Brexit shutdown slashes UK car production by 45%

motor manufacturer

Factory shutdowns designed to cope with disruption from a 29 March Brexit, slashed UK car production in April by almost a half.

Even though Brexit is delayed the factories still closed and production fell 44.5% according to the Society of Motor Manufacturers and Traders (SMMT).

In what it called “an extraordinary month”, the SMMT said only 70,971 cars rolled off production lines.

That was 56,999 fewer than in April a year ago.

Production for both home and overseas markets fell by 43.7% and 44.7% respectively.

The SMMT said car firms had brought forward their annual stoppages normally scheduled for the summer holidays.

It said the shutting of factories was part of a raft of costly measures, including stockpiling, training for new customs procedures and rerouting of logistics. It said the factories would not be able to repeat the process for the new 31 October Brexit deadline set by the European Union.

Mike Hawes, SMMT chief executive, said: “Today’s figures are 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, with the fear of ‘no deal’ holding back progress, causing investment to stall, jobs to be lost and undermining our global reputation.”

Global slowdown

The stoppages in the factories have exacerbated a continuing slow down in the global car industry caused by the trade tensions between the US and China, uncertainties over the arrival of electric and self driving cars, and tougher environmental controls after the VW emissions scandal.

April was the 11th consecutive month of output falls in the UK.

In the year to date, 127,240 fewer cars have been built compared with the same period in 2018 – a decline of more than a fifth.

The SMMT estimated production for the whole of 2019 would be about 10% down on last year. It said the market might pick up by the end of the year if there was a favourable deal between the UK and the EU and a substantial transition period to adapt to trading outside the single market.

But it said a no-deal Brexit would make the declines worse with the threat of border delays, production stoppages and additional costs.

Mr Hawes said: “This is why ‘no deal’ must be taken off the table immediately and permanently, so industry can get back to the business of delivering for the economy and keeping the UK at the forefront of the global technology race.”

Speaking about the announcement Markus Kuger, Lead Economist at Dun & Bradstreet said: “Although partly explained by factories being closed for repairs and servicing equipment earlier than usual due to Brexit supply chain concerns, the significant drop in car production in April is indicative of the wider uncertain economic climate in the UK.

Manufacturers have traditionally relied on cross-border suppliers as well as exporting cars to the continent and decades of industry growth have led to the UK no longer being home to storied British nameplates.

With a potential no-deal Brexit on the horizon, there is likely to be more challenges ahead for the largely foreign-owned UK automotive industry.

The UK’s exit from the EU has already been blamed for the planned closure of the Honda plant in Swindon, a location that is estimated to create over 150,000 cars a year in the UK. Honda cited global shifts and investment in electric vehicles as the reasons, but the speculation points to Brexit as the true culprit.

“According to the latest Supply Risk Report due to be published by Dun & Bradstreet and Cranfield School of Management, Foreign Exchange Risk (the measurement of how at risk a sector is due to foreign currency fluctuations) in the manufacturing sector was at 42%; this is much higher than the average 28.5% across all sectors. One reason for the high level of risk in manufacturing could be that buying companies are looking to pay suppliers in different currencies to exploit changes in currency exchange, but this is a risky approach in the uncertain economic climate.”