‘One in three’ businesses already cutting jobs amid Brexit fears

15 October 2019 One in three automotive-related businesses in the UK is already cutting jobs in preparation for Brexit, according to the figures released by the Society of Motor Manufacturers and Traders (SMMT). This is up from one in eight when the survey was last conducted in November last year. With the sector reliant on ′free and frictionless’ trade with the EU, the body is urging an end to ′dangerous’ talk of no-deal, and for all sides to focus energies on an orderly withdrawal to safeguard jobs and the sector’s long-term survival. The survey results highlight the fear currently gripping the market. Four-fifths (80.3%) fear leaving the EU without a deal will have negative consequences for their future prospects (up from 74.1% 10 months ago). Virtually the same number (79.6%) are worried about the impact on their profitability while two-thirds (62.2%) are saying no-deal will impact their ability to win overseas business and a similar number state that they will be unable to invest in their UK operations. Worries increasing An indication that the mere threat of no-deal is having a real impact on the UK economy, 11.8% of firms said that they had already divested from their UK-based operations and 13.4% are relocating operations overseas. Overall, three quarters (77.2%) of firms say that there has already been a negative impact on business even before the UK has left the EU. The industry has also taken considerable steps to prepare for the possibility of no-deal, with the vast majority (73.2%) actively preparing for post-Brexit disruption. Almost half have spent money on stockpiling and warehousing to mitigate against the risk of border delays and production stoppage. The SMMT’s 2019 UK Automotive Trade Report calculates that a no-deal Brexit would knock £50,000 a minute off the sector’s economic contribution. Meanwhile, a third have made adjustments to logistics and shipping routes, and 26.8% have been forced to invest hard-won profits in new customs infrastructure, despite a recognition that such systems cannot guarantee against border delays in the event of no deal.

′Damage has already been done: investment is haemorrhaging, competitiveness being undermined, UK jobs cut and vast sums wasted on the impossibility of preparing for no-deal. Make no mistake; every day no-deal remains a possibility is another day of lost investment and another day that makes it harder to recover investor confidence in the UK.’

Manufacturer woes Separate SMMT research has already shown that some of the UK’s biggest automotive manufacturers have spent more than £500 million in an attempt to mitigate at least some of the risks of a no-deal scenario. The industry cannot, however, fully prepare for all the uncertainties and many will not survive the application of a 10% tariff on finished vehicles as they already operate on wafer-thin margins. Volkswagen, Nissan and Honda have already highlighted that they cannot absorb the tariffs and would either need to pass costs onto the consumer or consider their UK business. Another problem is the development of cleaner powertrain technologies, which is already pulling money from other manufacturer projects. This represents another complex drain of carmaker finances, one which some can ill afford. ′As the Brexit clock ticks ever closer to midnight, this survey reveals the bleak future that awaits this vital sector in the event of no-deal,’ says SMMT chief executive Mike Hawes. ′Damage has already been done: investment is haemorrhaging, competitiveness being undermined, UK jobs cut and vast sums wasted on the impossibility of preparing for no-deal. Make no mistake; every day no-deal remains a possibility is another day of lost investment and another day that makes it harder to recover investor confidence in the UK. ′As yet, the damage is not irreversible, but we need a deal. A deal that, in the short term, enables a ′business as usual’ transition for as long as it takes to negotiate and implement the future trading relationship. In the longer term, that deal must replicate all of the benefits we currently enjoy, which means an ambitious deal that delivers free and frictionless trade. UK jobs, innovation, trading strength and economic growth all depend on the automotive sector, so we urge all parties to get a good deal done before it is too late.’