UK car manufacturers are losing patience with the government as stalled Brexit talks threaten to reverse a decade of growth in the industry.
Plans to build new models have been delayed and factories are at risk of closure as uncertainty remains over future trading arrangements with EU countries. Companies such as Nissan, Peugeot and Jaguar Rover are said to be lobbying hard to convince the government to avoid a hard Brexit. Anything short of a free trade deal could ring the death knell for car making in the UK, analysts say.
“Until they know the terms of trade, car manufacturers can’t plan forward,” said David Bailey, Professor of Industry at Aston Business School in the UK. “If we’re not careful we could lose a whole cycle of development and lose car models and potentially lose plants.”
Long simmering concerns about Brexit’s effects on the industry intensified last week when BMW’s special representative in the UK Ian Robertson warned the cost of cars would increase if new trading restrictions were imposed when the UK leaves the EU. Although the German maker of luxury cars later tempered its comments, other manufacturers joined the fray. Among them, plane maker Airbus said it would pull out of the country if a so-called hard Brexit resulted in new tariffs and border controls.
Adding to jitters, the car industry’s lobbying body renewed its call for clarity. The Society for Motor Manufacturers and Traders (SMMT) said investment in the sector had halved last year because of Brexit uncertainty, warning that 168,000 jobs depended on a favourable outcome to separation talks. Other analysts warn that at the very least, the price of car will increase substantially.
The industry has called on the government to keep borders open and trade flowing after Brexit. It wants the UK to remain in the EU’s single market and customs union, which will enable easy movement of goods, services and people across its borders and remove the threat of new trade tariffs (among already present ones).
Those are key to the modern car industry, which relies on fast and efficient supply chains that provide parts and tools on a just-in-time basis, said Tim Lawrence, an industry expert with PA Consulting.
“The whole nature of industry is moving to one in which people want personalised, customized cars immediately,” Lawrence said. “You need a fast, responsive supply chain. A hard Brexit will make it potentially less responsive and at the end of the day customers will pay more.”
The car industry has been one of the UK’s few manufacturing success stories of the past few decades. After reaching a peak in the 1970s, it fell into decline until the late 1980s when Japanese companies such as Nissan and Honda set up shop in the country. By the 1990s the UK was churning out an estimated 1.9 million cars. While that dropped during the financial crisis, it’s climbed back to 1.7 million, according to Bailey.
Much of that growth can be attributed to the frictionless border and trading arrangements the UK has had with the EU since the early 1990s. Most of the vehicles the UK produces are exported to Europe.
Brexit uncertainty is playing havoc with manufacturers’ product release plans. Car makers renew each vehicle model every five to seven years to keep their product lineup fresh. The cost of retooling factories to produce them is so expensive that manufacturers plan their release schedule at least three years in advance.
The next model renewal is expected from French car maker Peugeot. Its decision on where to make an updated Vauxhall Astra is due later this year, and is being keenly watched as a bellwether of the impact of Brexit uncertainty on the sector.
The concern is that without clarity on the shape of the UK trading environment post-Brexit, Peugeot and other manufacturers with model renewals in the wings, will move production from the UK to a country that has a predictable business climate. The threat is all the greater considering most manufacturers have spare capacity at other plants in Europe.
“Manufacturers need certainty because they work on a long planning cycles,” said Lawrence. “Where there is uncertainty they will either delay a decision or make a decision that reduces the risk – which is not likely to be favourable to a country that has little certainty about what’s going to happen.”
There are huge long-term ramifications. Once production of a car model is lost, it’s unlikely to return. The UK has already lost production of Jaguar Land Rover’s Discovery to Slovakia with no plans yet announced for what model will be produced at the Solihul plant where it had been made.
Reports said the capacity would be used to build an electric model. But no formal announcement has been made, a fact Bailey finds ominous. More worryingly, it may portend the UK’s exclusion from the electric revolution. That’s a real risk, warns Lawrence, who adds that no amount of government support for the tech industry will make up for the UK missing out on the next big step in the evolution of car manufacturing.
“If we lose some mass production because of Brexit I don’t think we will ever recover it,” said Bailey.