below 1m units in the period Jan-Aug was 2014 (994,951 units); 847,196 units produced in first eight months of 2011
3. https://www.smmt.co.uk/2019/09/eu-automotive-leaders-unite-to-say-no-to-no-deal-brexit/
4. Tariff calculations:

UK exports to EU27 on WTO terms

Passenger cars Light commercial vehicles/pick ups Commercial vehicles Buses Engines                  (in vehicles) Parts
10 10 22 16 2.7 2 – 5

Source: https://madb.europa.eu/madb/euTariffs.htm

Temporary Tariffs – UK imports

Passenger cars Light commercial vehicles/pick ups Commercial vehicles Buses Engines Parts
10 10 22 16 0 0

Source: https://www.gov.uk/government/news/temporary-tariff-regime-for-no-deal-brexit-published

5. Delays to the arrival of components would cost gross value of £70 million a day based on five-day working week. This equals £50,000 a minute. Source: www.smmt.co.uk/wp-content/uploads/sites/2/2019-UK-AUTOMOTIVE-TRADE-REPORT.pdf

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