The Lux List / Business of Luxury

UK Automotive Industry staggers under punches from Brexit and Covid-19

Society of Motor Manufacturers and Traders warns that the UK automotive industry is under catastrophic threat from Brexit and Coronavirus

Jun 25, 2020 | By LUXUO

The UK’s historic Brexit vote on 23 June 2016 sent the UK automotive industry reeling. Not only were 53% of cars produced in Britain sold in the EU, but an average 60% of the automotive supply chain depended on car components are imported from the continent. By August 2019, the UK automotive industry was already reeling from £257 million drop 
in investment. This was largely attributed to the uncertainty around Brexit, as fears where the UK leaves the European Union without a deal protecting the cross-border trade looked increasingly probable. An internal memo written pre-Referendum estimated that Brexit could hit profits by over £1bn by 2020, much of that is due to the havoc such trade barriers might wreak on the UK automotive supply chain.The was pre-covid-19.

Since then, talk of Brexit has practically disappeared thanks to a news cycle dominated by the coronavirus outbreak. Though barely mentioned in these tumultuous days, UK’s departure from the EU is still a looming spectre as UK Premier Boris Johnson stated that the Kingdom will not extend its transitional period with the EU beyond 2020. As a result, cars coming in from abroad in 2021 will be subject to a 10% import tariff if the UK and EU fail to strike a deal. Some 81% of all cars built in the UK last year were exported, with the EU taking almost 55% of that total, at 576,000 cars.

Bentley has cut a quarter of its workforce in June in what has been a bleak month for the UK car industry. Photograph: Phil Noble/Reuters

UK Automotive Industry staggers under punches from Brexit and Covid-19

“With a third of automotive workers still furloughed, the end of the government’s job retention lifeline in November highlights the critical need for a dedicated restart support package to safeguard these jobs,” –

Though showrooms are reopening and production lines are restarting, the Society of Motor Manufacturers and Traders (SMMT) announced that more than 6,000 jobs have been lost in the automotive sector this month alone; calling for a “restart package” to stimulate demand while easing cash flow problems through emergency funding, permanent short-term employment, business rate holidays, and VAT cuts in order to stem a downward spiral through further job losses.

MP Claire Perry (L) joins Andy Palmer (C), CEO, Aston Martin and Mike Hawes (R), Chief Executive of the Society of Motor Manufacturers and Traders (SMMT), at an event in Westminster, London, to celebrate specialist car manufacturing in the UK.

Mike Hawes, SMMT Chief Executive, said: “UK automotive is fundamentally strong. However, the prolonged shutdown has squeezed liquidity and the pressures are becoming more acute as expenditure resumes before invoices are paid. The government’s intervention has been unprecedented. But the job isn’t done yet. Just as we have seen in other countries, we need a package of support to restart; to build demand, volumes and growth, and keep the UK at the forefront of the global automotive industry to drive long-term investment, innovation and economic growth.”

 A hard Brexit will disrupt our logistic chains overnight, the flow of skilled labour from outside the UK – 30% of our staff are non-Brits. We are importing 38,000 components daily, higher for some models and I only need to lose one part and we cannot finish a product anymore. Only 10% come from UK suppliers and even these suppliers will have sub-suppliers in Europe, this chain is very delicate and our products are super bespoke with specific configurations. I cannot afford to go on a stock hold for components. – Rolls-Royce CEO Torsten Müller Ötvös talking to LUXUO

LUXUO Head of Content Jonathan Ho and YACHT STYLE Publisher Gael Burlot in conversation with Rolls Royce CEO Torsten Muller

Jaguar Land Rover has stated that it would cost the British marque £500m a year in tariffs on vehicle exports alone. On the supply chain side, the European Automobile Manufacturers Association noted that a growing body of climate positive benchmarks like electrification while also impact the Kingdom given that UK produces so few electric motors and batteries, EVs like the Mini Cooper SE Electric might become particularly susceptible to high tariffs, given how large a proportion the battery is of a car’s overall cost.

Mini Cooper SE Electric

Hawes added that, “a ‘no-deal’ scenario would severely damage these prospects and could see volumes falling below 850,000 by 2025 — the lowest level since 1953. This would mean a GBP40 billion cut in revenues, on top of the GBP33.5 billion cost of COVID-19 production losses over the period. COVID has consumed every inch of capability and capacity and the industry has not, the time nor the clarity to prepare for a further shock of a hard Brexit,”

British car manufacturing came to a screeching halt in April thanks to the coronavirus quarantine, down 99.7% against the same month last year.


 
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