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Brexit and the Effects on the Automotive Industry

The first half of 2016 saw a sixteen year high for the British automotive industry, but manufacturers warn that growth, jobs and investment could be challenged in the future as the effects of the Brexit vote takes hold.


The turnover created by the automotive industry is massive, accounting for more than £71.6 billion. The industry currently employs over 814,000 people in the UK with 169,000 of these people employed directly in manufacturing.


The automotive industry is so big it accounts for 12% of all UK exports and invests £2.5 billion each year.


After the first six months of this year 13% more cars were produced than during the same period in 2015. Over 1 million cars rolled off production lines in UK factories during the first 7 months of the year.


According to the SMMT these half-year figures have not been reached since 2000. This is partly due to the billions of pounds of investment which started way before Brexit was even considered.


The EU is the largest market for UK produced vehicles with around 78% making their way to other countries.


Despite this initial growth SMMT said that the majority of its members which includes the likes of Toyota, Mini and Nissan are worried about the long term effects Brexit will have on their companies with 57% believing it will cause long term negative effects. Car manufacturers may be located in the UK but with 60% of vehicle parts needed to build cars coming from Europe there is a worry that the free importing will come to an end.


Tariffs, custom charges and tax barriers could cause the biggest problems for automotive industries between the EU and UK markets.


The chief executive of SMMT said a lot had to be done to ensure the continued success of the automotive industry in the UK, 'This includes securing tariff-free access to European and other global markets, ensuring we can recruit talent from the EU and the rest of the world and making the UK the most competitive place in Europe for automotive investment.'


It isn’t just the automotive manufacturers that could be affected by the vote to leave the EU. Drivers within the UK could also see changes in car and fuel prices.


A spokesman from the RAC said that buying new cars won’t be more expensive with the UK out of the EU due to the UK being one of Europe’s largest markets, but getting car repairs could increase in price if the imported parts get taxed to enter the UK.


Something that could change sooner rather than later is fuel prices. Based on Golden Sachs and HSBC fuel prices could increase due to the pounds value falling by 20%. The AA predicts that the worst case scenario could see prices increase by 18.7p per litre which would mean a two car family could be £494 worse off every year.


Not to worry though because the movement out of the EU will take months if not years so nothing is going to happen overnight.

posted by: Abigail Lavallin 09 September 2016