CEO Update

A thriving auto sector is good for the country

31 January 2020 #CEO Update

Confirmation this week of the turbulence we all felt in 2019, with UK  car production down -14.2% to its lowest level since 2010, and commercial vehicle output down -7.8%. There were multiple factors at play, including weakened consumer and business confidence, slower demand in key overseas markets, significant model changeovers and a shift from diesel across Europe.

Not only that, but factory shutdowns in the spring and autumn, timed to mitigate expected disruption arising from the anticipated departure of the UK from the EU on 29 March and 31 October, also had a marked effect.

There were bright spots – our small volume car manufacturing sector is well regarded worldwide, and bucked the trend with 16.2% growth. Likewise production of alternatively fuelled cars rose 34.7% as global appetite for the UK’s electric, plug-in hybrid and hybrid offering continues to grow.

Manufacturing for the home market fell -12.3%, while cars built for export overseas fell -14.7%. Despite that drop, exports are a key part of UK automotive output, with eight in 10 cars built in the country heading abroad. The European Union remains the UK’s biggest trading partner, with a 2% increase in the share of exports to 54.8%.

The UK’s departure from the European Union is finally upon us after three and a half years of talking about it. For now the change is more of a paper exercise until the end of the 11-month transition period – practically speaking the UK operates as if in the customs union and single market, enjoying the benefits of EU membership while a new relationship is negotiated.

That must mean an ambitious free trade agreement that guarantees all automotive products can be bought and sold without tariffs or additional burdens. This will boost manufacturing, avoid costly price rises and maintain choice for UK consumers. Negotiations will be challenging but all sides stand to gain and this sector is up for it.