Carmakers not ready for Brexit, says SMMT as UK sales fall

UK carmakers are not ready for Brexit, the head of the automotive trade body has warned, as concerns about cross-border trade were underlined by fresh figures showing nearly nine in 10 cars built in the UK last month were destined for export.

Output of vehicles for the UK market plunged by 47% in June, compared with a 6% rise in exports, amid a “perfect storm” of factors, the Society of Motor Manufacturers and Traders (SMMT) said.

The SMMT chief executive, Mike Hawes, played down the significance of the monthly slump but said the figures were a “reminder of the exports-led nature” of the UK car industry.

Hawes said this showed the importance of striking a deal with the EU, the destination for 53% of UK car exports, and warned that a lack of clarity on Brexit had left the industry struggling to prepare for the departure date in March 2019.

UK cars

“No one would profess to being Brexit-ready because there are too many variables in there,” he said. “We need a deal. If we have no deal, there is no transition, there is no implementation period, that would kick in less than eight months away. You can operate on WTO [World Trade Organization] trade rules but it would be at a significant extra cost and burden than we currently enjoy.”

Asked if there were any potential Brexit benefits for the British automotive industry, which employs 186,000 people and has a combined annual turnover of £82bn, he said: “Not that we can see.”

The SMMT has repeatedly called for continued membership of the single market and the customs union, warning that prolonged uncertainty puts thousands of jobs at risk.

Leading firms in the industry have said anxiety about a trade deal has already choked off investment, while Jaguar Land Rover said a no-deal Brexit could force them to pull out of the UK.

Hawes warned that leaving the EU in March without a deal would send car firms scrambling to find ways to avoid production lines grinding to a halt and could tip the industry into long-term decline.

“Given the cost of stopping production, manufacturers will do everything they can to stop that happening,” Hawes said, adding that this would cost millions of pounds per day.

“You survive on the basis that you’re competitive. Once you cease to be competitive – you generally don’t shut overnight – but your ability to attract that next round of investment is that much tougher. Gradually, it’s a death by a thousand cuts.”

The warning came as monthly figures from the SMMT showed that production for the UK market nearly halved to 15,647 in June, an acceleration in the 12.9% fall recorded in the year to the end of June.

The trade body blamed a “perfect storm” of factors, including persistent consumer confusion about the government’s future taxation and regulation of diesel cars, which have come under increased scrutiny in the wake of the “Dieselgate” emissions-rigging scandal.

It said this had been exacerbated by one-off factors such as manufacturers winding down the production of certain models as they come to the end of their life cycle.

Overall car production declined by 5.5% in June and has fallen by 3.3% in the first half of the year to 834,402.

With most of the decline due to falling production for the UK market, the percentage of cars built for export hit nearly 88% in June, while the year-to-date proportion was 81%.

The UK exports most of the cars it makes. However, British buyers also get the majority of their vehicles from overseas, with about 86% of new cars imported and 69% from the EU.

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Hawes said this demonstrated “our mutual dependency on free and frictionless trade” and praised the government’s recent efforts to reassure UK business in the Brexit white paper.

“The UK government’s latest Brexit proposals are a step in the right direction to safeguard future growth and consumer choice,” he said. “We now look to negotiators on both sides to recognise the needs of the whole European automotive industry, which, combined, employs more than 12 million people. Any disruption risks undermining one of our most valuable economic assets.”


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