UK Car Industry

Brexit Backlash as British Car Manufacturing Plummets by 45 Percent

Brexit Backlash as British Car Manufacturing Plummets by 45 Percent

Brexit backlash as British car manufacturing plummets by 45 percent.

Vehicle manufacturing dropped by roughly 45 percent last month as carmakers downsize on UK based production in keeping with contingency plans to deal with Britain’s withdrawal from the bloc, which ultimately has not happen yet, sparking a revived sense of confusion amidst the UK car industry as the uncertainty that emanates from Brexit wreaks havoc on UK businesses.

The CEO for the Society of Motor Manufacturers and Traders (SMMT), Mike Hawes said:

“While we’ve avoided a ‘no deal’ Brexit on Friday, it is utterly unacceptable that, more than two years since negotiations started, industry still does not know what the UK’s relationship with the EU will be in the coming weeks and months. Uncertainty has already caused serious damage – car plants are on enforced shutdown; investment has been cut and jobs lost.”

“This cannot go on. Government and Parliament must use this extension purposefully to take ‘no deal’ off the table for good and guarantee a positive long-term resolution that delivers frictionless trade. If they fail, we face yet another devastating ‘no deal’ precipice on 31 October.”

Click here to read the full SMMT article.

The Society of Motor Manufacturers and Traders called the downturn “extraordinary”, as car production figures dropped by almost 45 percent. In April approximately 71,000 automobiles were produced in comparison to the 128,000 of last year.

Labour’s Shadow Brexit Secretary, Rebecca Long Bailey, said: “These figures show why Labour has been so critical of the uncertainty caused by the Prime Minister’s shambolic Brexit negotiations. They confirm what Labour has been warning of for months; that the government’s botched Brexit negotiations and the looming prospect of ‘no deal’ is undermining British industry. The government must end this chaos and back Labour’s credible alternative plan, including a comprehensive customs union, before it is too late for car manufacturing, the companies in its supply chain and all those who work in it.”

Taken from Labour.org.uk.

Will Britain leave the bloc with or without a deal?

Carmakers such as BMW, Peugeot, and Jaguar Land Rover had moved their scheduled manufacturing cuts to an earlier than expected date in order to reduce any disruption that would have been caused by the Brexit withdrawal.   

Nevertheless, with the extension of the initial Brexit date, the shutdowns only proved costly and futile as the UK’s Gross Domestic Product figures could be damaged by the slump in car production figures.

Last month’s drop in the car manufacturing figures completes a row of 11 consecutive months in which the UK has seen production outputs drop, with a slow-moving global market being partly responsible as climate change concerns are pushing car manufacturers towards electric vehicles. Businesses have been putting contingency strategies into effect since the original Brexit date was announced; however, Aprils plummet of nearly 45 percent is by far the largest decline when compared to 13 percent in March and 15 percent in February.

The SMMT suggests that: “British car manufacturing output plummeted by almost half in April, according to figures published today by the Society of Motor Manufacturers and Traders (SMMT).”

“70,971 cars rolled off production lines in the month, down -44.5% year on year as factory shutdowns, rescheduled to mitigate against the expected uncertainty of a 29 March Brexit, took effect in many plants across the UK.”

“Manufacturing for domestic and overseas markets fell -43.7% and -44.7% respectively as most volume manufacturers brought forward, and extended, production stoppages normally scheduled for the summer holiday period.”

Click here to read the full SMMT report.

The UK’s car industry has faced the greatest difficulty in terms of what consequences a no-deal Brexit would have on business relationships as Britain divorces itself from the European Union. According to the SMMT, the number of vehicles produced in Britain has dropped 22 percent at 441,260, with exports cut by 23.3 percent. Some experts fear that in the event of a no-deal Brexit Britain’s automotive sector could suffer a drop of 50 percent as companies close industrial plants to relocate abroad, and the UK’s borders get hit with long delays, effectively threatening the jobs of thousands of workers across the country.  

UK Car Industry

SMMT CEO, Mike Hawes when commenting on the notion of a no-deal Brexit, said:

Today’s figures are evidence of the vast cost and upheaval Brexit uncertainty has already wrought on UK automotive manufacturing businesses and workers. Prolonged instability has done untold damage, with the fear of ‘no deal’ holding back progress, causing investment to stall, jobs to be lost and undermining our global reputation.”

