The ongoing uncertainty surrounding Brexit has taken a toll on the British motor industry, with new investment in UK car makers halved in a year, a new report claims today.
The Society of Motor Manufacturers and Traders said manufacturer investments into new plants, machinery, tooling and equipment, models and model development fell to £347.3million between January and June this year, down from £647.4million in the first half of 2017.
The UK motor industry body went on to blast Prime Minister Theresa May’s government’s ‘slow pace of negotiations’ and dubbed the proposed plans for trade after Britain leaves the EU as ‘unrealistic’.
Investment halved: In the first half of 2018, investment in the motor industry fell to £347m, down from £647.4m in the first six months of 2017
Mike Hawes, SMMT chief executive, said Brexit uncertainty was causing ‘growing frustration in global boardrooms’ of some of the biggest car makers.
Speaking at the launch of the UK Automotive’s 19th annual Sustainability Report, he said: ‘Today’s figures show the critical importance of the automotive industry to the UK economy.
‘The current position, with conflicting messages and red lines goes directly against the interests of the UK automotive sector which has thrived on single market and customs union membership.
‘There is no credible “plan B” for frictionless customs arrangements, nor is it realistic to expect that new trade deals can be agreed with the rest of the world that will replicate the immense value of trade with the EU.
‘Government must rethink its position on the customs union.’
SMMT chief executive Mike Hawes said the UK government had ‘no credible ‘plan B’ for frictionless customs arrangements’
At stake is the future of one of Britain’s few manufacturing success stories since the 1980s.
The car industry currently employs over 800,000 people in the UK and generates a turnover of £82billion.
It was the eighth consecutive year of growth for the sector.
But the early signs for 2018 have been less encouraging.
As well as the decline in investment, production has fallen, demand in new vehicles is down and job cuts have already been announced.
And with just nine months left until Britain is due to leave the EU, little is clear about the trade agreements that will be put in place to help the industry thrive.
‘There is no Brexit dividend for our industry, particularly in what is an increasingly hostile and protectionist global trading environment,’ Hawes added.
‘Our message to government is that until it can demonstrate exactly how a new model for customs and trade with the EU can replicate the benefits we currently enjoy, don’t change it.’
The car industry currently employs over 800k people in the UK and generated a turnover of £82bn last year
Under the current timetable, both London and Brussels hope to get a final Brexit deal in October to give enough time to ratify it by Brexit day in March 2019,.
However, few diplomats expect the deal to be struck until months later.
The SMMT said business leaders are now growing nervous about Britain’s future relationship with the EU, as 52 per cent of the UK’s trade in goods last year was with the EU members.
It has urged Mrs May to speed up negotiations to sign a free trade agreement to ensure as frictionless trade as possible in fear that leaving the EU single market and customs union will compound the pain on the motor industry.
The EU customs union clubs the 28 EU members in a duty-free area where there is a common import tariff for non-EU goods.
Just last week, BMW’s UK boss Ian Robertson suggested that the German carmaker could cut operation in the country if no deal is put in place following Brexit.
BMW makes the Mini in Oxford and also owns Rolls-Royce and its Goodwood facility, employing around 8,000 people in the UK in total.
Robertson told the BBC: ‘If we don’t get clarity in the next couple of months, we have to start making those contingency plans – which means investing money in systems that we might not need, in warehouses that might not be usable in the future, in effectively making the UK automotive industry less competitive than it is in a very competitive world right now.’
BMW bosses in the UK said Brexit concerns could force them to rethink its existing investments in the UK, which would include the Mini plant in Oxford
Ana Nicholls, lead automotive analyst at the Economist Intelligence Unit, said: ‘There’s no doubt that the automotive industry is going to be among those hardest-hit by Brexit, given the integrated nature of EU supply chains.
‘Unless there is comprehensive trade agreement, the legal and regulatory difficulties faced by the industry will span everything from environmental regulations, to workforce restrictions, research and development and product-type approvals.
‘If EU markets become harder to access and no new trade deals appear on the table, vehicle exports will fall – and domestic demand is unlikely to be strong enough to make up the difference. Trade barriers will also affect the import of auto parts, making even production for the home market more difficult.
‘The sole Brexit dividend may be less competition within the UK market, if German carmakers find it harder to sell here, but this won’t make up for the problems the industry faces.’
She added: ‘Some companies, including Jaguar Land Rover, have already announced plans to invest in EU production (in JLR’s case, in Slovakia) rather than in their UK plants.
‘Many parts manufacturers are doing the same as the EU supply chains disentangle.
‘But the SMMT’s report also warns the government that worse will come unless there a deal emerges quickly.’
Honda, Toyota and Vauxhall – all of which have significant production bases in the UK – are still prepared to keep investing, to a greater or lesser extent, but Nicholls warned that they can’t wait much longer to find out the terms they will be operating under.
Alex Buttle, director of car buying comparison site Motorway.co.uk said there is ‘no starker picture of the impact on UK businesses of Brexit confusion than what’s happening to the car industry’ and added that the sector is ‘hurting badly’ and ‘in need of a massive confidence boost’.
‘Sadly, the PM’s pledge to try and and agree a ‘customs arrangement’ is unlikely to provide that boost and alleviate the confusion,’ he added.
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