Since the 2016 referendum, auto production has dropped 25% in the UK. The exit from the EU comes at the worst time, while the sector is tackling the electric shift.
Since the June 23, 2016 referendum in favor of Brexit, the British automobile industry has been one of the sectors most affected. In 2019, vehicle manufacturing fell 14% from 2018, dropping to 25% over three years, according to statistics released Thursday, January 30 by the Society of Motor Manufacturers and Traders (SMMT) the area. Production is now 1.3 million vehicles, making the ambition displayed only four years ago seem fanciful to reach the 2 million mark. “The drop in production, to its lowest level in almost a decade [at the time of the financial crisis], is very worrying,” said Mike Hawes, director of the SMMT.
The British auto crisis isn’t just from Brexit. The diesel scandal and the transfer of consumers to electric vehicles are shaking the sector across Europe. The economic slowdown in China, where luxury cars are very popular, is also being felt heavily, especially for Jaguar Land Rover.
But the release of the European Union (EU), which will be effective Saturday 1 st of February, comes at the worst time. First, the latter caused severe short-term turmoil. The British pound fell sharply, increasing imports of spare parts. Worried consumers have also turned away from important purchases such as a car. Then, faced with the risk of a Brexit without agreement, which would have been chaotic, most factories preferred to close for several weeks in April and October, dates which were supposed to mark the exit from the EU. These risks have not materialized, but the consequences for production are real.
Last but not least, as the industry must prepare for the electric shift, manufacturers have largely stopped investing in the United Kingdom. Too risky, when no one knows for certain what future relations will be between London and Brussels. Will there be customs duties? Border controls? A free trade agreement?
In this fog, the automakers invested, in 2019, 1.1 billion pounds (1.3 billion euros), about 60% less than the average of the previous seven years. And still, almost everything comes from a single investment from Jaguar Land Rover, which announced in July 2019 that it would inject nearly 1 billion pounds into one of its factories to build electric vehicles. The rest of the industry is waiting. “The more the uncertainty continues, the more we will miss the investments necessary for the future,” said David Bailey, professor of economics at the University of Birmingham, who has just co-edited a book on Brexit and the automobile (“Carmageddon? Brexit and Beyond for UK Auto” , Bite-Sized Books, 2020, untranslated).