British car production slumped to a 10-year low last year as the economic uncertainty ahead of the UK’s exit from the European Union kept investors away from the country’s major manufacturers.
The total number of vehicles built in the UK slumped 13.8 per cent to its lowest level since 2004 as a result of steep falls in the volume of commercial vehicles and heavy duty trucks produced, according to the Society of Motor Manufacturers and Traders.
And the picture is unlikely to be brightening in 2019, with the SMMT predicting production will decline 4.4 per cent this year, partly due to the looming impact of Brexit in March.
Despite the depressed state of the industry, the SMMT reaffirmed its support for the post-Brexit automotive relationship between the UK and the EU after a wide-ranging consultation with its members.
“Our manufacturers strongly support government announcements of favourable tariff and non-tariff trade arrangements for UK and EU cars with each other, and the EU-UK automotive free trade area,” the organisation said in a statement.
The industry remains confident the UK will secure favourable deal terms that “ensure the free flow of components and components components from the UK for the export markets” of the European Union and that “neither supplier nor consumer is disadvantaged”, it added.
David Bailey, senior macroeconomist at Fathom Consulting, agreed the industry was in good shape for the longer term. “We think the fear of the UK having to accept unfavourable trade terms in the exit negotiations will subside in time,” he said.
But the impasse in talks to introduce a deal on future trade relations, which also took up part of last year’s European Council summit in Brussels, underlined the magnitude of the challenge ahead for the industry.
The prime minister has said the UK will make sure “good, well-paid jobs” in car production were not lost, and a gradual reduction in EU tariff and non-tariff barriers remains a priority.
But SMMT chief executive Mike Hawes, speaking at the Smem show in Geneva, warned that without a deal “car manufacturing will be the forgotten sector”.
Meanwhile, in China, the world’s biggest vehicle market, the government is clamping down on pollution and as a result the Chinese car market has slowed to a crawl.
China imported 75 per cent of vehicles manufactured in the UK in 2017, most of them passenger cars but a growing proportion of commercial vehicles, increasing production costs, Mr Bailey said.
The picture looks bleaker for French, German and Spanish manufacturers, which have been suffering from the combination of recession and the sharp depreciation of the euro since the UK voted to leave the EU.
The renewed slump in automotive sector exports from Europe is hitting car makers hard, forcing some to shut plants.
Honda has closed a plant in Slovakia, while Jaguar Land Rover has dramatically cut its UK workforce.
Sales of cars and trucks in the UK declined 3.2 per cent last year to 1.96m units, while total car production was 1.35m units, down 12.8 per cent from 2016.
Total commercial vehicle production fell 30.8 per cent to 1.15m units, while heavy goods vehicle production dropped 36.3 per cent to 190,000 units.
The Fathom model, to which SMMT subscribes, projects a rise in production of light-weight passenger cars to about 1.72m units in 2020, with 3.6m light and commercial vehicles in 2021.
“The significance of this number is that it could represent a vehicle production capacity of around 1.5m,” Mr Bailey said.