British car investment stalls amid Brexit fears

INVESTMENT in the British car industry halved last year and surveys show consumers and businesses are more anxious about the economic outlook due to uncertainty about future trade with the EU.

The Society of Motor Manufacturers and Traders (SMMT) said late last month that investment in Britain’s automotive sector was £589 million ($771 million) last year, nearly 50 per cent less than in 2017 and the lowest since the 2008 financial crisis.

Overall car production fell by 9.1 per cent as “domestic and global downturns take effect”, it reported.

The steeper than expected declines prompted the head of the SMMT to reiterate warnings that leaving the EU without a deal would be “catastrophic” for the industry.

“Investment has effectively stalled,” said SMMT CEO Mike Hawes, who called on the government to avoid “the permanent devastation” of a nodeal exit by Britain from the EU.

“A lot of that is on hold because until you see what the future is, do you have the confidence to invest when there is that sort of uncertainty?”

Britain is preparing to leave the EU on March 29 after 45 years of membership.

SMMT said it expected car production to fall another three per cent this year, assuming an orderly Brexit with a transition period to minimise economic disruption.

Some 850,000 Britons are employed in the car industry.

Other data showed confidence among British consumers held at a 5.5 year low in January. Increasing gloom about the outlook for the next 12 months was offset by a small improvement in personal finances, the GfK index showed.

Surveys of businesses by the Confederation of British Industry and Lloyds Bank also gave a sobering outlook for the world’s fifth largest economy.

House prices, a key barometer of consumer confidence in Britain, rose by just 0.1 per cent in annual terms in January, their weakest rise in nearly six years.

Britain’s housing market has slowed since the Brexit referendum in June 2016 when Nationwide estimated house prices were rising by around five per cent annually.

But warnings by former finance minister George Osborne that a Leave vote would hit the value of people’s homes by up to 18 per cent have not materialised.

That has led many advocates of Brexit to dismiss warnings as a “Project Fear” campaign that a no-deal scenario could cause severe disruptions to food and medical supplies, transportation and manufacturing.

But SMMT’s Hawes pinned the fall in automotive industry investment firmly on the uncertainties surrounding Brexit.

“I think the numbers give the lie to that accusation – investment figures, production figures,” said Hawes.

“If it’s ‘Project Fear’, then we’re doing a good impression of it being a reality.” AdditionalreportingbyAFP,Xinhua.