UK automotive on red alert as ‘no deal’ Brexit threatens and investment falls

31 January 2019

UK automotive companies are urging politicians to do whatever it takes to avoid a ′no deal’ Brexit as the Society of Motor Manufacturers and Traders (SMMT) has revealed that fresh inward investment in the sector plummeted in 2018. Compared to 2017, investment fell by almost half (-46.5%) to just £588.6 million in 2018, amid fears over the UK’s future trading prospects with the EU and other key global markets after 29 March.

SMMT figures also show that UK car production fell to its lowest level for five years in 2018. 1,519,440 new cars left UK factories in 2018, a decline of -9.1% year compared to 2017, marking the second consecutive annual fall in car output.

Car production for the domestic UK market fell by 16.3% as regulatory changes and ongoing uncertainty over future diesel policy and taxation were exacerbated by declining consumer and business confidence. Exports were also down, with output for overseas markets dropping 7.3% as slowdowns in important European and Asian markets took effect. UK car exports to China also slumped, by 24.5%, whereas EU demand for cars produced in the UK fell by a comparatively modest 9.6%. Overall, the EU27 countries still accounted for the vast majority of UK exports (52.6%) in 2018 – amounting to 650,628 cars.

Exports to the US grew by 5.3%, cementing the country’s position as the UK’s second biggest customer after the EU but this underlines the risk to output if tariffs are imposed. Meanwhile, exports to Japan and South Korea rose by 26.0% and 23.5% respectively. Both countries, along with other key markets, including Canada and Turkey, are (or will imminently become) subject to preferential EU trade agreements, from which the UK benefits – together representing 15.7% of UK car exports.

The SMMT release states that ′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.’

Hawes adds that ′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 SMMT highlighted that the automotive sector is Britain’s biggest exporter of goods and that ′much of this success is due to our global competitiveness, drawn from economic and political stability, investment, a highly skilled workforce and beneficial trading conditions with our biggest markets. As a highly-integrated sector that has maximised the benefits of the European single market and customs union, a ′no-deal’ Brexit is the most significant threat to the competitiveness of the UK automotive sector in a generation.’

With the pressure also on new car demand and residual values in the UK because of the relentless uncertainty surrounding Brexit, Autovista considered how the UK automotive sector will weather this storm here.