UK production falls for domestic market as large export numbers add to Brexit concerns

23 November 2017

Car plants in Britain will produce fewer vehicles than expected in 2017, following a downgrade in expected output figures by the Society of Motor Manufacturers and Traders (SMMT).

The country saw an increase in total new car production during the month of October, with 157,056 units leaving factories around the country, a 3.5% rise compared with the same period in 2016. The growth was driven by vehicle exports, which rose 5% in the month, boosted by demand for new models in overseas markets.

In total, 82.1% of all UK-built cars were shipped abroad in October, the highest proportion this year, with the bulk going to mainland Europe. This raises questions over what may happen to the market following Brexit, with car manufacturers in discussion with the UK Government over the impact any ′no deal’ outcome will have on trading. Honda has already stated that it will not be able to absorb the potential 10% duty on exports, while Toyota has urged for the ′fog’ to be lifted around the discussions.

Meanwhile, production for the UK market continued to fall, with a 2.9% drop in October, the ninth month of decline so far in 2017. A total of 28,178 cars were produced for domestic buyers, as lower business and consumer confidence, combined with confusion over government policies towards diesel, continued to dent orders. Only 17.9% of cars made in Britain were sold in the country during October, the lowest percentage this year.

Year-to-date figures show production for the home market decreased by 6.8% or almost 22,000 units. Exports have fared better, broadly stable so far in the year with a drop of just 0.1%, while overall output is down 1.6%.

However, as a sign of the struggles within the UK market, the latest independent production forecast has revised the expected UK output for 2017 down to 1.73 million, lower than previous SMMT expectations of around 1.8 million. The revision is due in part to the decline in domestic demand, but also because of lower than expected production levels of certain models as some approach the end of their lifecycles.

Mike Hawes, SMMT chief executive, comments: ′It is encouraging to see positive growth in exports this month and a slight increase in overall output. Production for British consumers, however, has continued to fall as domestic demand for new cars decreased for the ninth month this year amidst continued uncertainty over both Brexit and the government’s air quality plans. It’s important that confidence is restored to the new car market, as sales of the latest cleaner, greener cars not only address air quality concerns but speed up activity on factory lines across the UK. The latest independent UK forecast report is worrying news for the sector, predicting annual output which is, at best, static compared with last year. The industry needs stability and a clear roadmap for Brexit if we are to encourage investment and arrest the decline in both the market and business confidence.’