Is Brexit destroying the UK car industry?

Investment in UK carmakers falls by nearly 50% as no-deal fears mount

Jaguar Land Rover
(Image credit: 2017 Getty Images)

Carmakers have sent a “red alert” to the Government over fears of a no-deal Brexit after it was revealed that investment in UK manufacturers almost halved in the past year.

A new report by the Society of Motor Manufacturers and Traders (SMMT) shows that “fresh inward investment” into British carmakers fell to £589m in 2018, down by 46.5% on the previous year.

The industry body also found that the number of cars manufactured in the UK fell by 9.1% last year to 1.52m vehicles, the “second consecutive fall and biggest annual decline” since the financial crisis a decade ago, The Daily Telegraph reports.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.


Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

The SMMT’s chief executive, Mike Hawes, said: “With fewer than 60 days before we leave the EU and the risk of crashing out without a deal looking increasingly real, UK Automotive is on red alert,” reports the BBC.

“Brexit uncertainty has already done enormous damage to output, investment and jobs,” Hawes went on. “Yet this is nothing compared with the permanent devastation caused by severing our frictionless trade links overnight, not just with the EU but with the many other global markets with which we currently trade freely.”

Responding to Hawes’s comments, the Government says it is working on “the broadest and deepest possible agreement” with the EU to “maintain the strength of our world-leading automotive sector”, Sky News reports.

It added that it is looking to increase investment to help carmakers produce the “next generation batteries” in a bid to make Britain a leading manufacturer of electric vehicles.

Is Brexit to blame for the industry’s downturn?

Yes, but it’s not the only issue facing the motoring industry.

The BBC’s business editor, Simon Jack, says investment in the motoring industry “comes in uneven lumps as old models are retired and new ones introduced over time.

“But even allowing for that, the plunge in new investment revealed this morning is stark,” he said.

Global carmakers invested around £2.5bn in the UK motoring industry in 2015, says Jack, but that figure has fallen every year since to the 2018 figure of £589m.

The biggest issue manufacturers face in the event of a no-deal Brexit are possible tariffs applied to vehicle exports, making them more expensive, The Telegraph says.

Manufacturers also frequently move components between their UK factories and plants based in EU states, a process that would become more difficult if stricter border checks are applied, the newspaper adds.

However, there are other factors outside of Britain’s divorce with the EU.

A “global economic slowdown”, particularly in China, a market that has been especially fruitful for UK manufacturers in recent years, has caused a number of headaches for carmakers across the world over the past 12 months, says Sky News.

“Confusion” over the future of diesel cars and the “new official fuel consumption figures” from the WLTP (Worldwide Harmonised Light Vehicle Test Procedure) system have also “added to the industry’s problems”, The Independent reports.

These factors led to Jaguar Land Rover announcing the loss of around 4,500 workers earlier this month, while the Chinese-owned London Electric Vehicle Company laid off 70% of employees at its Coventry plant as it anticipates a “challenging year” in 2019, the Financial Times reports.

Continue reading for free

We hope you're enjoying The Week's refreshingly open-minded journalism.

Subscribed to The Week? Register your account with the same email as your subscription.