Scale of crisis facing automotive sector amid Brexit laid bare

The scale of crisis facing the British automotive sector can be laid bare today, with experts identifying five major plants and thousands of jobs that are at risk as the UK prepares to leave the European Union.

Analysts expect UK-based car manufacturers to make 150,000 fewer vehicles this year – sending production rates to an eight-year low – even if Britain leaves the EU on favourable terms.

The decline is being blamed on the UK’s crackdown on diesel, competition from global rivals where the move towards electric vehicles has happened faster, as well as fears over Brexit.

Past tense: In 2016, the year Britain voted to leave the EU, automotive manufacturing hit a 17-year high as firms produced 1.7 million cars in their UK plants

LMC Automotive also warns that PSA Group, the French owner of Vauxhall, may find it ‘tough to justify’ the existence of its Ellesmere Port plant after 2021 when the Astra model is due to be replaced.

A PSA spokesman said last night: ‘Whilst we have no plans to close any of our plants, no decision on the future of Ellesmere Port will be taken until the outcome of Brexit negotiations are known.’

Cox and Oakley also suggest that Jaguar Land Rover could divert production away from the UK to Slovakia and Austria. JLR, owned by India’s Tata Motors, declined to comment, but is rumoured to be plotting a major new investment to electrify its cars in the Midlands.

Cox and Oakley added: ‘[It] would be overly optimistic to assume that manufacturers which export large portions of their UK output to the EU would continue to do so indefinitely under persistently unprofitable operating conditions. Indeed, should more of these currently UK-produced models fail to be renewed in Britain, annual UK car production could be over 500,000 units lower in the second half of the next decade.’

A perfect storm of factors, not least Brexit, threatens fatal damage 

One of the book’s editors, David Bailey, a professor of industrial strategy at Aston Business School, warns that a No Deal Brexit would likely lead to plant closures.

He identified three as being ‘the most vulnerable in such a scenario’: Ford’s Bridgend plant, which employs 1,790 people; Vauxhall’s Ellesmere Port factory, which has 1,100 workers; and JLR’s Castle Bromwich site, which has a 2,000-strong workforce.

A Ford spokesman said: ‘The auto industry is undergoing rapid change. Together with our union partners, we continue to look at other high-technology opportunities for the future.’

Bailey added: ‘Ford Bridgend, Vauxhall at Ellesmere Port and Jaguar Land Rover at Castle Bromwich are three sites which are the most vulnerable in [a No Deal scenario]. And note that there would be no coming back; capacity would be permanently reduced.’

And he warned: ‘Don’t expect a wave of Japanese, or Korean or Chinese investment to turn things around as in the 1990s. Japanese investors came to the UK to access the EU’s Single Market, after all.’

Despite a raft of Brexit warnings from the car industry – with the SMMT describing it an ‘existential threat’ – Honda bosses claimed their decision to leave Swindon was not related to the UK’s departure from the EU. 

The Mail on Sunday last week revealed that Honda’s bosses had previously hinted a good Brexit deal could encourage them to invest further in the UK as they move to electrify its cars. But there are other issues at play.

Ian Howells, senior vice-president of Honda in Europe, pointed to the fact that Honda sells more vehicles in North America, Japan and China than it does in Europe.

And the Swindon decision was taken around the time Japan was tying up a free trade deal with the EU. This means cheap and easy trade between Tokyo and most of Europe is guaranteed, while there is uncertainty about the EU’s future relationship with Britain.

Cox and Oakley also linked Nissan’s X-Trail decision to this deal, adding: ‘In force since February 1, 2019, this new trade agreement ensures that the EU’s 10 per cent tariff on Japanese auto imports will be tapered to zero over the next ten years. 

Increasingly, Japanese [firms] may choose to import new models rather than invest and continue to localise production in their European [plants].’

Honda’s decision to manufacture electric cars in China and Japan was seen by experts as a kick in the teeth for Business Secretary Greg Clark’s industrial strategy, which set out electrification as a key area of growth for the UK.

It came on top of UK vacuum cleaner firm Dyson announcing it would be building its electric cars in Singapore because it offered access to growing sales markets such as China, advanced materials and components needed to build the cars.

Bailey said the Government’s industrial strategy, which also set out to train more people in automotive manufacturing, had proved to be a ‘damp squib’. 

Writing alongside Richard Burden, a Birmingham MP who chairs the All-Party Parliamentary Motor Group, he also pointed to a crackdown on diesel.

In 2017, the Government unveiled plans to ban the sale of new diesel and petrol cars and vans by 2040.

Bailey and Burden said: ‘Unfortunately this is an area in which UK Government policy has been muddled and has sent out confused “signals”. 

‘There is no doubt that the future of automotive does not lie with internal combustion engines – whether diesel or petrol. 

‘Effective management of the transition is, however, vital. Decimating the market for new diesel engines has brought with it damaging if unintended consequences.’

‘The industrial impact of failing to manage the transition threatens to be severe too, with UK engine plants of manufacturers like BMW, Ford and JLR all currently heavily dependent on diesel production.

‘Ministerial mixed messages over diesel undermines the capacity of manufacturers to manage that transition. A successful transition also requires more clarity from the Government in support of both the production and take-up of the electric and other alternatively powered vehicles that will be the future of the sector.’