Brexit Is Heavily Damaging the U.K. Auto Industry—And It Hasn’t Even Happened Yet

January 31, 2019, 9:57 AM UTC

Brexit hasn’t even happened yet, but it’s already causing massive damage to the U.K. auto industry. Now industry leaders are warning of “permanent devastation” if the country crashes out of the EU without a deal.

The U.K.’s car industry trade association released a scary set of statistics on Thursday, showing a near-halving of fresh investment during 2018, to $772.6 million. It also noted a fall in production of 9.1% to 1.52 million units—the lowest output in five years—though this was also partly down to regulatory uncertainties and economic slowdowns at home, in China and the EU.

The investment drop is no surprise. We are now just under two months away from Brexit and the U.K. is yet to agree on a deal with the EU. Due to intransigence on both sides, the odds of a no-deal Brexit are steadily rising, opening up the possibility that trade and supply chains between the U.K. and EU will face massive disruption after March 29th.

This would devastate the British car industry, the Society of Motor Manufacturers and Traders (SMMT) warned, as it begged the government to avoid a no-deal scenario.

According to the body, no-deal would put two-thirds of the U.K.’s global auto trade at risk. This is partly because the country gets preferential trade terms with countries like Canada and Turkey because it’s part of the EU club. “Time has almost run out to guarantee continuity of any of these arrangements before Brexit,” the SMMT warned.

“With fewer than 60 days before we leave the EU and the risk of crashing out without a deal looking increasingly real, U.K. Automotive is on red alert,” said SMMT chief executive Mike Hawes. “Brexit uncertainty has already done enormous damage to output, investment and jobs. 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.”

The SMMT attributed the production drop to “declining consumer and business confidence,” as well as uncertainty about what the future will hold for diesel policy and taxation. The U.K. exports just over 80% of the cars it produces—with more than half of those going to the EU—and output for overseas markets fell by 7.3% in 2018. Domestic output fell by 16.3%.

“Given the global headwinds, the challenges to the sector are immense,” said Hawes. “Brexit is the clear and present danger and, with thousands of jobs on the line, we urge all parties to do whatever it takes to save us from ‘no-deal’.”

Jaguar Land Rover, the U.K.’s biggest car manufacturer, said last week that it would be halting production for a week in April, shortly after the Brexit date, as it anticipates disruption that will affect its car and engine plants.