01 May, 2019

UK manufacturing drops again as Brexit extension causes headaches

British car production declined 14.4% in March as market instabilities, and economic and environmental issues continue to bite.

The drop marks the tenth consecutive month that manufacturing in the UK has struggled, with March seeing 126,195 units rolling off production lines, according to new figures from the Society of Motor Manufacturers and Traders (SMMT).

Production for both home and overseas markets suffered double-digit declines, down 18.1% and 13.4% respectively.

Continuing recent trends, soft demand in key Asian and European markets was a significant factor, coupled with model changes and shifting car segment preferences globally. Although UK exports fell in March, they increased their share of overall production year-on-year to 78.7%, demonstrating the crucial importance of free and frictionless trade the industry body states.

Brexit impact

Engine production, another key industry in the UK, also fell last month, down 6.3% with 244,201 units built.

Year-to-date, car production is down 15.9%, with engine manufacturing down 7.6%.

The news comes as a new independent report is published illustrating what’s at stake for British car manufacturing following Brexit. Assuming a positive result to the negotiations with a favourable deal and transition period maintaining the status quo, UK car production could be 1.36 million units in 2019, down from 1.52 million in 2018, before rising to 1.42 million by 2021.

However, should Britain crash out of the EU and fall back on WTO rules for a sustained period, the output is forecast to fall around 30% on recent levels to just 1.07 million units by 2021, a level consistent with the dark days of the mid-1980s.

April limbo

The UK is not likely to see a return to positive manufacturing numbers in April. With the original Brexit deadline set on 29 March, several carmakers decided to bring forward planned factory shutdowns to the fourth month of the year to avoid potential production bottlenecks. The deadline extension has left these companies in limbo, shutting down at a period they could still benefit from free trade while not avoiding the issues they sought to cover by the early closures.

‘Despite the extension, the Brexit clock is still ticking and a devastating ‘no deal’ remains a threat,’ said SMMT chief executive Mike Hawes. ‘This new period of limbo does not end the havoc for industry, with investment stopped and expensive factory shutdowns moved to avoid a Brexit deadline that has itself now moved.

‘Just a few years ago, the industry was on track to produce two million cars by 2020, a target now impossible with Britain’s reputation as a stable and attractive business environment undermined. All parties must find a compromise urgently so we can set about repairing the damage and diverting energy and investment to the technological challenges that will define the future of the global industry.’