Brexit spells uncertainty for UK car industry

Carmakers are hoping the UK is able to negotiate a preferable trade agreement with the rest of the EU in the wake of the Brexit vote

Carmakers are predicting an uncertain future for Britain following the Brexit vote to leave the EU. The UK automotive industry could face a drop in sales and production if a good trade and labour agreement with the rest of the European Union is not negotiated in the future. 

EU referendum results revealed 51.9 per cent of Brits had voted to leave the EU on June 23 with more than 17 million voters backing a Brexit. The outcome prompted David Cameron to resign as Prime Minister.

And car manufacturers with UK factories like Nissan, BMW, Jaguar Land Rover and Toyota which had strongly backed the Remain campaign now face a waiting game on what financial and trade agreements are put in place in a post-EU Britain.

Car manufacturers express Brexit concerns

Toyota, which manufactured around 190,000 cars in its Burnaston plant in Derbyshire last year, told its employees: "If the UK leaves the EU, we think it unlikely that the UK can keep the current trading arrangements." The Japanese manufacturer also predicted paying up to 10 per cent higher duties on cars and parts as a result of the UK losing its free-trade agreement with the EU.

Torsten Muller-Otvos, chief executive of Rolls-Royce Motors Cars, previously said: "For BMW Group, more than half of MINIs built and virtually all the engines and components made in the UK are exported to the EU, with over 150,000 new cars and many hundreds of thousands of parts imported from Europe each year.

• How will the EU referendum affect motorists?

“Tariff barriers would mean higher costs and higher prices and we cannot assume that the UK would be granted free trade with Europe from outside the EU. Our employment base could also be affected, with skilled men and women from most EU countries included in the 30 nationalities currently represented at the home of Rolls-Royce here at Goodwood.”

The German Automotive Industry Association has already said the UK would have to accept the "bitter pill" of free movement of people between EU countries if it wants full access to the European market. A spokesman said: "If you want full access to the market, that comes necessarily with the free movement of people. That's the bitter pill the Brexiteers have to accept." 

Both Vauxhall and Nissan, with plants in Ellesmere Port and Sunderland, have previously voiced their support for the UK to remain in the EU, while Honda, with a manufacturing plant in Swindon said it will carefully continue to monitor developments. 

UK new car sales could fall by 20%

Experts predict new car sales could tumble by up to 20 per cent if the UK falls into a recession following the Brexit vote. The PSA Group has said it is already making changes to its UK vehicle prices following the Brexit vote. A spokesman said: "Our teams are looking at different scenarios for price adjustments to our brands' models to respond to swiftly to the markets' reaction." 

Mike Hawes, SMMT chief executive, said, “The British public has chosen a new future out of Europe. Government must now maintain economic stability and secure a deal with the EU which safeguards UK automotive interests.

"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.”

Fuel and car insurance costs

Motor insurance policies are also governed by many EU laws and the British Insurance Brokers' Association has recognised the difficulties that lie ahead.

A spokesman said: "This is an unprecedented situation for the UK and BIBA is conscious that this will create a considerable amount of work and concern amongst members and their customers.

"The process of negotiating exit terms, setting out future arrangements with the EU and creating trading deals is likely to take some considerable time and will impact our industry during that period.

• 'In or Out of the EU - it'll make no difference to motorists'

"BIBA will work with the Government and other authorities to ensure that the interests of insurance brokers and their customers are fully represented in these vital negotiations. BIBA will make this a priority work stream during this time."

It's likely it'll be 2018 before the UK has formally left the EU with the Government required to activate Article 50 of the 2009 Lisbon Treaty. This then kick-starts a two-year negotiation period.

In the shorter term, the falling pound - which lost 10 per cent of its value in the hours following the vote - means the price of petrol and diesel could rise. 

What do you think of the EU referendum result? Leave us a comment below...

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