Letter from the UK: On the edge of the industrial cliff

On March 29th

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of March when the United Kingdom is scheduled to acrimoniously depart the European Union. Even at this eleventh hour there is still rampant uncertainty as to what is going to happen. No final decisions have been made by our weak and floundering politicians.

Emotive words and phrases like ‘crisis’ and ‘crashing out’ and ‘going over the cliff’ don’t help at all.

Economic Strife

Lost Investments

Crashing Out

Lower Sales

Regulatory Hiccups

Economic Strife

A crisis is a plague or famine or warfare; this is economics. If you expect nothing from your so-called ‘leaders’ then you won’t be disappointed, that’s the people’s motto. Nevertheless, wide social divisions have opened like earthquake fissures. It is neighbour against neighbour and it is going to take a generation to get past, whatever the final outcome. In some quarters, hatred is not too strong a word. It is all very sad and the blame lies as much with the blustering, bombastic, un-elected suits who run the EU (which, remember, is only a trade bloc and not a country in its own right) as it does with our home-grown authorities.

Industry is similarly divided with some sectors saying it’s all going to be great with many new global trade opportunities including the USA. Other players are saying it will all end in tears for manufacturing. Batting firmly for the latter team is the motor industry.

Lost Investments

There’s a reason for their negativity. Although the car industry is truly global now with mergers and associations, the European car makers are very closely tied. They depend on us for vehicles, parts, and consumers just as we depend on them. Vehicle parts criss-cross the Union on a just-in-time basis. When it is considered how important motor manufacturing, retail sales, the used car market, and all the ancillary trades and professions are to employment and the success of individual economies, it makes sensible people wonder what politicians are for.

The indisputable fact is that investment in the British car sector almost halved last year. Output has tumbled as the growing fear of the unknown has put manufacturers on red alert. Inward investment fell 46.5 percent to 588.6 million Pounds Sterling last year from £1.1bn in 2017. These figures are courtesy of the Society of Motor Manufacturers and Traders (SMMT).

Last year, the Nissan Juke became the fourth Sunderland-built model to hit one million units. On average, a Juke is built at the plant every 105 seconds. Photo: Nissan Motor Company Ltd.

Crashing Out

Similarly, UK production fell 9.1 percent to 1.52m vehicles, with output for the UK and for export falling 16.3 percent and 7.3 percent respectively. It is not Brexit as an entity that has done the damage so much as the uncertainty surrounding it. This was highlighted by the recent, now-confirmed rumour, that Nissan will not build the new X-Trail at their Sunderland, UK plant.

Much is being made of this but, on the other hand, the X-Trail is a very niche model and low-scale seller that currently only offers unpopular diesel engines, so how much of a problem this will make can only be conjectured. It does indicate though how conflicted UK motor manufacturing is.

As SMMT chief Mike Hawes puts it about the impact so far on output, investment, and jobs: “is nothing compared with the permanent devastation caused by severing our frictionless trade links overnight, not just with the EU but with the many other global markets with which we currently trade freely. With fewer than 60 days before we leave the EU and the risk of ‘crashing out’ without a deal looking increasingly real, UK Automotive is on red alert.”

Photo: Nissan Motor Company Ltd.

[bctt tweet=”The indisputable fact is that investment in the #British car sector almost halved last year. Output has tumbled as the growing fear of the unknown has put manufacturers on red alert.” username=”Automoblog”]

Lower Sales

In fact, it is hard to be totally accurate with forecasts such as this because investment in the motor industry always comes in uneven chunks as old models are retired and new ones are introduced over time. But even allowing for that, the plunge in new investment is clear. In 2015, car manufacturers invested £2.5bn in the UK. In 2016 we had the national Brexit vote which signaled the end of our association. Since then it has fallen ever year and in 2018 was just £589m, according to SMMT.

Regulatory Hiccups

There are other factors which get less publicity, for example falling sales in the Chinese market and EU regulatory hiccups are of concern. With exports to China slumping 24.5 percent, Jaguar Land Rover, Britain’s biggest car maker, has already underlined the pain being felt from a sales slowdown in China. The industry is clear that Brexit has presented “the most significant threat to the competitiveness of the UK automotive sector in a generation.”

Thank goodness we didn’t join the Euro currency too!

Geoff Maxted is a motoring writer, photographer, and author of our Letter From The UK series. Follow his work on Twitter:

@DriveWrite

Cover photo: Jaguar Land Rover.