British car production dropped to a five-year low in 2018, as manufacturers warned that fears of a no-deal Brexit have prompted a slump in new investment.

UK car factories produced 1.52m vehicles last year, 9.1% fewer than 2017, according to figures published on Thursday by the Society of Motor Manufacturers and Traders (SMMT), the UK auto industry lobby group. Production for the British market fell by 16.3%.

Investment into British car manufacturing almost halved during the year to £588.6m, a fall which the SMMT blamed on Brexit uncertainty. Publicly announced investments were lower than in any year since 2012, the first year comparable data was collected.

“Investment is effectively stalled,” said Mike Hawes, the SMMT’s chief executive. “Industry is waiting to see what happens. Business is sitting on its hands in terms of investment.”

The global automotive industry is already struggling with multiple challenges. Car sales in China fell in 2018 for the first time since the 1990s, while demand for diesel vehicles in Europe has been rocked by the regulatory backlash to Volkswagen’s emissions-cheating scandal.

However, manufacturers with UK operations have expressed growing concerns that a no-deal Brexit will damage one of the most prominent British manufacturing success stories to the benefit of other nations.

Carmakers have built their businesses around “just-in-time” deliveries of parts, meaning delays at the border could be costly, risking British jobs.

“Brexit uncertainty has already done enormous damage to output, investment and jobs,” said Hawes. “Yet this 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.”

Analysis from the SMMT on Thursday showed that two-thirds of UK car exports go to countries covered by preferential trading arrangements, including the EU and the US. Those trading relationships would default to less favourable World Trade Organization terms overnight on 29 March if there were no transition period. EU countries were responsible for more than half of the UK’s car exports during 2018.

Some major parts manufacturers, such as Germany’s Schaeffler, have already cited Brexit as a factor in their decision to move jobs abroad. Ford’s European president, Steven Armstrong, refused this month to rule out the closure of plants employing thousands of workers if there is a no-deal Brexit.

Hawes described claims of some Brexit-backing MPs that German carmakers will put pressure on the EU to give the UK a better deal than currently on offer as “utter, utter nonsense”, and said that the idea of a managed no-deal Brexit without a transition period was a “fantasy”.

“If it’s ‘Project Fear’, we’re doing a good impression of it being a reality,” Hawes said.