Automotive industry urges politicians to steer clear of ‘no deal’ Brexit

With car production falling to its lowest level for five years, politicians are being urged by UK automotive companies to ‘do whatever it takes’ to avoid a no deal Brexit.

no deal Brexit
Pic: JLR

According to figures from the Society of Motor Manufacturers and Traders (SMMT), 1,519,440 new cars left UK factories in 2018, which marks a -9.1 per cent decline in production and the second consecutive annual fall.

According to SMMT, inward investment fell by -46.5 per cent on 2017 to £588.6m, a situation attributed to fears surrounding the UK’s future trading prospects with the EU and other key markets following Brexit.

In 2018, production for the UK market fell -16.3 per cent as regulatory changes and ongoing uncertainty over future diesel policy and taxation were exacerbated by declining consumer and business confidence. Output for overseas markets dropped -7.3 per cent as slowdowns in European and Asian markets took effect. UK car exports to China slumped -24.5 per cent, while EU demand fell by -9.6 per cent. In the UK, registrations of British-built cars were down -20.9 per cent in the year. Overall, EU27 countries still accounted for 52.6 per cent of UK exports, amounting to 650,628 cars.

Elsewhere, consumers responded to increased availability of several new premium models currently built only in the UK. Exports to the US grew +5.3 per cent, cementing the country’s position as the UK’s second biggest customer after EU and underlining the risk to output if tariffs are imposed. Similarly, exports to Japan rose +26 per cent and South Korea also showed growth (+23.5 per cent).

no deal Brexit

Both countries, along with other key markets, including Canada and Turkey, are – or will soon become – subject to preferential EU trade agreements, which together represent 15.7 per cent of UK car exports. SMMT noted “time has almost run out to guarantee continuity of any of these arrangements before Brexit, and ‘no deal’ could therefore put more than two thirds of UK Automotive’s global trade under threat.”

Mike Hawes, SMMT chief executive, said: “With fewer than 60 days before we leave the EU and the risk of crashing out without a deal looking increasingly real, UK Automotive is on red alert. Brexit uncertainty has already done enormous damage to output, investment and jobs.

“Yet 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 global markets with which we currently trade freely.

“Given the global headwinds, the challenges to the sector are immense. Brexit is the clear and present danger and, with thousands of jobs on the line, we urge all parties to do whatever it takes to save us from no deal.”

The decline in UK car manufacturing in 2017 and 2018 follows seven years of growth for the sector as it emerged from recession faster than any other major EU market, with output rising over 70 per cent in that time.

Commenting on today’s announcement from SMMT, Stuart Apperley, director and head of UK automotive at Lloyds Bank Commercial Banking, said: “As these figures show only too clearly, there’s no doubting that UK carmakers are facing into a number of strong headwinds. Many depend on frictionless trade, and manufacturers will fear anything that disrupts that, but slowing sales in China, Europe and the UK are arguably a more immediate threat.

“The potential for US tariffs on imports of European cars could also have a detrimental impact on those UK firms that make models and parts for the US market.

“Without strong sales of their existing models, carmakers will find it difficult to invest in the technology that will one day power electric and autonomous vehicles. With governments around the world stalling on giving strong backing for diesel in particular, consumers and businesses are parking their investment decisions too.

“While some of the headwinds carmakers are facing are cyclical, manufacturers would certainly welcome a little certainty about either their future trading relationships or the future of diesel.”