UK car industry pleads for Brexit deal as investment collapses by half in 2018

Fresh inward investment in the sector plummeted in 2018, down 46.5 per cent on 2017 to just £588.6m

Investment in the British car industry fell by 50 per cent in 2018 as firms held back spending due to Brexit-related uncertainty.

Unveiling the figures, industry leaders are issuing a heartfelt plea: “We need a deal”.

Despite all the support initiatives by the UK government and parliament, car bosses are clear about one thing, according to their spokesman.

“Nothing has changed” since the 2016 referendum to reassure them about the prospects of investing in Britain. And they are “beyond frustration” with the politicians.

Among many other problems, the industry has highlighted the lack of progress in signing off on the valuable free trade deals with nations such as Japan and South Korea that the UK currently enjoys via the EU, but which will be forfeited automatically after a no deal Brexit.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), abandoned much of the industry’s previous politesse and reticence about commenting on policy by publicly backing Theresa May’s deal with the EU, if only because it appears to be the least worst option.

As he released the latest figures for investment and production in Britain’s car factories and supply chains, Mr Hawes said it was “not a pretty picture”, and he repeated that a “no deal” Brexit was the worst outcome of all, indeed an “existential threat” for British industry, and that all forms of Brexit were an exercise in “damage limitation”.

No deal could place more than two thirds of UK automotive’s global trade under threat, he added.

The SMMT reported that fresh inward investment in the sector plummeted in the year – down almost half (46.5 per cent) on 2017 to just £588.6m, amid fears over the UK’s future trading prospects with the EU and other key global markets after 29 March.

“Investment has stalled,” Mr Hawes said

The domestic car industry, dominated by transnational giants including Nissan, Toyota, Tata, Honda and BMW, has been “sitting on its hands” while it waits to see what happens.

Mr Hawes said these companies have found the process “exasperating”, and while he believed some ministers were sympathetic and that Theresa May “gets it” they are increasingly frustrated by the failure of policy.

UK car production fell 9.1 per cent to 1.52 million units in 2018, a five-year low for the sector.

With eight out of 10 cars exported, weak demand in many markets, including the eurozone, the UK and China has depressed production.

Confusion over new official fuel consumption figures and mixed messages from governments about diesel added to the industry’s problems. It was the second consecutive annual fall as the sector faces multiple challenges.

That’s about a third of the level seen in recent years and as little as a tenth of the figure that was being ploughed into revitalising car plants and their productivity after the financial crisis.

Mr Hawes called again for the Government to guarantee “frictionless trade” with the EU, preferably via membership of the customs union and single market.

He deplored the notion of a “managed no deal” as a “fantasy”.

In 2018, production for UK car exports to China slumped 24.5 per cent, while EU demand fell by 9.6 per cent, less steep than the decline at home, with registrations of British-built cars in the UK down 20.9 per cent in the year.

Overall, EU27 countries still accounted for the vast majority of UK exports (52.6 per cent) – amounting to 650,628 cars.

Exports to Japan rose 26 per cent and South Korea also showed growth, up 23.5 per cent. Trade with the US was broadly unchanged.

Mr Hawes added: “UK Automotive is on red alert. Brexit uncertainty has already done enormous damage to output, investment and jobs. 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.”

“Given the global headwinds, the challenges to the sector are immense. Brexit is the clear and present danger and, with thousands of jobs on the line, we urge all parties to do whatever it takes to save us from no deal.”

While the “gradual erosion” of competiveness and loss of jobs were of great concern, the SMMT also pointed out that, with more than 80 per cent of new cars sold in the UK being imports, and the majority of these made in Europe, a no-deal Brexit, with tariffs imposed on those cars, could add £1,500, on average, to the price a new car.

The fate of the Vauxhall plant at Ellesmere Port on Merseyside, which makes the Astra, now under the control of Peugeot SA, has been intensely discussed, and Mr Hawes suggested that government support on business rates and energy costs would help the business case for fresh investment.