Brexit puts the brakes on a flawed business model

which left the firm vulnerable to exchange rate swings.

Both MG6 and later MG3 cars were imported from China virtually complete, requiring just the fitting of engine and front suspension, front end and wheels at Longbridge.

The cars themselves – both the initial MG6 and the recent MG3 – were actually well designed (at Longbridge in fact) and drove well enough, but were let down by old-fashioned and thirsty engines which didn’t fit the British market or local petrol prices.

The firm made a key strategic mistake early on not to use General Motors engines in Europe (with whom it has a significant joint venture in China) but rather to develop its own engines.

It later had to call GM in to help and has been playing catch-up ever since.

Despite budget prices, car sales were well below expectations although they had grown over the last year with the launch of the MG3.

Last year, it sold just over 3,000 cars in the UK, its only European market, but had predicted this would increase that to 5,000 after the launch of the new GS SUV, assembled at SAIC’s Lingang factory in China.

The decision to quit the UK badly dents the brand here which still had a British feel about it.

The Brexit vote and its aftermath have not helped the firm and, in many ways, have pushed it over the edge.

The ten per cent depreciation in the value of sterling following the Brexit vote has pushed up the cost of imported components for Shanghai and the firm scrapped its planned assault on the European market.

The firm was planning to use its (limited) UK production base at Longbridge to serve the single market.

With uncertainty over whether the UK will actually be in the single market in the future, SAIC decided to pull the plug rather than invest further at Longbridge.

But, as Mr Burden noted, it was a shame SAIC didn’t explore with the UK government whether more could have been done to help the firm get costs down – perhaps by sourcing more components locally or through launch aid if GS production came to the UK.

While redundancies will be limited to 15-25, Burden’s comments reflect a disappointment as to what could have been.

SAIC has said that it will continue to employ – for now at least - more than 400 skilled design engineers at Longbridge as well as sales, marketing and aftersales operations.

The real success story for SAIC at Longbridge has been its design operation where cars are designed for Shanghai Auto and MG brands.

Earlier this year, the company announced it would invest £1.2 million to install a fifth engine test facility among other improvements to the development centre.

Once UK production stops, MG will have to pay a ten per cent import tax on fully assembled cars that arrive from China, in accordance with WTO rules, as opposed to the four per cent tax imposed on cars on imported components (which is what the semi-finished cars classify as now).

SAIC will, however, save money on renting the 105-acre property, which still takes up a fair chunk of the old Longbridge site.

The exit by the firm will mean a large part of the land currently occupied by SAIC will no longer be needed and will mean more land being freed up for development at Longbridge.

While the flawed nature of SAIC’s business model was the key driver of the Longbridge pull-out, it should be noted the Brexit vote and its aftermath contributed to the decision.

The Brexit vote leaves considerable uncertainty over the nature of the UK’s trading relationship with the EU.

That uncertainty has the potential to impact on foreign investment in the UK auto sector, especially when auto firms are looking to replace models.

Plants and jobs could be at risk if that uncertainty isn’t ‘nailed down’ as quickly in the form of clear parameters for a trade deal – and preferably one that is as close as possible to existing single market arrangements.

So far, the Government has failed to commit to prioritising single market access when Article 50 negotiations get started. That needs to change. Professor David Bailey works at

the Aston Business School

The Brexit vote and its aftermath have not helped the firm and, in many ways, have pushed it over the edge