Britain’s decision to leave the European Union has led to uncertainty in the motor industry, with experts urging Prime Minister Theresa May to put a deal in place to ensure the UK continues to have access to the market. As Brexit negotiations continue, vehicle manufacturer Ford has warned that the UK’s competitiveness could be at risk if a suitable deal isn’t brokered.
Ford’s manufacturing plants at Dagenham and Bridgend export engines to the continent for assembly into vehicles – and the company is anticipating having to cut 1,100 jobs already by 2021, regardless of the repercussions of Brexit. Now the American owners have said negotiating a transitional deal is “critical” until a new permanent trade deal can be finalised.
Ford has pledged to do everything it can to keep a presence in Europe and keep profits buoyant, but it can’t rule out cutting costs – even if this means closing plants. Ford’s European president, Jim Farley, is calling for a Brexit deal that keeps UK and EU economies strong to create an investment-friendly environment.
Prior to the referendum on 23rd June 2016, when the UK voted to leave the EU, a survey of motor manufacturers – including Nissan, Jaguar and Toyota – and supply chain companies revealed 80% wanted to remain in the EU. Only 10% wanted to leave and 10% were undecided. Chief executive of the Society of Motor Manufacturers and Traders Mike Hawes described the leave vote as a “shock” because no-one knew what the potential impact on the motor industry would be.
British-owned car companies have declined since the 1980s, but the UK’s automotive industry has been rebuilt in recent years, thanks to overseas manufacturers’ investment in operations, the integration of people and products from other European countries and an absence of tariffs and regulatory barriers.
According to the SMMT, 814,000 people are employed in the British motor industry, which turned over £72 billion in 2015. Products valued at £34 billion were exported, with 65% of vehicle components and 56% of car exports going to countries in the EU. Studies by the SMMT revealed that investment in the first six months of 2017 had slumped to only £322 million – down from £2.5 billion in 2015.
Hawes believed the large investments made by major manufacturers in the UK motor industry made it unlikely they would leave, but there was a risk that smaller suppliers may choose to leave the UK. He described this prospect as “demoralising” after the progress that had been made prior to the Brexit vote, claiming this was the general feeling in the industry. However, he said the industry was determined to “rise to the challenge” – although ideally, this would include all the benefits currently enjoyed that were helping to make the sector successful.
On a cautionary note, he warned that politicians displayed some “ignorance” of what the Brexit situation actually involved, citing the oft-used phrase “access to the single market” as meaning being outside it, thus facing regulatory and customs barriers.
Industry insiders predict another knock-on effect of Brexit could be an increase in the price of a typical family car from Europe by as much as £1,500. This would be caused by a reduction in investment and a tariff on imports of vehicles made in Europe. Car industry insiders are said to be frustrated at a lack of consultation on the impact of Brexit, with much of the Prime Minister’s discussions based on immigration, rather than the wider picture.
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