No-deal Brexit contingency plans cost UK car industry £330m

Contingency plans in case of a no-deal Brexit have so far cost the UK car industry £330 million (Rs 2,809 crore), according to data released today.

Research from the Society of Motor Manufacturers and Traders (SMMT) found that, collectively, car makers have spent £330 million on preparations for a no-deal Brexit since the referendum in 2016. The SMMT added that not all of its members had yet responded so the total figure would be higher. 

For most major UK manufacturers, these plans include stockpiling materials and components, securing warehouse space and looking at new logistics such as using alternative ports. It has also been necessary, in some cases, to purchase additional insurance, train in new customs procedures and recruit people. 

Most significantly, the movement of annual plant shutdowns from the summer to April, which were pulled forward in anticipation of the March Brexit deadline, were costly for those car makers affected. The SMMT added that this measure cannot be repeated for the proposed October departure date from the EU.

While individual makers’ expenditure was not disclosed, the SMMT said some marques had spent more than £100 million (Rs 851 crore), others had spent “tens of millions’ and some under a million. 

SMMT chief executive Mike Hawes said the fear of a ‘no deal’ Brexit was “causing investment to stall, as hundreds of millions of pounds are diverted to Brexit cliff-edge mitigation – money that would be better spent tackling technological and environmental challenges.”

“Pitiful” investment in car industry
In the first six months of 2019, £90m (Rs 766 crore) of investment was pledged in the UK car industry, comprising £23m (Rs 196 crore) of government funding for electrification projects, plus a couple of smaller, unnamed suppliers. By comparison, £374.3m (Rs 3,187 crore)of investment was announced in the same period last year and £647m (Rs 5,509 crore) in 2017. 

Hawes added: “We expected a decline in investment [because of product cycles]. We are not blaming it entirely on Brexit but the downturn has been precipitous. A ‘no deal’ is causing investors to sit on their hands.” He described the £90m figure as “pitiful”.

He renewed calls for “a free and frictionless trade – to have competitive just-in-time manufacturing depends on that. Any tariff threatens the industry. The worst possible outcome is no deal. If we can get a deal, the future of the industry is still strong”.

The importance of a gigafactory
Hawes also said the industry was “desperate” for a Tesla-esque gigafactory. “We want to bolster the supply chain and ensure that the UK industry moves at the pace of new technology.

“Without a Brexit deal, it would be much harder to attract Gigafactory investment. In future, value will be in batteries rather than powertrains, as it is now. We are going to need multiple gigafactories, especially to reach zero emissions.”

It was also announced today that UK car manufacturing has fallen by 20.1% in the first six months of 2019. The decline is caused by downturns worldwide and April’s widespread factory shutdowns, pulled forward in anticipation of the March Brexit deadline.

By the end of the year, UK car making is expected to be down approximately 15% year-on-year, with 1.37m units set to be produced.

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