British car makers are 'losing money', former motor boss says

2016 was a year of record car sales in Britain as the number of cars made reached its highest level in 17 years.

It was also a year in which the British car industry warned a vote to leave the EU would jeopardise its future.

1.7 million cars rolled off British production lines and 2.5m engines were assembled - but the former head of General Motor's European business told ITV News that the picture is not as rosy as it looks.

Nick Reilly spent 37 years with General Motors.

In 2009, he took charge of GM Europe and is widely credited as having helped save the Vauxhall factories in Luton and Ellesmere Port from closure during the economic slump. He retired in 2012.

The pound has fallen since the referendum and we still trade freely with the EU for now so, in theory, Britain has become a more attractive place to build cars - but in practice Reilly believes devaluation is causing headaches.

"Right now, pretty much everybody is losing money selling cars in this country," Reilly told me.

He added: "The pound has gone down so quickly it's not been possible to raise prices to offset that, so I would say for sure car manufacturers - all of them - are suffering."

The issue is that the British car industry imports 60% of the components it needs for the vehicles it produces. The fall in Sterling has made those parts more expensive.

"If we can get more local content, if we can encourage component manufacturers back to this country, then the industry has a very bright future. If we remain with cars with very low local content then for sure we're at risk," Reilly says.

Reilly's point is that too many companies aren't really building cars in Britain - they are assembling them using imported parts and re-exporting them again. Such a complex supply chain works inside a single market, outside the single market - which is where we're headed - and that becomes a vulnerability that may leave the British car industry exposed.

Reilly wouldn't say which companies have the fewest British suppliers but the likes of Toyota, Honda and Vauxhall are likely to be among them.

The Prime Minister's plan is to maintain tax, tariff and quota-free access to the 27 other EU countries. Reilly doubts such a trade deal is possible (unless the government pays for access) but is actually rather hopeful.

Free trade is not a given, but his suspicion is tariffs on cars will be quite low - around 2-3%.

"It's not just the UK that doesn't want high tariffs, it's the French, the Germans, the Spanish and the Italians who import into this country".

Given the need to source locally, Nick Reilly believes the rescue plan for the Port Talbot steel works, which was announced just before Christmas, was vital. "It could have been a tipping point," he insists.

He believes that had Port Talbot closed, several car manufacturers would have had to move their operations out of the UK.

"It was a crucial decision, a great decision" he told me. "We have to have a significant local content, it's very important for the future of the industry"

Car production in Britain is heading back to levels last seen in the 1970s.

Back then 80% of cars were from British suppliers.

In recent years there's been an effort to increase local content, but little progress has been made. Reilly warns when we leave the single market the industry's survival will rely on that changing.