Car investment slumps as Brexit uncertainty strikes the industry


Car investment slumps as Brexit uncertainty strikes the industry

According to some of the latest figures from the motoring industry in Britain, Investment in has fallen by half since Brexit preparations began.

The Society of Motor Manufacturers & Traders (SMMT) in the UK said that Brexit uncertainty was "thwarting" decisions by all the biggest car manufacturers to invest more money into their UK factories.

In the first half of 2017, investment in new car models and factory improvements stood at £647.4m but so far this year, the figure had fallen to £347.3m for the same period prompting the comments from the SMMT to say that these are the lowest figures since the financial crisis.

They claim that the UK government's "red lines" on Brexit and "conflicting messages" were working "directly against the interests of the UK automotive sector". Mike Hawes, who is the chief executive of the SMMT told the BBC that the industry needed "clarity" and demanded that Britain stay within the customs union and that a "no deal" scenario where the UK leaves the customs union and the single market with no preferential trading deal  would be "the worse option imaginable".

The SMMT feels that the situation is so dire that the supply chain will be severely disrupted as millions of car and truck parts at the present time move freely between the UK and the rest of the EU.

It hasn't been all that dire though since the Brexit referendum as a number of car manufacturers, such as Nissan, have announced additional investment in Britain. In saying that, there seems to be quite some frustration within the car manufacturing boardrooms as the uncertainty over Brexit continues.

[caption id="attachment_6584" align="aligncenter" width="620"]Car investment slumps as Brexit uncertainty strikes the industry Nissan has committed to building two new models at its Sunderland plant[/caption]

The SMMT are claiming that 850,000 jobs directly and indirectly employed in the sector are at risk because of Brexit, and they are calling on the UK government to stick with the benefits of the single market.

So what could be the effect if there is no “deal” between the UK and the EU at the end of this year? Mr Hawes of the SMMT had this to say to the BBC:

"It won't be an overnight closure but it could be a death by a thousand cuts. Gradually the competitiveness of the UK is eroded, making it that much harder to attract the investment, and it's the investment that makes it [the UK car sector] so competitive. We still need to see significant additional progress [on Brexit]. We still don't know what our future trading relationship is going to be, not just with Europe, but with some of the other countries with which the EU has free trade agreements which are important to this industry as well. There's undoubtedly frustration in boardrooms at the slow pace of negotiations. The way the industry works - with investments over four or five years - you will see over the next couple of years, particular plants will reach that decision point. What we have seen over the last six months is that investment has been declining. Investment in the automotive industry is always a bit lumpy, but if you match what is happening in terms of total investment with what we hear, we are seeing companies sitting on their hands for as long as possible. But it reaches the point you have to make that decision, that's when you need the clarity,".

There would seem to be no credible plan B for frictionless customs arrangements. It may very well be unlikely that trade deals made between the UK and the EU with regard to Brexit will be somewhat unrealistic for the rest of the world to agree on and that replicate the immense value of trade with the EU. Mr Hawes went on to say:
"The government must rethink its position on the customs union. There is no Brexit dividend for our industry, particularly in what is an increasingly hostile and protectionist global trading environment. 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."

It looks likely though, that the UK will look to strike new trade deals with markets such as America and China. One spokesperson said:
"We're confident of securing a good deal with the EU that's mutually beneficial, and allows for the most free and frictionless trade with our European neighbours,"

"The UK automotive industry remains one of our great success stories and a whole host of companies have recently committed to investing billions of pounds in the sector, including Nissan, Toyota, BMW and Vauxhall.

"Through our modern Industrial Strategy and landmark Automotive Sector Deal, we are working with the sector to put the UK at the forefront of new automotive technologies to ensure we remain the destination of choice for future investment."