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Van production at Luton to rise despite Brexit anxiety

Light Commercial Vehicles are the new cool. The car market may be in the doldrums, but demand for vans - delivery vans in particular - is increasing along with our tendency to order online.

PSA Group, the new owner of Vauxhall, spies an opportunity. The company has decided to relaunch its Vivaro van and ramp up production. Luton is the factory it has chosen to do it from.

PSA plans to sink £100 million into Luton: van production will almost double to 100,000 a year and Peugeots and Citroens will roll off the line, alongside Vauxhalls and Opels.

The existing 1,400 jobs now look secure for at least the next 10 years. PSA hopes more jobs will be created but won't say how many. The union Unite is less bashful, predicting "350-450".

On the face of it, this is quite a win for Luton and the UK. A vote of confidence post-Brexit? Up to a point, yes.

An existing 1,400 jobs at the Luton plant have been guaranteed. Credit: PA

The car industry continues to warn about the potentially devastating impact of leaving both the Single Market and the Customs Union, but since the referendum Nissan, BMW, Toyota and now PSA have all made significant investments in their UK operations here - extracting pledges as subsidies from the Government as they go.

Some £9 million of taxpayer money and an "assurance" that trade with the EU post-Brexit will be "tariff-free and frictionless" appears to have done the trick here.

"Saved by the paint shop!" jokes a former industry executive. They have a point. Luton is the only factory in the Vauxhall/Opel group with the capability and the capacity to build (and paint) vans. The case for keeping van production here looked compelling even before the talks with the Government began.

But saving Vauxhall's factory at Ellesmere Port looks a lot tougher. The head of PSA, Carlos Tavares, told me that the slump in the pound post-Brexit means every Astra car which is assembled at Ellesmere loses the company money.

Around 650 staff have been laid off since PSA took over and the workforce is down to a single shift. This is not sustainable.

Tavares says he'll wait until 2020 to make a decision about what to do with the factory. He told me he's never closed a car plant in his career. Does that mean Ellesmere Port will survive in some form? "No".

Carlos Tavares is still to decide about Ellesmere Port's future. Credit: PA

What happens next depends on the workforce at Ellesmere Port becoming "more productive" and the Government delivering on its assurance of a tariff-free, frictionless Brexit.

Unite argues that if PSA shuts Ellesmere Port then UK sales of Vauxhall, Peugeot and Citroen will slump, but it's not clear that "Made in Britain" is such a high priority for British car-buyers.

Tavares will feel he holds the whip-hand with the union and the Government. He'll doubtless use it to see what further concessions he can extract.