Analysis: The effect of Brexit on the UK car industry

The drumbeat of dangerous information coming from the UK’s automotive trade in 2019 is changing into deafening. Jaguar Land Rover is reducing four,500 jobs, Honda has closed its long-established Swindon plant, Nissan has reversed plans to construct the subsequent X-Path SUV in Sunderland, and Ford will axe as much as 1,000 jobs at its engine plant in Bridgend.

Final yr, there have been important job cuts at Vauxhall’s Ellesmere Port plant and Nissan’s Sunderland manufacturing facility, whereas Toyota’s Derbyshire plant misplaced the Avensis. 

The hazard is that Britain’s automotive trade isn’t simply reversing its current manufacturing good points however it’s going into terminal decline.

The job cuts and mannequin deletions are being blamed on a poisonous brew involving the cratering demand in China, a hunch in diesel gross sales and altering funding priorities as carmakers scramble to react to world commerce turmoil and looming new applied sciences. And arising in the entire debate is Brexit.  

Nissan’s X-Path reversal led nationwide information bulletins as a result of the announcement to put in the mannequin, simply after the referendum in 2016, was hailed for instance of how Britain would shrug off Brexit and proceed to draw funding. Nissan’s resolution throws doubt on that perception, particularly given the UK authorities supplied it a £61 million sweetener. 

Because the UK lurches blindfolded in direction of the March 29 finish date of its membership of the EU, the Society of Motor Producers and Merchants (SMMT) has repeated its perception that leaving the EU with no deal can be “catastrophic” for the automotive trade.  

Figures collated by the SMMT on funding into the UK automotive trade present a collapse from a mean of round £2.5 billion a yr to only beneath £600m in 2018, because the trade sits on its fingers, ready to see what’s going to occur. “Whether it is ‘Venture Concern’, then we’re doing a great impression of it being a actuality,” SMMT chief govt Mike Hawes stated.

The worst case: 5 vegetation may shut

The automotive trade has all the time disliked the concept of Brexit, however remained sanguine within the perception that – within the phrases of Bentley CEO Adrian Hallmark – “widespread sense will prevail”. More and more, carmakers are speaking a lot harder. In addition to shutting down manufacturing by means of a lot of April to cushion the disruption to elements provide within the occasion of a no-deal Brexit, makers are threatening plant closures. “Nothing can be off the desk in a tough Brexit,” Ford of Europe CEO Steve Armstrong had stated in January. 

Again in 2015, on the top of optimism in regards to the trade, the SMMT’s manufacturing analyst forecasted the UK would break its all-time manufacturing report of 1.92 million automobiles, set in 1972, by 2017. By 2018, the UK would break by means of two million. As a substitute, automotive manufacturing final yr fell 9 % to 1.52 million.  

Three, presumably 5, factories may disappear within the doomsday state of affairs. “There’s a really actual concern, even when there’s a deal, that automotive corporations will shift their funding elsewhere,” stated Aston College’s David Bailey.  

Bailey singles out Vauxhall’s ailing Ellesmere Port facility, which constructed simply 77,481 Astras final yr, in addition to Jaguar Land Rover’s Fortress Bromwich plant, which makes the slow-selling XE and XF sedans. 

Fortress Bromwich might be a buying centre inside 5 years,” predicts Max Warburton, an analyst at Bernstein financial institution. 

Within the good storm state of affairs, Donald Trump may additionally impose long-threatened import tariffs on European automobiles, threatening the viability of UK manufacturing for export. 

And Toyota may discover its Derbyshire manufacturing facility surplus to necessities after not too long ago shopping for out the PSA Group’s share in its Czech Republic small-car joint-venture plant. Toyota’s senior managing officer not too long ago said that the agency “can not keep away from the unfavorable affect” of no deal, no matter planning. In December, it warned that state of affairs may price it as much as £7.7 million a day by means of provide delays. The Japanese may but stage their very own Brexit. “They got here to the UK as a launch pad into Europe and are very shocked by what’s happening,” stated Bailey.

The perfect case: UK engineering shines

It’s not all gloom for the UK’s automotive trade. China’s Geely is pouring cash into Lotus to create a world-class manufacturing facility on the model’s Norfolk HQ. It has been reported that a future SUV might be inbuilt China, however holding the UK as a base for halo fashions and analysis is essential. General, producers spend £four.7 billion yearly on R&D within the UK and that is more likely to proceed. 

Aston Martin will begin manufacturing at its plant in St Athan, South Wales, in 2020, making its first SUV, the DBX. McLaren had a report yr in 2019, promoting nearly 5,000 automobiles globally. And Bentley appears to be like to be turning round its current hunch.  

Jaguar Land Rover is creating a brand new battery meeting centre at Hams Corridor, Warwickshire, to work in direction of producing extra electrified automobiles within the UK. Mini's manufacturing rose final yr in Cowley, Oxford, whereas strikes threaten its rival plant within the Netherlands, the place BMW additionally builds Minis. 

Brexit received’t change the core of what the UK has, as enterprise secretary Greg Clark wrote in his 2016 letter to Nissan’s former CEO, Carlos Ghosn. Sunderland’s success, he wrote, “displays the unrivalled enterprise atmosphere right here within the UK – versatile labour regulation, expert staff, world-class universities coaching world-class engineers.” Britain can pull extra levers to encourage carmakers to remain throughout robust instances. 

The UK remains to be the world’s fifth largest financial system and Europe’s second-largest automotive market, with the potential to be world leaders in electrical automobile and autonomous automotive improvement. What occurs will depend on the federal government popping out of its “parish council” mindset after Brexit, believes Robert Forrester, head of UK seller group Vertu. “If it turns into weak and incompetent, then we’re in for a tricky time,” he stated. “If it implements the technique nicely, we will grow to be profitable. There are a raft of causes to be optimistic in regards to the British financial system.”

NICK GIBBS

Read More

Leave a Reply

Your email address will not be published. Required fields are marked *