Honda to close UK plant as Brexit looms
Business minister calls decision ‘major blow’
Honda will close its only British car plant in 2021 with the loss of up to 3,500 jobs, a major departure of Japanese investment announced just over one month before the UK is due to leave the EU.
The automaker, which builds more than one-tenth of the 1.5 million cars made in Britain, said the move was not related to Brexit, and it needed to focus activities in regions where it expects to sell most cars after struggling in Europe.
But the timing of the announcement about the plant, which came just 38 days before the scheduled Brexit, comes after a series of warnings from Japan that it would pull investments if they are no longer economically viable after Britain leaves the bloc.
“We had to consider the rise of electric vehicles and the different speeds at which electric vehicles will be taken up in North America and Europe,” said Honda Chief Executive Takahiro Hachigo. “This decision was not informed by Brexit.”
Honda, which builds its Civic in Britain and Turkey, said it would stop making the model in both countries. The announcement came just over two weeks after bigger Japanese car maker Nissan canceled plans to build its X-Trail sport utility vehicle (SUV) in Britain.
Most of the Civic hatchbacks built in Britain are for export to the US rather than Europe. Europe’s expected faster take-up of electric vehicles could be supplied from China and Japan, where Honda already plans mass production.
Britain’s business minister said Honda’s decision was a major blow and illustrated how much was at risk from Brexit.
“Decisions like Honda’s ... demonstrate starkly how much is at stake,” said Greg Clark.
“This news comes on top of months of uncertainty that... manufacturers have had to endure about Brexit, about our future relationship with the EU,” Clark said.
He said it was unacceptable that business did not have clarity on future trading terms ahead of the scheduled March 29 departure.
Honda, Britain’s fourth-biggest automaker, will cease production at Swindon in southern England, where it made 160,000 cars in 2018.
The move followed decisions by Japanese electronics companies Sony and Panasonic to move their headquarters from Britain into the EU, while Hitachi put a $28 billion nuclear power project in Britain on hold in January.
‘Devastating decision’
Some 1,000 Japanese companies are based in Britain, where they employ about 140,000 people. They have invested about 60 billion pounds ($78 billion) there, according to the Japanese embassy in London.
Nissan, Honda and a third Japanese car- maker, Toyota Motor Corp, together account for roughly half of the cars built in Britain.
The three automakers were encouraged to come to Britain in the 1980s as a pro-business gateway to the EU and have helped turn around an ailing domestic car industry.
The trio build half of Britain’s cars and hundreds of thousands of engines at production sites across the country, but a no-deal Brexit could destroy the free and unfettered trade manufacturers rely on.
The loss of such a major employer in Swindon, which backed Brexit in the June 2016 referendum, risks a further 10,000 jobs in the supply chain, which could have knock-on effects for other carmakers due to the interconnected nature of the sector.
For Honda, declining demand for diesel-powered vehicles and tougher emissions regulations have also clouded its manufacturing prospects in Europe, which accounts for just 3 percent of its global sales.
The company said in October 2017 it would stop making vehicles at its Sayama plant in Japan by 2022 as it faces a shrinking domestic market, while it has a share of less than 1 percent in Europe.
The outlook in Europe looks gloomy as sales in every major country fell in January, according to industry figures, with a double-digit drop expected in Britain, Europe’s second-biggest auto market, if there is a disorderly Brexit.
US-based automaker General Motors has already pulled out of the continent while Ford is conducting a major restructuring.
A recently agreed on EU-Japan trade deal also means tariffs on cars from Japan to the bloc will be eliminated, while Britain is struggling to make progress on talks over post-Brexit trade relations with Tokyo.
Honda said this was not part of the decision-making process but its head said it would benefit from the EU-Japan deal.
Britain’s largest trade union Unite said it would continue to consult with the company and fight to keep the site open, blaming the handling of Brexit for making it harder for companies to keep investing in the country.
“We believe that the uncertainty that the... government has created by its inept and rigid handling of the Brexit negotiations lurks in the background,” said national officer for the automotive sector Des Quinn.
“The car industry in the UK over the last two decades has been the jewel in the crown for the manufacturing sector – and now it has been brought low by the chaotic Brexit uncertainty,” said Quinn.
In January, Britain’s biggest automaker Jaguar Land Rover said it would cut 10 percent of its workforce, mainly at home, due to sluggish sales to China and a slump in European diesel demand.