How Brexit is wrecking UK carmaking

Brexit has now been delayed, at least until the end of October, but it is already disrupting the British economy. Goldman Sachs say it has cost the UK some £600 million (€694 million) a week since the 2016 referendum to leave the EU, while the Centre For European Reform (CER) think tank says the UK economy is 2.5% smaller than it would be if Britain had voted to stay in the EU. The transport sectorhas been in particular turmoil because of the uncertainty, with especially acute fears around the risk of a no-deal Brexit. As for the UK auto industry, business leaders are warning of “permanent devastation”.

The Society of Motor Manufacturers and Traders (SMMT), which represents the UK’s car industry, said in March that fresh investment had almost halved, to £588.6 million (€681 million) last year from £1.1 billion (€1.27 billion) in 2017. It also noted a fall in production of 9.1% to 1.52 million units, the lowest output in five years. SMMT chief Mike Hawes said that a no-deal Brexit could throw trade and supply chains between the UK and EU into disarray, wrecking the industry.

Many carmakers are pulling back from Britain. Jaguar Land Rover is cutting 4,500 jobs, Honda is set to close its Swindon plant, Nissan has reversed plans to build the next X-Trail SUV in Sunderland, and Ford will axe up to 1,000 jobs at its engine plant in Bridgend. It followed major job cuts last year at Vauxhall’s Ellesmere Port plant and Nissan’s Sunderland factory. At this rate, Britain’s car industry could fall into terminal decline.

Brexit is not the only factor

It is a far cry from the heady days of the Brexit referendum campaign in early 2016, when David Davis – who would later serve as Brexit Secretary – promised that “Within minutes of a vote for Brexit the CEOs of Mercedes, BMW, VW and Audi will be knocking down Chancellor Merkel’s door demanding that there be no barriers to German access to the British market.” However, Brexit has simply detached the UK from the rest of the EU. And the world too, because the UK gets preferential trade terms with countries like Canada and Turkey because it is part of the EU.

Brexit is not the only factor behind the misfortunes of the UK industry. For example, there has been a sharp decline in demand for diesel vehicles. But as Japanese car producers say, Brexit uncertainty is not helping them “plan for the future”.

This is echoed by other players in the transport industry. Airbus has warned that it could move wing-building out of the UK in the future if there is a no-deal Brexit, with CEO Tom Enders saying it is a “disgrace” that businesses cannot plan for Brexit.

Of course, the fate of the UK car industry is only one part of the wider European transport puzzle. But it could be crucial. The auto industry is one of Europe’s biggest manufacturing sectors, and the UK is still the second biggest carmaker after Germany. Carmakers are a powerful lobby, able to influence relevant policymaking for the sector.

If one of Britain’s biggest and proudest industries collapses, it could transform the entire transport debate.