The state of the UK car industry after Brexit

In this piece, James Ash from Motors.co.uk looks at what the European Union referendum result means for the car industry in the UK.

Evidence suggests that jobs and investment in the British car industry are at risk following the Brexit vote.

The EU is the biggest market for the 1.9 million cars that rolled off production lines at UK factories in the first nine months of the year, and about 78 per cent of the cars built in UK factories in the first half-year were destined for other countries.

Such a reliance on European trade is a cause for concern for many economic and industry commentators. Credit agency Fitch Ratings said in a report following the referendum result, ‘The UK’s vote to leave the EU will create uncertainty for several automotive manufacturers and is likely to weigh moderately on revenue and earnings in the next couple of years.’

Some car industry executives have expressed concerns that if the UK struggles to retain good access to the EU single market after Brexit, then British car plants, such as that of Nissan in Sunderland, the UK’s largest car assembly line, risk becoming uncompetitive, leading to lost work on refreshed models and, in time, possible closure.

Future investment in the UK

Opinion of sector commentators is that action needs to be taken before the industry can be convinced further investment in the UK is a wise move.

Joe Gallard of car buying platform Carwow, is one of those who says that the industry needs to show more certainty at the moment.

‘In order for British automotive manufacturing to have any chance of continuing its growth, there needs to be a quick and clear agreement. The industry needs to know what, if any, tariffs are going to be in place. Until this is complete, it makes no sense for a manufacturer to invest further in the UK,’ he adds.

Nissan’s public pronouncement that they are delaying any decisions on the Sunderland plant until Brexit negotiations are complete, sadly, makes complete sense, according to Gallard.

‘There is no doubt other manufacturers will be reacting similarly. While this won’t necessarily put automotive manufacturing into reverse the uncertainty is likely to slow things down, at least over the short to medium term.’

Over the longer term, though, Gallard is confident in the UK’s ability to negotiate a deal that ensures manufacturing cars in the UK remains competitive. ‘The UK remains the second-largest market in the EU and EU carmakers will already be demanding unfettered access to UK consumers. A zero-tariff regime would appear to suit both sides of the table and, therefore, seems the most logical result.’

British cars and the EU

Executive opinion supports the suggestion that the British car manufacturing industry may lose ground in the EU, regardless of post-Brexit tariff agreements. European showrooms have reported a negative response to the referendum result. Dr Ralf Speth, chief executive of Jaguar Land Rover, told the Paris Motor Show that Europeans have been boycotting British cars since the Brexit vote.

Speth said JLR’s European sales team have reported customers turning their noses up at British cars after the vote to leave the EU. ‘They have the very first customers in their showrooms [who] clearly highlight that they don’t want to buy British products any more,’ he added.

The German boss said JLR had not changed its investment plans in the light of Brexit, but hinted that the company may have to spend its money elsewhere. ‘We have to realign all of our thinking and work on how to handle this Brexit best,’ he said. Asked if that could include investment, he said: ‘Everything.’

The domestic market

However, when it comes to UK consumer attitudes, the picture is different. Motors.co.uk has decided to find out how Brexit may change consumer attitudes towards buying a car and the company was pleasantly surprised by the results. Motors.co.uk 2016 Car Buyer Survey found that just three per cent of people in the UK have been discouraged from buying a car following the result.

Indeed, September figures from the Society of Motor Manufacturers and Traders (SMMT) show that domestic demand is up 38.1 per cent year on year, countering a 10.9 per cent fall in exports.

SMMT chief executive Mike Hawes says that UK engine manufacturing continues to benefit from investments made in previous years into new plants and models, with output having increased by 6.3 per cent this year to meet demand.

If the UK needs to look more to the internal market to bolster its revenues, the signs are promising. However, Hawes adds, ‘Although manufacturing for overseas factories has fallen recently, exports still account for the majority of engine demand, so it is crucial that government safeguards the conditions that will allow the industry to maintain its international competitiveness.’

Ben Lobel

Ben Lobel

Ben Lobel was the editor of SmallBusiness.co.uk from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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