“This is why ‘no deal’ must be taken off the table immediately and permanently, so the industry can get back to the business of delivering for the economy and keeping the UK at the forefront of the global technology race.”

A representative from the Business Department said: “A number of large automotive manufacturers did see planned production shutdowns during this period.”

“The government wants to see the UK automotive sector continue to grow and attract further investment. Through our modern Industrial Strategy we continue to invest in the future of our automotive industry, including £1bn for research and development into cleaner vehicles, and the Faraday Battery Challenge to develop the next generation of car battery technologies in the UK.”

Taken from independent.co.uk.

The SMMT has 2 main areas of focus when it comes to Brexit and the UK’s car industry:

In terms of regulation the SMMT advises that the British Government needs to indicate how existing regulation surrounding the car industry will correlate with new proposals such as the ‘Repeal Bill’ and should come up with ways of adapting to new EU regulations that will affect the UK once Brexit is delivered. Some of the key regulations that need to be considered include implementing tariff-free trade agreements in which the UK could trade with the Eurozone.

When it comes to Customs arrangements, the SMMT suggests that the Government needs to ensure that a customs agreement with the Eurozone does not include checks and inspections that bring about the risk of long delays, and guarantees the free-flow of vehicles and parts across borders to minimize costly disruptions and preserve the UK’s competitiveness in the global automotive industry.

Around 80 percent of the vehicles produced in the UK are exported abroad, moreover, over 50 percent of which are sold within the Eurozone; however, European demand has dropped by nearly 15 percent. The SMMT has emphasized that this is an important motive for the government to strike a good deal with Brussels before the end of October 2019.

The UK car industry has been open in its disapproval of a no-deal Brexit saying:

‘Weakening demand in key markets continued to affect output, with exports to China down more than half (-55.6%) and cars destined for the US down -2.8%. Meanwhile, production for the EU – the UK’s biggest customer – declined by -14.9%.’

‘Although exports have declined in recent months, overseas demand continues to drive output, still accounting for nearly eight in 10 cars produced – more than half destined for the EU. This underlines the importance of securing a truly free and frictionless future trading relationship with our most important trading partner.’

‘The motor industry has been unequivocal about the impact of no deal, which would have an immediate and potentially irreversible impact on cost, productivity and competitiveness.

Click here to read the full report from SMMT.co.uk.

Investments in the automotive sector dropped by 50 percent in 2018, after the UK’s main car company, Jaguar Land Rover, which has been crippled by a negative slump in the demand for diesel cars especially amidst growing concerns surrounding climate change and carbon emissions, in March 2019 announced international cutbacks effectively putting around 5,000 jobs at risk, the bulk of which are based in Britain.

Car production in the UK goes cold

Steve Turner, the General Secretary for manufacturing at Unite the Union said:

“The car industry is facing unprecedented challenges amid weakening global sales and the government’s demonisation of diesel. With investment plummeting, job losses racking up and Honda planning to leave the UK what does the government do? It fiddles while Rome burns as Theresa May menaces the nation with the chaos of a ‘no deal’ Brexit.”

“We are in the middle of a manufacturing emergency with 130 manufacturing jobs being lost every day in the UK. It’s time for the government to wake up before it is too late.”

“The government needs to take the Brexit handbrake off its support for the car industry by throwing its full weight behind the fight to persuade Honda to stay in the UK and by properly supporting the transition to electric and alternative powered vehicles.”

Click here to read the full article from UnitetheUnion.org.

Risk Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79.28% of retail investor accounts lose money when trading CFDs with this provider. The information contained in this market review should not be construed in any way, as containing investment advice and/or a suggestion and/or solicitation for any trading activity and financial transaction. The data contained in this market review is not necessarily real-time nor accurate. The data and prices on the material are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. There is no guarantee and/or prediction of future performance. EuropeFX, its affiliates, agents, directors or employees do not guarantee the accuracy and validity of any information or data made available and assume no liability as to any loss arising from any investment based on the same. Trading Forex/CFD’s carries a high level of risk and can result in the loss of your whole investment. Forex/CFD’s are leveraged products and therefore Forex/CFD’s trading may not be appropriate for all investors. It is recommended that you do not invest more money than you can afford to lose to avoid significant financial problems in the case of losses. Please make sure you define the maximum risk acceptable for yourself.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79.99% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Find more details about risk here.

eFXGO! Official iOS Mobile App Free • available on app store

4.5/5