Brexit's Impact On The U.K. Auto Industry

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Ten British built cars line up before departing for the Frankfurt motor show in London. (Frank Augstein/AP)
Ten British built cars line up before departing for the Frankfurt motor show in London. (Frank Augstein/AP)

Britain’s automotive industry is well-known for its luxury brands: Jaguar, Bentley, Rolls-Royce.

It’s also a major player in the U.K. economy, employing about 850,000 people and exporting to 160 different countries, according to the Society of Motor Manufacturers and Traders.

But the industry now stares down an unclear future. Brexit has made automakers uneasy, from uncertainty about timing to the looming prospect of a no-deal exit from the European Union’s single market.

One in three British auto firms has cut jobs as Brexit nears, according to the SMMT, and 80% of the firms surveyed by the society feared leaving the EU would hurt their future prospects.

“You are seeing companies making decisions of fear of no-deal Brexit,” says SMMT chief executive Mike Hawes. “Companies are looking to relocate. Some of them have already admitted that they've lost orders. Some, as a result of that, have reduced employment.”

Interview Highlights

On the industry’s feelings about Brexit

“We made very clear before, during and after the referendum that we view the relationship that we had as a sector with Europe to be as good as you could get. Part of the single market, part of the customs union, totally integrated into the European automotive industry. So any change to that arrangement is likely to be a reduction in the competitive terms under which we operate. So since then, it's been a case of damage limitation. What is it that we can do to try and ensure and safeguard this industry? We don't just trade with Europe, but Europe accounts for over half of our finished vehicle exports.”

On the argument by Brexit campaigners that the industry might be able to trade more after Brexit

“I don't view that we were held back from doing so by being members of the European Union. As it is, we trade to over 160 different countries. Through the U.K.'s membership of the EU, we have preferential trading agreements with over 40 additional countries, big automotive countries like South Korea, Canada. ... So the question is where else? The all too obvious answers are the U.S. and China, the two biggest international automotive markets. But ... being able to negotiate a deal with respect to those two countries will not be easy. Why? Well, as it is already seeing rising global trade tensions. We potentially had Brexit, this Thursday, that's now been postponed. Within two, two and a half weeks of that, the U.S. administration will decide on the potential application of Section 232 tariffs on the import of global automotive products. That would hit us badly too.”

On whether Brexit or the trade war has had a larger impact

“I think at the moment, the one that's really affected us is Brexit, because that has undermined confidence, investors' confidence in the U.K., because of this fear of no deal. And speaking of that fear, if investors were calm and confident that they could continue to survive and grow and prosper under no deal, then investment would have continued. It has virtually stalled over the last 12 months. … But the impact of perhaps some of the U.S. actions hasn't yet been seen because we wait to see what the decision is on Section 232.”

On the future of auto jobs in the U.K.

“It's easy to blame everything on Brexit … but that would be wrong. Globally, the industry is facing a very challenging set of circumstances. You're changing the way we make cars with digitalization and manufacturing, changing the way you power them as you move towards electrified vehicles, connected vehicles, self-driving vehicles coming, as well as the global environmental and trade geopolitical issues. That maelstrom is happening internationally. So decisions that have been taken here are in the context of that global issue as well as the local conditions.

“The threat for Brexit is that it undermines the long-term competitiveness of the U.K. automotive industry. I don't expect to wake up, you know, in three months time and the factories close overnight. But if you gradually undermine the competitiveness, it's like death by a thousand cuts. … If you had a no-deal Brexit, the imposition of tariffs, in our case to Europe, that would be 10%. 10% is way in excess of the margin that most individual plants operate on. They're looking at sort of 2 to 4% return on investment. A 10% tariff would totally undermine the proposition.”

On the resilience of the U.K. automotive industry

“I still believe the strengths of the U.K. automotive industry are world-class, high levels of engineering excellence. Some globally famous brand names: Rolls-Royce, Bentley, Aston, McLaren, to name a few. Jaguar, Land Rover. You know, we're almost uniquely, I think probably uniquely globally, we have this long array of small, high-value sports luxury manufacturers, which are often the envy of the world. Most other countries would kill to have that sort of brand heritage.

“We need to make sure we remain competitive. But what I'd rather be talking about, what the industry would rather be investing in, are these new technologies: electrified vehicles, connected vehicles, autonomous vehicles. That's what the rest of the world is focused on. That's what we in the U.K. should be focused on as well.”

On the fact that the prime minister drives a Jaguar while the Royal Family has Rolls-Royce models

“Well the royal family, they have Bentley ... and Range Rovers. They are great supporters of U.K. automotive manufacturing. God bless them.”

Francesca Paris produced and edited this interview for broadcast with Todd MundtParis also adapted it for the web.

This segment aired on October 31, 2019.



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