Car sector frets about Brexit
• Investments fall amid firms’ trade concerns
Uncertainty over Brexit has halved new investment in the British car industry, and Prime Minister Theresa May should change tack to keep the world’s fifthlargest economy in the EU’s customs union, the country’s main car lobby group says.
Uncertainty over Brexit has halved new investment in the British car industry, and Prime Minister Theresa May should change tack to keep the world’s fifth-largest economy in the EU’s customs union, the country’s main car lobby group says.
Public announcements of fresh investments into new plant, machinery, models and model development fell to £347.3m between January and June 21, down from £647.4 min the first half of 2017.
“There is growing frustration in global boardrooms at the slow pace of [Brexit] negotiations,” said Mike Hawes, head of the Society of Motor Manufacturers and Traders.
“The government must rethink its position on the customs union,” Hawes said, referring to May’s position that Britain will leave the customs union that groups EU members in a duty-free area where there is a common import tariff for nonEU goods.
With only nine months left until Britain is due to leave the EU, there is little clarity about how trade will flow as May, who is grappling with a rebellion in her party, is still trying to strike a deal with the bloc.
In a sign of just how worried big business is getting, Siemens, Airbus and BMW have publicly cautioned Britain in the past week that their businesses will be hurt by a disorderly Brexit.
Under the timetable, both London and Brussels hope to get a final Brexit deal in October to give enough time to ratify it by Brexit day in March 2019, but few diplomats expect the deal to be struck until months later.
The nature of the future relationship with the trading bloc remains unclear and there is concern in boardrooms about the prospect of Britain crashing out of the bloc without a deal, or with a deal that would silt up the arteries of trade. That could be highly damaging for an industry that is dependent on the speedy movement of huge numbers of parts across borders.
The average car, for example, has about 30,000 parts.
BMW’s Mini plant in Oxford brings in 5-million components a day and the company is increasingly frustrated about the lack of clarity around how it will be able to do that in future.
The car manufacturer’s UK boss, Ian Robertson, said that if Britain tumbled out of the EU without a deal on March 29 there was no longer enough time to put in place the systems to ensure components could keep moving easily across borders. “What we are asking for is negotiations to take place, decisions to be made, clarity to be achieved and then we can plan our business model,” he said on the sidelines of the Society of Motor Manufacturers and Traders conference.
PRODUCTION CAPACITY
BMW has quietly ramped up production capacity at a new export hub for the Mini on continental Europe with Dutch contract manufacturer VDL Nedcar, thereby cutting its dependency on Oxford.
It quadrupled staffing in Born, the Netherlands, where the Mini is also built, and added the assembly of BMW’s X1 model to the Dutch production line in August 2017. More people now work at VDL Nedcar than BMW employs at its plant in Oxford.
Even a small increase in paperwork or customs checks after Brexit, for example, could lead to spiralling costs for big manufacturers that depend on vast supply chains that stretch across Europe and the globe.
At stake is the future of one of Britain’s few manufacturing success stories since the 1980s: a car industry employing over 800,000 people and generating turnover of $110bn.
Much of the industry is owned by foreign companies.
The world’s biggest car makers — including Toyota, BMW and Ford — have urged Britain to ensure that they can import and export without hindrance after Brexit.
One British manufacturer is McLaren Automotive, which produces about 5,000 high-end cars a year.
The company’s CEO, Mike Flewitt, said the industry needed to know the shape of the new trading relationship in good time. “The thing we plead for most is time, is notice,” he said.
“If we don’t know what’s coming then we just run into a brick wall.”
Supporters of Brexit admit there may be some short-term pain for Britain’s $2.9-trillion economy, but that long-term it will prosper when cut free from the EU, which they cast as a failing German-dominated experiment in European integration.
About 52% of Britain’s total $1.1-trillion trade in goods in 2017 was with the EU so May wants to sign a free trade agreement and negotiate an as yet relatively undefined customs arrangement to ensure as frictionless trade as possible.
Hawes said that the British government’s current position — leaving the EU single market and the customs union — would hurt the industry.
“The current position, with conflicting messages and red lines goes directly against the interests of the UK automotive sector which has thrived on single market and customs union membership.”