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Storm clouds gather for car industry and SMEs

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Figures released today show that UK car production has fallen by 20 per cent in 2019 and that SME optimism on exports is at a ten-year low.

smes
(Credit: SMMT)

The respective results come from reports by the SMMT (Society of Motor Manufacturers and Traders) and CBI (Confederation of British Industry). June saw a 15.2 per cent month-on-month decline in automotive production, making it the 13th consecutive month to witness a fall in output.

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According to the SMMT, new data shows that Brexit mitigation measures – accentuated by preparations for a ‘no deal’ exit – has already cost the automotive sector £330m. Inward investment in the car industry has also virtually drawn to a standstill in 2019. From January-June, newly pledged investment was just £90m, compared with the average annual investment figure of £2.7bn over the previous seven years.

“Today’s figures are the result of global instability compounded by ongoing fear of ‘no deal’,” said SMMT chief executive Mike Hawes. “This fear is causing investment to stall, as hundreds of millions of pounds are diverted to Brexit cliff-edge mitigation – money that would be better spent tackling technological and environmental challenges.

“The industry’s foundations are fundamentally strong, however, and we’re ready to work with the new government to build on these through the industrial strategy. We need an internationally competitive business environment to encourage more investment, more innovation and more growth. That starts with an ambitious Brexit deal that maintains frictionless trade.”

Meanwhile, the latest quarterly CBI SME Trends Survey shows optimism falling at the fastest rate since just after the Brexit referendum in July 2016. In a survey of 268 SME manufacturers, optimism about export prospects for the year ahead also worsened to the greatest extent since the midst of the financial crisis in April 2009.  Domestic and export orders are falling at the quickest rates since April 2013 and October 2015 respectively.

In the three months to July, just nine per cent of firms said they were more optimistic regarding their business situation, while 37 per cent said they were less optimistic. SME manufacturers plan to reduce investment in training and retraining (-19 per cent), buildings (-20 per cent) and plant & machinery (-19 per cent) in the year ahead. Numbers employed stayed largely flat, however, and output is expected to  remain steady over the coming quarter.

“Against the backdrop of slower global growth and continued Brexit uncertainty, optimism among SME manufacturers is waning,” said CBI principal economist Alpesh Paleja. “With orders falling and output and headcount stalling, the new Prime Minister must restore confidence and set out a pro-enterprise path that supports SME manufacturers.

“Securing a Brexit deal ahead of the October deadline remains a top priority for smaller manufacturers.  Firms will also be looking for early signs of how domestic priorities – from fixing the apprenticeship levy to improving infrastructure – will be delivered.”

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