Investment in UK automotive sector plunges by a third

January 31, 2018
Britain's Society of Motor Manufacturers and Traders says it urgently needs clarity on the transitional arrangements for Brexit, after investment in the sector slumped in 2017

Investment in the British automotive industry fell by a third in 2017, its trade association said Wednesday as it called for a swift agreement on the Brexit transition period.

The Society of Motor Manufacturers and Traders said that only £1.1 billion ($1.55 billion, 1.25 billion euros) of investment earmarked for vehicle and supply chain manufacturing was publicly announced last year.

The figure is down 33.7 percent from £1.66 billion in 2016. It stood at £2.5 billion in 2015.

"We urgently need clarity on the transitional arrangements for Brexit," SMMT chief executive Mike Hawes told a press conference.

Britain is due to leave the European Union at the end of March 2019.

London and Brussels are yet to sort out the details of a transition period that could last until the start of 2021, intended to allow business time to adjust to whatever trading arrangements apply once the UK leaves the bloc.

"For the transition, we must see business as usual—so staying in the single market, staying in the customs union," said Hawes.

Due to the uncertainties on the transition and the future trade relationship, "there is a general climate of hesitancy... and its political and economic impact is affecting consumer and business confidence".

The mood weighed on new car sales in Britain in 2017.

They fell for the first time in six years, on plummeting demand for diesel-powered vehicles and as Brexit-fuelled inflation hit spending.

Total sales dropped 5.7 percent to 2.54 million vehicles, the first annual drop since 2011—as consumers ditched diesel cars for those seen as more environmentally friendly, according to the SMMT.

A similar sales drop is expected in 2018, said Hawes.

As a result, production dropped by three percent in 2017, to 1.67 million cars.

Production for export declined by 1.1 percent, while in Britain, demand declined by 9.8 percent.

The UK car industry employs 169,000 people in manufacturing alone and 814,000 across the wider industry, accounting for 13 percent of total UK export goods, says the SMMT.

The dependence on exports—at 80 percent of total production, with more than half going to the rest of the EU—makes it all the more imperative, according to the SMMT, to strike a swift agreement between London and Brussels.

A government spokesman said: "The UK's automotive industry remains a great British success story and global demand for UK designed, engineered and manufactured cars and engines remains strong.

"The UK is the third largest European car producer and has the highest productivity in Europe amongst the major automotive producing nations."

Explore further: Brexit could cost nearly 500,000 UK jobs: study

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