It is no news that Britain’s automotive industry, for a while now, has been on a dangerous downward run. In fact, for the past few months, the industry's output has been on a steady decline. 

UK Car Production Declines

For instance, in October last year, the units produced were 5,000 short of the production in the same period in 2018. This decline, of course, has been due to various reasons, including a lesser demand in the domestic market. 

The 4% fall in manufacturing output in October saw output decline for the 16th time – out of the last 17 months before then. The exception was August, when production seemed to have bounced back to normal.

Just a few days before the release of this data, SMMT UK (Society of Motor Manufacturers and Traders) held their annual event. During the event, Hawes admonished that a fruitful and viable Brexit trade deal is vital to ensure the industry stays afloat. He further projected that without the agreement, the output could decline by a third after the UK finally walks out of the EU.

It gets gloomier if you take a closer look at the numbers. The year-on-year output had a 4% drop as 134,752 cars were produced in October 2019. In September, the industry recorded a 3.8% dip.

Last year, UK car plants produced 1,123,926 units. The production output was 14.4% less than the units they had completed in 2018. 

The SMMT attributed the drop to the reduced demand. The domestic demand in the UK recorded a 10.7% fall while the export demand had a 2.6 dip. Export orders account for the most significant share of the output, approximately 80% according to reports by SMMT.

Worrying Times for the Automotive Sector

A statement by Mike Hawes, the Chief Executive of SMMT, read, “Yet another month of falling car production makes these extremely worrying times for the sector.”

All is not lost yet, at least as per Hawes, who proposed several suggestions to alleviate the problem. He asserted that a closer partnership with the next government would go a long way in ensuring that the industry gets back to its feet. 

The partnership with the next government would yield positive results by getting rid of tariffs. Hawes’ goal is to achieve congenial trade that is compliant with the outlined policies.

“Our global competitiveness is under threat, and to safeguard it, we need to work closely with the next government to ensure frictionless trade, free of tariffs, with regulatory alignment and continued access to talent in the future,” he added.

Averting the Crisis

The UK has a broad export reach with markets in most of the countries in the world. With the backing of these markets, the car industry may rise again.

“This sector is export-led, already shipping cars to more than 160 countries, and in a period of unprecedented change a close trading relationship with the EU and preferential trading with all these other markets will be essential to keep automotive in Britain,” the industry body executive said.

Automakers in the UK have taken some measures to avert the crisis. SMMT revealed that they [automakers] had used a huge chunk of resources including £50O million.

The SMMT also did model changeovers for the industry’s situation. Many manufacturers cut down production while others called off their funds. As tensions rose regarding Brexit issues, some factories were shut down. Britain did not walk out of the EU during those two dates; hence the anticipation move the factories had made to guard against supply issues seemed irrelevant. It further contributed to the poor year the industry had in terms of production. 

The car industry in Britain has close ties with European countries. Apart from the European countries being the market, they also provide supplies for the industry. Several car models are dependent on parts and systems from the EU. Worth noting is that out of five cars assembled, four are exported outside the UK.

Amidst the political conundrum during that period, the weight of this issue was overlooked. Alex Buttle, director at Motorway.co.uk, stated that the sharp decline of output in the car industry should have made headlines, but it didn’t due to the political noise.

What Happens after January 31, 2020?

On the bright side, there appears to be a silver lining. UK's departure date from the European Union was postponed to this month (January 31, 2020). The industry can take a sigh of relief, especially now that it has dodged a bullet – the prospect of a no-deal Brexit – at least for the moment.

According to Stuart Apperley, head of UK Automotive (Lloyds Bank), there is an indication of worldwide growth getting better. This may be a light at the end of the tunnel as it will be beneficial to the UK car industry.

“Germany’s latest GDP data at least showed modest growth, and there is the prospect of the US and China agreeing to end their trade stand-off,” Stuart said.

For the optimists, there is some consolation as automakers Aston Martin and Ineos have injected funds to projects in South Wales. 

Nonetheless, there is an urgent need for clarity on the relations between the UK and the EU because the car industry’s future hinges on it.

Author

Sam O.