Warning over impact of Brexit on Nissan and wider UK car industry

One of the most senior figures in the British car industry has told the Government there is 'no Brexit dividend' for the business.

By The Newsroom
Tuesday, 26th June 2018, 10:08 am
Updated Tuesday, 26th June 2018, 5:49 pm
Mike Hawes
Mike Hawes

The Society of Motor Manufacturers and Traders (SMMT) has blamed a lack of certainty over the UK's future trading relationship with Europe for a 50% fall in investment in the British motor industry.

The SMMT said £347million of investment was earmarked for new models and facilities in the UK in the first half of this year, compared with £647.4million in the same period in 2017.

Sunderland's Nissan plant supports thousands of jobs across the North East

The trade association is calling for the Government to safeguard jobs in the sector and to end the current uncertainty about the UK's future trading relationship with the EU post-Brexit.

Chief executive Mike Hawes said: "There is growing frustration in global boardrooms at the slow pace of negotiations.

"The current position, with conflicting messages and red lines, goes directly against the interests of the UK automotive sector which has thrived on single market and customs union membership.

"There is no credible plan B for frictionless customs arrangements, nor is it realistic to expect that new trade deals can be agreed with the rest of the world that will replicate the immense value of trade with the EU."

Adding that the best model for customs and trade with the EU was the current one, he said: "There is no Brexit dividend for our industry, particularly in what is an increasingly hostile and protectionist global trading environment.

"Our message to government is that until it can demonstrate exactly how a new model for customs and trade with the EU can replicate the benefits we currently enjoy, don’t change it."

Nissan employs more than 7,000 people at its Sunderland plant - though it announced in April it was cutting an undisclosed number of permanent salaried positions, blaming a decline in the sale of new diesel cars.

The plant also supports almost 30,000 more posts in its supply chain, the vast majority of which is based in the North East.

Nissan produces the best-selling Qashqai and Juke, as well, as the Q30 and QX30 for the firm's prestige Infiniti range and the all-electric Leaf.

The car giant announced in October 2016 that it was investing in production of new Qashqai and X-Trail models at Sunderland after receiving Government assurances that EU withdrawal would not affect the plant's competitiveness.

Car giant BMW has also aired concerns over the future of the motoring industry post-Brexit.

The German giant employs around 8,000 people in the UK, with its plant in Oxford producing the popular Mini range.

But senior director Stephan Freismuth said delays in importing components would put the operation under serious threat, potentially forcing UK closures.

He told the Financial Times: "We always said we can do our best and prepare everything but if, at the end of the day, the supply chain will have to stop at the border, then we cannot produce our products in the UK."

It comes after plane manufacturer Airbus warned it could also pull out of the UK with the loss of thousands of jobs if Britain crashes out of the EU without a deal.

Airbus sent shockwaves throughout British industry and the Government when it said it would "reconsider its investments in the UK, and its long-term footprint in the country" if Britain was forced to leave the single market and customs union in March 2019 without any transition agreement in place.

Airbus employs 14,000 people at 25 sites across the country.

Professor Christian Stadler, of Warwick Business School, is Professor of Strategic Management and researches the car industry: "Unless the UK stays in a customs union worse is to come for the car industry in the UK," he said.

"Expect jobs to go, it will be gradual, they will be whittled away until we will look back 10 years from now and see there could be a lot more jobs in the car industry, but instead they are in other countries.

"The politicians may think a last minute deal will be thrashed out before the Brexit deadline on March 29 next year, but that doesn’t work for business. Investment decisions are being made now and in the car industry that is for the next 10 years or more, far longer than any transition period that has been talked about in some quarters.

"The decline in investment in the car industry in the UK is not a surprise, and the lack of any plan or resolution for Brexit will continue to have an impact on investments in the UK, businesses will have to play safe and look to invest elsewhere.

"Theresa May seems to be trying to appease the Brexiters in her party, but sooner or later she will have to make some unpopular decisions with them that are necessary for the UK economy and that is staying in the customs union or some version of it.

"There is nothing to replace the customs union that is as good for the car industry and indeed the manufacturing sector in the UK. In the car industry parts move across borders multiple times through an integrated supply chain. You can’t unwind that, and you can’t move everything to the UK as that is just not economically viable. Compared to the European Union, the UK is a small market, so then companies will move parts of production to mainland Europe.

"It will not be headline-grabbing entire factories being closed, but smaller units moved, a gradual decline. Once decisions to move production to a new facility have been taken these things don’t tend to come back.

"The decline in investment is very large and should be a wake-up call to the Government - without a customs union the future looks bleak for the car industry in the UK."

North East Automotive Alliance chief executive Paul Butler said: "While these figures do not make easy reading, they have to be taken in context.

"I’m sure Brexit has held back some investment decisions as companies wait to see what our trading terms with Europe are. However, we also need to look at the record levels of investment that have come into the UK automotive sector since 2010 – well over £15billion. To continue at those levels would be difficult.

"There’s also a factor relating to the cycles of new modelsintroductions, which happens typically every six years or so, when significant investments are made by manufacturers and supply chain companies.

"In the North East we are fortunate that we are going through one of those cycles following the decision by Nissan to manufacture the new generation of the Juke, Qashqai and X-Trail at its Sunderland plant.

"Once sourcing decisions have been made, we should see investment into the North East both in terms of existing companies investing into their plants and new companies establishing manufacturing plants in the region.

"I’m confident that by the end of the year the North East will be bucking the national trend and investment will be strong."