Opinion: Will Brexit kill the British car industry?

The Jaguar XF is built in Britain

The latest figures on UK car production and investment make for some alarming reading

The latest UK car manufacturing figures are “deeply depressing”, according to Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, the automotive industry’s mouthpiece in the UK.

If that doesn’t give you a clue to the current sentiment, not much else will.

UK car sales fell 6.8% in 2018. UK car manufacturing, as we found out today, fell 9.1%. Lots of things are to blame: uncertainty over diesel policy in the UK and abroad, falling business and consumer confidence, regulatory changes, slumps in China and Europe. 

But, of course, the looming issue of the 'B' word is not far away. The SMMT has lobbied so hard for a frictionless trade deal that it’s imprinted on my mind. The SMMT and its members are getting increasingly nervous about what’s going to happen. 

Two-thirds of UK car exports go to Europe or countries with EU trade agreements, says the SMMT, adding that a ‘no-deal’ Brexit could put this under threat. 

Hawes says the industry is “increasingly nervous and exasperated” and claims that he’s not met a single person in the industry who has been pro-Brexit. When the referendum happened, 10% of SMMT members who responded to its survey said they were pro-Brexit.

The biggest problem at the moment is the uncertainty. The SMMT’s take is that it wants a single market that means – yes - frictionless trade. This will ensure the many parts of the supply chain involved in producing a car should go unaffected.

That’s looking less and less likely, but whatever way it’s going to go, the car industry just wants to know either way, says Hawes. Whether it's a no-deal Brexit or a transition, firms are desperate to be able to plan, knowing what to plan for - something that hasn’t been possible for more than two years. That’s one reason why automotive investment in the UK almost halved in 2018. It is the first time it’s been under £1 billion in five years. 

One possible scenario after Brexit is trading on World Trade Organization terms, but the SMMT says that raises many issues. It means tariffs of 10% on cars, plus Hawes says there will probably be border checks and other additional costs.

For many, in the industry and beyond, it’s starting to look rather alarming. Could Brexit kill the UK car making industry?

There’s a counter argument, of course. A pro-Brexit automotive expert makes the point that an independent Britain can make our own rules.

For example, as part of the WTO and facing 10% tariffs, the UK could reduce corporation tax for auto makers to balance things out. It could, he says, give us a competitive edge over Europe.

But for now, the industry sees no light at the end of the tunnel. Hawes says that, in the long term, no deal will be “a catastrophe for the industry”. He added: “It would be hard to see the levels of production volume that we currently have remain.”

Watch this space.

Read more 

UK car manufacturing falls 9%

The winners and losers of the 2018 car market 

European diesel sales fall sharply in 2018