UK manufacturing drops by nearly half amid Brexit factory shutdowns

New car sales fell 44.5 per cent in April as manufacturers brought their annual factory shutdowns forward to the original Brexit date

Car manufacturing in the UK fell by 44.5 per cent in April after manufacturers brought their annual factory shutdowns forward to 29 March – the date on which Britain was supposed to leave the EU. 

Several manufacturers with large factories in the UK – including MINI, Rolls-Royce and Vauxhall – decided not to reschedule their shutdowns a second time when Brexit was delayed, meaning 56,999 less cars rolled off production lines last month than in April 2018, according to figures from the SMMT (Society of Motor Manufacturers and Traders).

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The rescheduled shutdowns, which cannot now be repeated on the new Brexit date of 31 October, were part of a raft of contingency measures – including stockpiling, rationalisation, training for new customs procedures and rerouting of logistics – for the automotive industry, intended to mitigate against any negative effects of the UK leaving the single market and customs union. 

The total number of cars built fell from 127,970 to 70,971 year-on-year, with production decreasing 43.7 per cent (24,294 to 13,669) for the home market and 44.7 per cent (103,676 to 57,302) for exports. The eleventh consecutive month of decline was made worse by an underlying downward trend caused by slowing demand in key international markets, including the UK, EU, US and China.

The SMMT says that – if the UK leaves the EU with a “favourable” deal and “substantial” transition period, and global trade tensions don’t escalate any further – the decline in UK manufacturing volumes should ease off by the end of 2019, with new models entering production and factories remaining open during the usual summer shutdown months.

Output is still predicted to be down 10.5 per cent on 2018 levels, though, and the SMMT believes a no deal Brexit would exacerbate the decline, with the risk of border delays, production stoppages and additional costs all compromising competitiveness. 

Mike Hawes, chief executive of the SMMT, said the figures were “evidence of the vast cost and upheaval Brexit uncertainty has already wrought on UK automotive manufacturing businesses and workers”.

“Prolonged instability has done untold damage,” he said, adding that the “fear” of a no deal Brexit was “holding back progress, causing investment to stall, jobs to be lost and undermining our global reputation”.

UK car manufacturing and investment hit by “deeply depressing” decline

The latest figures from 2019 follow a “deeply depressing” decline of 9.1 per cent in 2018, the same year investment in the UK automotive industry fell by a “disturbing” 46.5 per cent.

Some 1.52 million cars were built in the UK in 2018, a 9.1 per cent decline on the previous year, when 1.67 million left factories. While production at MINI plants rose by 7 per cent, Vauxhall saw a 15.9 per cent fall in the number of cars it produced in the UK, with Nissan down 10.7 per cent, Toyota down 10.4 per cent and Jaguar  Land Rover witnessing a 15.6 per cent production reduction.

Brexit-related uncertainty, diesel downturn, regulatory changes, model cycles, market stagnation in Europe, and slowdown in China have been cited amongst the reasons for the manufacturing slump.

The biggest concern for UK automotive, however, which employs around 856,000 people across the wider industry, is the fall in investment witnessed last year.

The chief executive of the Society of Motor Manufacturers and Traders (SMMT), Mike Hawes, said: “The most disturbing feature of the figures is about automotive investment. Last year, total automotive investment was £588.6 million for the year. The previous year was about £1.1 billion. The year before that it was about £1.6 billion. If you look at a running average over the last three or four years, it’s about £2.5 billion. We had some good years coming out of the recession where it reached £5 billion, so to be down at £588.6 million shows investment is effectively stalled.”

Hawes placed blame for the stalled investment firmly at the feet of Brexit: “We know uncertainty is the big enemy of business. We need a deal.” He added the industry was on “red alert” for the threat of no deal, adding: “Brexit uncertainty has already done enormous damage to output, investment and jobs.”

Declining investment is “also about sentiment”, Hawes added. “You can be very competitive and have all the right positions…but do you feel confident about investing in the UK for the longer term? You might be competitive now, but do you feel welcome as an investor, and do you feel confident about the positions?”

In an attack on those who considered a no-deal Brexit feasible or desirable, Hawes said: “There are new proposals coming out politically every day. Issues around ‘no deal can be managed’ – for us, that is a fantasy.” Asked about ‘project fear’, Hawes simply explained that “the numbers give a lie to that…investment figures, production figures; if it’s project fear, we’re doing a good impression of it being a reality.”

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Addressing the idea that German car companies would put pressure on their government for fear of losing UK sales, Hawes said “Utter, utter nonsense. They’ve been there.”

Asked if there were a sense that confidence and investment had caused irreparable damage to the UK car industry, Hawes said while we were not at the point, he suspected we were “very close…there’s exasperation…there’s an on-going uncertainty…We haven’t reached the point of no return but, at some point, you will reach it.”

Turning to another common refrain among those who see Brexit as opening up new trade deals, Hawes said: “When we leave, we still have to operate with our biggest market by far under the rules Europe sets. At the moment, we have a seat at the table, we can influence those rules. The other major regulatory hub is obviously Washington. Should we do a free trade deal with America? I can’t ever see us having a seat at the table. They set their rules.

What do you think of the “deeply depressing” UK car manufacturing decline? Let us know in the comments below…