The British car industry has witnessed its worst period of decline since 2001, as rising global trade tensions and Brexit uncertainty combine to provide a dire operating environment for manufacturers.
UK car production was down more than 10% year on year in July and has now fallen for 14 consecutive months, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT). The decline is now longer than the 13-month downturn between October 2008 and October 2009 at the height of the global financial crisis.
Mike Hawes, the SMMT’s chief executive, described the continued decline as a serious concern.
The fall in production has come amid an unprecedented array of challenges for the sector. Diesel sales have slumped following emissions scandals and the trade war between the US and China has added to fears of a global growth slowdown.
At the same time, Brexit uncertainty has meant that investment in British factories has stalled and carmakers worldwide are scrambling to find money to make significant investments in electrifying their ranges.
“It’s a very gloomy time in the UK car industry,” said David Bailey, a professor of business economics at the University of Birmingham. “It’s clearly a negative performance in export markets, which is a big worry, because we expected the devaluation of sterling to boost exports.”
Manufacturing output was down by 10.6% in July, to 108,239 cars, the SMMT said.
British car factories, which make vehicles for companies including Jaguar Land Rover, Nissan and Mini, produced 774,760 cars in the first seven months of the year – almost a fifth lower than the same time last year.
Hawes said: “The sector is overwhelmingly reliant on exports and the global headwinds are strong, with escalating trade tensions, softening demand and significant technological change.”
The weak production came before any possible disruption to operations at the beginning of November if the UK leaves the EU without a deal.
Economists on Wednesday deemed a no-deal Brexit increasingly likely following the prime minister’s decision to prorogue parliament for five weeks, making it harder for MPs to block a no-deal Brexit. If there is no deal, parts and finished vehicles could be delayed at the border by new checks. Carmakers also fear the imposition of tariffs as high as 10%.
Car industry executives almost universally believe a no-deal Brexit would be damaging for the sector. The PSA Group, the owner of brands including Peugeot and Citroën, warned in June that it will only build its new Vauxhall Astra in the UK, at Ellesmere Port, if the government secures a good Brexit deal.
Of the six carmakers that produced more than 10,000 cars in the UK last year, only Mini increased production in 2018. With Honda announcing in February the closure of its Swindon factory, which produces the Civic, the loss of Ellesmere Port would mean the UK losing almost 16% of its manufacturing capacity in the space of little more than six months. This year Nissan has also withdrawn production of its Infiniti cars from Sunderland and backtracked on a commitment to build a new X-Trail model there.
Honda’s factory closure announcement will mean the end of about 7,000 jobs, while another 1,100 are in the balance at Ellesmere Port.
Car industry workers whose jobs are under threat will be among a delegation scheduled to meet Michael Gove on Thursday. Gove is the minister in charge of government planning for no deal.
The union Unite said it would press Gove on providing clarity for carmakers that rely on just-in-time deliveries of parts to allow continuous production, as well as asking what assurances the government can offer to the foreign companies on which British car manufacturing relies.
