Remaining in Europe vital to future of UK auto industry, warns SMMT

The UK motor industry has today restated its view that staying in the European Union is best for its business and best for British jobs, just days ahead of the referendum on the UK’s membership of the EU.

The Society of Motor Manufacturers and Traders (SMMT), which represents the UK automotive industry, wants to ensure there is absolute clarity on the sector’s position given recent misrepresentations in the Europe debate.

The industry is a huge employer, supporting 800,000 jobs across the UK and contributing £15.5 billion (Rs 152,566 crore) annually to the economy. It has emerged from the recession stronger, more productive and more competitive and is now a leading global player, with exports at record levels and vehicle production at the highest level for over a decade.

The British industry is export led with around 80% of vehicles heading abroad and over half of those (57.5 percent) destined for the rest of the EU. Unrestricted access to the world’s largest single market, the negotiating strength of the EU to secure international trade deals, the ability to shape technical regulations and free movement of labour all provide significant benefits to UK businesses. SMMT says the majority of its member companies – large and small – are overwhelmingly in favour of remaining in the EU.

Before the start of the campaigning period, SMMT commissioned a survey of its members – which includes car and commercial vehicle manufacturers, parts suppliers, aftermarket companies and other companies large and small. An overwhelming majority of 77% firms surveyed said remaining in Europe would be the best for their business, with only a minority 9% saying leaving would be best. Notably no large company said that an exit would be in their business’ best interests.

Mike Hawes, SMMT chief executive, said, “UK Automotive is globally competitive, securing record levels of investment, creating tens of thousands of jobs annually and exporting to over 100 countries. We want this success to continue rather than jeopardise it by increasing costs, making our trading relationships uncertain and creating new barriers to our single biggest and most important market, Europe. Remaining will allow the UK to retain the influence on which the unique and successful UK automotive sector depends."

Brexit fears: Risks and uncertainties

A number of SMMT members are of the view that since they extensively trade with the EU, any barrier to this would be bad for their business. While they say that prospects for jobs, exports and investments are enhanced in the single market, leaving the EU would weaken their position for international trade negotiations and isolate them from winning contracts abroad. Another member said, “UK access to the EU is one significant reason for our location in the UK. As an engineering services company, unrestricted recruitment of skilled EU labour is an important strength. I do not believe this would continue if the UK leaves.”

Some others cited fears that leaving the EU will only put trade barriers in place, making growth harder and providing opportunities for EU-based competitors. They also fear that they would not be eligible for EU research grants and collaborative projects while their competitors would be. Another risk of exiting the EU is that “Global OEMs will not invest in new models, while the UK’s involvement in a European supply chain will become harder.”

SMMT says there should be no ambiguity about the sector’s views ahead of such a critical vote. Senior figures from a wide range of UK-based automotive companies have reinforced this message.

Ken Gregor, Chief Financial Officer of Jaguar Land Rover, said, "Remaining in the EU – our largest market – will increase Jaguar Land Rover's chances to grow, create jobs and attract investment in future technologies. Our European supply chain has been fundamental in helping us to meet customer expectations worldwide and achieve sustainable, profitable growth.”

Tony Walker, Deputy Managing Director, Toyota Motor Manufacturing UK, said, “After considered review, we believe that continued membership of the European Union is best for our business and for our competitiveness in the longer term.”

Dr Ian Robertson, Member of the Board of Management, BMW AG, said, “We firmly believe Britain would be better off if it remained an active and influential member of the EU, shaping European regulations which will continue to impact the UK whatever the decision on Thursday.”

Rory Harvey, Managing Director and Chairman of Vauxhall, said, “We are part of a fully integrated European company where we benefit from the free movement of goods and people. We believe not to be part of the EU would be undesirable for our business and the sector as a whole.”

Nigel Stein, Chief Executive, GKN PLC, said, “We see a real benefit in remaining in the EU. A vote to leave will not mean manufacturing investment disappears overnight, but over time a UK outside the EU will be disadvantaged and will lose the investment it needs to maintain our industries.”

Gamil Magal, Group Chief Executive, Magal Engineering Limited, a medium-sized Tier 1 components supplier, said, “Full unhindered access to the European single market is essential for Magal Engineering’s UK operations and growth.”

Why auto matters for the UK

The automotive industry is a vital part of the UK economy accounting for more than £69.5 billion (Rs 684,088 crore) turnover and £15.5 billion (Rs 152,566 crore) value added. With some 160,000 people employed directly in manufacturing and in excess of 799,000 across the wider automotive industry, it accounts for 11.8%of total UK export of goods and invests £2.4 billion (Rs 23,623 crore) each year in automotive R&D. More than 30 manufacturers build in excess of 70 models of vehicle in the UK supported by over 2,000 component providers and some of the world's most skilled engineers.