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Writer's pictureJosh Cadbury

COULD BREXIT INACTION BE THE BIGGEST THREAT TO THE UK AUTO INDUSTRY?



No matter whether you are firmly on one side of the fence or the other (or perched precariously on top), there’s no doubt that Brexit has become far more contentious than anyone ever expected. At the time of writing, with “no deal” day fast approaching, many organisations in the UK and beyond are having to make contingency plans for every eventuality.

Anti-Lock Brexit

Some parts of the automotive industry are in full crisis mode. In fact, a majority of business insiders are now expecting the no deal scenario to be very harmful to their organisation, according to one survey commissioned by the Society of Motor Manufacturers and Traders. Almost three-quarters of the companies surveyed believe “no deal” would damage their business, with only one in 10 predicting a rosy future.

Special Case?

The UK auto industry may be particularly vulnerable, as it has become very reliant on trade within the EU single market and customs union, both in terms of supply and distribution. After all, the domestically driven manufacturing scene has long since disappeared and the implant manufacturers rely on just-in-time supply chains and frictionless movement, as part of their global approach. When you consider that 80% of the 1.6 million cars produced in the UK each year are sent (principally) to the EU, it doesn’t take much effort to see the risks of “no deal.”

For an industry that’s still recovering from last decade’s financial slowdown, the predicted disruption at each port could last for weeks or months, hammering at sales and costing jobs.

Where’s Westminster?

With tempers rising at the same pace as rhetoric, it’s difficult to know where to turn to get a balanced opinion. However, the biggest risk may be inaction and the fact that politicians in Westminster are seemingly unable to come to any conclusion. Consequently, many organisations are ramping up preparations for the “no deal” scenario and some of them are taking decisions which cannot be reversed.

If a major manufacturer were to decide that it’s too risky to remain in the UK, then they might decide that it would be far better in the long term for them to move to the EU, from a continuation-of-trade perspective. Any way you look at that, such damage could well be swift and irreversible.

One-Way Ticket

There are rumours that senior personnel at Ford have already told PM Theresa May that they are preparing alternative sites on the continent. “Such a situation would be catastrophic for the UK auto industry and Ford manufacturing operations in the country. We will take whatever action is necessary to preserve the competitiveness of our European business,” underlined a company spokesman.

Following Ford

Certainly, Ford has a significant presence in the UK that dates back for generations, but they have a much larger presence on the EU mainland. Whether Theresa May and Co. can come up with a deal at the last moment, much of the damage may already have been done.

With an auto industry facing significant headwinds from every direction, could the UK government have already shot itself in the automotive foot?

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