Car industry on red alert as production slumps, SMMT warns

  • ITV News Business and Economics Editor Joel Hills analyses the figures

Car production slumped by almost a tenth last year, leaving the industry on “red alert” amid continued uncertainty over Brexit, a new report reveals.

Investment by car companies halved in 2018 to £588 million as firms hold off making decisions until trading arrangements between the UK and other countries become clearer.

The Society of Motor Manufacturers and Traders (SMMT) said investment had effectively “stalled” amid fears over the UK’s future trading prospects with the EU.

Just over 1.5 million cars left UK factories in 2018, a 9.1% decline on the previous year, and the lowest for six years.

Production of diesel cars was down by 22% to 561,000 last year.

Car production has slumped by 9%. Credit: PA

SMMT chief executive Mike Hawes said the fall in investment was “deeply depressing” and should send a strong signal to politicians to secure a Brexit trade deal.

He said: “With fewer than 60 days before we leave the EU and the risk of crashing out without a deal looking increasingly real, UK Automotive is on red alert.

“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.

“Given the global headwinds, the challenges to the sector are immense. 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’.”

Car production for the UK fell by 16% last year, while exports were down by 7.3%, including 9.6% in Europe and 24% in China.

Exports to Japan increased by 26% and by 23% to South Korea, but the SMMT pointed out that both countries were subject to preferential EU trade agreements.

Credit: PA Graphics

Time has almost run out to guarantee the arrangements will continue, so a no-deal Brexit could put a huge percentage of the UK car industry’s global trade under threat, said the SMMT.

Exports to the US increased by 5.3%, leaving it the UK’s second biggest customer after the EU.

Mr Hawes said despite the Commons vote on Tuesday evening “nothing has changed”, leaving car-makers not knowing what the UK’s future trading relationship will be after the end of March.

He added it was “fantasy” to believe the car industry could manage a no-deal, warning it would be a “catastrophe”.

“Investors are asking what is going on, what is going to happen next. That is the definition of uncertainty.”

A Department for Business, Energy & Industrial Strategy spokesman said: ““As we leave the European Union we will seek the broadest and deepest possible agreement that delivers the maximum possible benefits for both the UK and EU economies and maintains the strength of our world-leading automotive sector.

SMMT chief executive Mike Hawes said the fall in investment was ‘deeply depressing’ Credit: David Parry/PA

“The automotive industry is a great UK success story, one we are working to grow through our modern Industrial Strategy, Automotive Sector Deal and research funding including millions for the creation of next generation batteries.”

Labour’s Shadow Business Secretary Rebecca Long Bailey said: “These figures are deeply worrying for the automotive sector, the 186,000 strong workforce and the economy as a whole.

“The Government’s reckless approach to Brexit is creating more uncertainty and refusing to rule out no-deal is having real repercussions now.

“The Prime Minister must take the prospect of no-deal off the table, not least for the sake of our automotive sector.’’

Unite assistant general secretary Steve Turner said: “The UK motor industry has been our ‘jewel in the crown’, leading a renaissance in manufacturing and economic renewal in regions across our nations.

“This global success story is now under threat from inaction and policy failures from a government in crisis, which is failing to back UK Plc.

“We are just a few weeks into 2019 and already major car makers have announced thousands of jobs losses, with more in supply chains, distribution and logistics companies.

“Jobs that support families and ensure money is spent in local communities.”