Not only is England’s entire automotive segment is experiencing difficulties inherently emanating from Brexit’s incredible complexities, but widespread misconceptions are further aggravating the ramifications of Britain’s voted-upon exit from the European Union – much to the dismay of chief executive Mike Hawes and the rest of roster comprising the United Kingdom’s Society of Motor Manufacturers and Traders (SMMT).
“The clock is ticking and automotive businesses are in paralysis,” says Hawes, citing the importance of negotiating suitable substitutes for existing EU trade deals prior to the stated Oct. 31 deadline for the UK’s withdrawal from the overall provisions of the EU pact. “The industry has been consistent and united – a ‘no deal’ Brexit would have a devastating impact on the sector and the hundreds of thousands of jobs it supports.”
As the nation’s largest industry trade organization, the SMMT represents more than 800 automotive companies – including aftermarket businesses – with the purpose of “providing them with a forum to voice their views on issues affecting the sector, helping to guide strategies and build positive relationships with government and regulatory authorities.”
Hawes, who served for more than 20 years in executive positions at Volkswagen, Bentley and Toyota prior to taking the SMMT helm in 2013, has joined with his staff and membership in preparing rebuttals for 13 myths deemed worthy of an industry response:
MYTH 1: The auto industry shouldn’t worry about leaving the EU with no deal.
TRUTH: Leaving without a deal would trigger the most seismic shift in trading conditions UK Automotive has ever experienced. Overnight, it would be hit by an immediate end to free and frictionless trade with its biggest market, an end to preferential trade with a further 70 countries worldwide, the imposition of billions of pounds of tariffs, severe disruption to supply chains and production, and lasting damage to the global reputation of the UK as an attractive and stable investment destination.
MYTH 2: This is just the automotive industry scaremongering.
TRUTH: The past two years have seen a significant drop in investment, car sales and manufacturing, driving the industry off course to meet its production target of 2 million cars by 2020. This is a cyclical sector and other issues are also undermining global growth, but companies surveyed said that Brexit was costing jobs and competitiveness – one in five automotive companies have already lost business; thousands of jobs are being lost – and the UK hasn’t even left yet. This is reality.
MYTH 3: Industry is blaming Brexit, but the real problem is falling diesel sales and the slowdown in global markets, including China.
TRUTH: These are all issues challenging the global industry – it faces a perfect global storm. Significantly, Brexit has not happened yet – yet it has been consistently cited by business as a cause of job cuts and reduced investment, now down to a fifth of the recent average, which undermines future competitiveness. Uncertainty is causing investors to look elsewhere.
MYTH 4: The EU market is in decline and growth markets are in the emerging economies. A “no deal” Brexit will let us focus on those countries for export.
TRUTH: EU car demand is slowing, but the Chinese market is also in decline, with UK-built cars exported there down by a quarter. We already export to some 160 markets worldwide including the emerging economies, but the EU, which accounts for more than half of this trade, is a 15 million-strong car market on our doorstep.
MYTH 5: A fall in the pound makes exporting cheaper, so UK car makers will benefit.
TRUTH: Sterling devaluation may make exporting cheaper, but it makes automotive manufacturing more expensive and will not offset the cost of tariffs. UK automotive manufacturing is integrated into the European supply chain network with the majority of parts used to build cars here imported, thereby negating any cost advantage.