Brexit could harm UK car industry growth

New figures published by the Society of Motor Manufacturers and Traders (SMMT), show the UK’s car industry grew profits by 7.3% and added 17,000 new jobs last year, revealing the strength of Britain’s industry before the EU referendum vote.

Vehicle production grew by 5.2% to 1.7 million units while the industry’s environmental impact was reduced by 24.2% thanks to increased recycling and a reduction in landfill waste.

Turnover amounted to £71.6 billion (Rs 650,320 crore) in 2015 and the total number of people employed in the UK automotive sector reached 814,000, with 169,000 involved in the direct manufacturing of cars – 8000 up on the year before.

Investment reached a new record with £2.5 billion (Rs 22,700 crore) injected into the industry – a figure that represents 12% of the country’s total research and development spend, emphasising the significance of the automotive industry on the economy.

Unsurprisingly, the SMMT is using the figures to urge the UK government to maintain Britain’s free-trade deal with the European Union following Brexit. Also supporting the free cross-border trade is Freight Transport Association (FTA) – the country’s largest trade associations representing the interests of companies moving goods.

SMMT chief executive Mike Hawes said Britain’s automotive success has been achieved thanks to its access to the EU’s single market. He warned that the UK’s departure from the EU could hinder future growth: “May’s performance is another strong month for UK car manufacturing, with demand for British-built vehicles up by over quarter. For this success to continue, we need government to maintain economic stability and help deliver the wider benefits – including free access to our biggest market – which has helped make the sector so globally competitive.”

“Our growth depends on certainty and continued open and reciprocal access to the 100-plus markets with which the UK automotive industry so successfully trades. This is not just finished cars but components, technologies and the wider automotive value chain. Any risks and uncertainty to these fundamental benefits need to be addressed head on by UK government,” added Hawes.

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Brexit supporters argue that the UK buys so many cars from other countries in Europe that the EU will have to agree to a free trade deal in order to preserve jobs in countries such as Germany, which exports around a fifth of its cars to the UK.

Matthias Wissmann, president of the VDA, Germany’s automotive industry association, has previously said: “keeping Britain in the EU is more significant than keeping Greece in the euro”.

Nigel Farage said in a European parliament meeting yesterday that he believes Europe needs the UK more than the UK needs Europe and made reference to Britain’s high demand for German cars.

Nevertheless, the SMMT’s latest figures suggest maintaining a free trade deal with Europe will be important to preserve growth. The period of uncertainty that follows Brexit before any potential deal can be struck is when most damage is likely to be done.

Insiders are therefore predicting a slowdown in growth following the referendum result, although the exact effects aren’t likely to be known until the SMMT publishes its next UK automotive industry figures.

SMMT recently revealed that its supply chain members plan to invest £225 million in new jobs, machinery and new product development in the next three years underscoring the need for economic stability. Meanwhile, the UK’s vehicle service and repair sector were revealed as one of the most competitive in Europe, with British motorists spending £21.1 billion every year looking after their cars – 12% more than the global average – as they ensure their vehicles remain safe, efficient and in fine fettle.

Also read: Automakers brace for Brexit impact

Source: Autocar UK