SMMT warns over customs and dealership reorganisation as UK manufacturing drops

26 April 2018

As UK automotive manufacturing falls, the Society of Motor Manufacturers and Traders (SMMT) has warned that Brexit and falling car sales could change the landscape of the industry.

Car production declined in March, with demand falling 13.3% year on year, according to figures. A total of 147,471 cars were built in British factories as the domestic market continued to slow, with demand falling 17.7% in the month.

Exports also declined, down 11.9% due to fluctuations in demand in some global markets. Also, some manufacturers were impacted by the adverse March weather conditions which negatively affected production operations, the body stated.

Overall output in the first quarter of 2018 fell 6.3%, with 440,426 cars leaving production lines in total this year. Almost 80% of these were exported, and while demand from overseas customers fell 4.0% in Q1, this was dwarfed by the 14.1% decline in manufacturing for the UK market.

The figures highlight once again the importance of the export market for the UK, and the impact leaving the EU Customs Union may have. The British Government are currently holding firm on this approach, known as a ′hard Brexit’, to fully remove the country from any EU ties and rely on its own trade agreements to broker deals.

This would, however, mean adopting tariffs on imports and exports, with current World Trade Organisation (WTO) rates meaning a 10% fee on goods moving in and out of the UK. A number of manufacturers have made it clear that they cannot absorb potential costs, while others have suggested they would have to unpick their supply chains, established over many years, and start again.

Britain’s vehicle and component manufacturers are important contributors to the UK economy and are responsible for 13.0% of all the country’s export of goods. For every one pound generated by the industry, three pounds are delivered to the economy via adjacent sectors such as logistics, retail and finance, with SMMT calculations putting the total economic impact at £219 billion (€251.3 billion), 10% of UK GDP.

SMMT chief executive Mike Hawes comments: ′A double-digit decline in car manufacturing for both home and overseas markets is of considerable concern. Following recent announcements on jobs cutbacks in the sector, it’s vitally important that the industry and consumers receive greater certainty, both about future policies towards diesel and other low emission technologies, and our post-Brexit trading relationships and customs arrangements.

′Maintaining free and frictionless trade is an absolute priority – it has been fundamental to our past success and is key to our future growth.’

Meanwhile, following the announcement that Opel is to restructure its dealership network. Hawes has warned that other manufacturers may look to do the same following a drop in UK car registrations.

′The staff in the retail market also have a strong reputation for adapting to changing markets. If the market does continue to decline, manufacturers will obviously look at the number of retail outlets they have,’ he told Automotive Management at the Commercial Vehicle Show.