UK car production falls again as investment stalls
31 July 2019
31 July 2019
UK car manufacturing has fallen by more than a fifth in the first half of 2019 as the country struggles with a lack of investment over economic and political uncertainty.
A 15.1% decline in June marked the 13th consecutive month of negative growth, according to figures released by the Society of Motor Manufacturers and Traders (SMMT). Year-to-date, car production is down by 20.1%.
In total, 1,666,521 cars rolled off production lines in the first six months of the year – a loss of 168,052 units, due largely to falling demand in key markets including the UK. Plant shutdowns, which were pulled forward in anticipation of the country’s withdrawal from the EU in March, have also affected output.
Last month saw output for the domestic market rise by 2,791 units. However, this is due to an anomalous figure in 2018, when production was down 47.2% as manufacturers prepared for the introduction of WLTP. Going back to 2017, 29,631 cars were built in the sixth month of the year, compared to just 18,438 in June 2019 – a drop of 11,193. Car production destined for the UK market over the first half of the year is down 16.4%.
Meanwhile, the number of cars built for export fell by 19.8% in June and by 21.0% in the first half of the year, with just over half a million units shipped overseas, due to softening of key overseas markets and global trade tensions. Exports to the sector’s top global markets fell by double digits, with the US down 12.9%, China down 53.1%, Japan down 10.5% and Turkey down 93%. Demand in the UK’s biggest market, the EU, also fell, by 15.6%. However, the EU still accounts for 57% of all UK car exports – the highest first-half dependence since 2016.
The news comes as new SMMT research reveals the substantial cost to industry of ′no deal’ Brexit preparations. At least £330 million (€360 million) has already been spent by the sector on contingency plans. Most major UK manufacturers have tied up working capital by stockpiling materials and components, securing warehousing capacity and investing in new logistics solutions, additional insurance and training in new customs procedures. Significantly, many manufacturers moved annual plant shutdowns from the summer to April – a measure which cannot be repeated for the October departure date that is now proposed.
Meanwhile, the latest figures show inward investment into the sector effectively stopped in the first half of the year. In the period January-June, newly pledged investment was down more than 70% to £90 million (€98 million), contrasting with the average annual investment figure of £2.7 billion (€2.9 billion) over the previous seven years. A vast majority of manufacturers have suspended plant and product spending in the UK amid ongoing uncertainty.
′Today’s figures are the result of global instability compounded by ongoing fear of ′no deal’,’ says 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, and we look to the new administration to get a deal done quickly so manufacturers can get back to the business of building cars and helping deliver a brighter future for Britain.’