Car production at 17-year high but investment falls

british motor manufacturing at risk

Car production surged to its second-highest level and its best performance for 17 years in 2016, according to an industry report also warning of a rockier road ahead, reports Sky News.

The Society of Motor Manufacturers and Traders (SMMT) reported an 8.5 per cent rise in the number of vehicles built in the UK, hitting 1.7 million.

Of those, 1.35 million were shipped abroad – a second consecutive annual record for the industry.

The SMMT said over half that number ended up in the EU – with the weaker pound since the Brexit vote last June giving firms some competitive advantage.

But the organisation said that sterling’s weakness had pushed up the cost of parts, despite currency hedging, with 60 per cent of the industry’s supply chain currently based abroad.

It had previously warned that UK buyers were facing average rises of 3 per cent for new vehicles.

Its latest report said that while the sector was likely to deliver a record annual production performance between now and by 2020 because of past investment levels, the next two years would be crucial in determining where future capital was likely to be spent.

Chief executive Mike Hawes told Sky News that some companies were currently “sitting on their hands because of uncertainty.”

The UK has 15 car plants, directly employing 169,000 workers and 814,000 across the industry.

The SMMT has lobbied fiercely for the UK to remain in the single market and customs union – the latter ensuring quick and easy access to parts – in the looming EU divorce.

It will have been left disappointed by the Prime Minister’s speech last week setting out her Brexit blueprint though the Government had already given assurances over the type of deal it was seeking – enough to encourage Nissan to build new models in Sunderland on competitiveness grounds.

Mr Hawes said: “When your biggest market by far is the rest of the EU our future relationship with Europe and what that’s going to look like is a concern to the industry.

“If we don’t have a future free trade agreement we could be looking at tariffs, which will make it that much harder for UK companies to grow abroad because their products would be less competitive.

“Also potentially it could put up price of cars that are sold in UK… Anything that slows down the movement of parts, which go into the cars will add cost and make us less competitive.”

The business secretary Greg Clark responded: “Our modern industrial strategy will make the UK one of the most competitive places in the world to grow a business and these figures show why the UK automotive sector has such a vital role to play as we build on our strengths and extend excellence into the future.

“We are providing long-term investment and support, so that all our auto companies, and the vital supply chain it supports, can strive for even greater success in 2017.”