WITH Article 50 now invoked and the process of Britain leaving the EU beginning in earnest, most industries are going to feel some effects.
The car manufacturing industry will not be an exception to this, and while long term, Brexit may create opportunities for Britain to develop itself into the centre of excellence for engineering that it once was again, in the short term, Brexit is certainly introducing some uncertainty to our existing car manufacturing operations.
The fffects of the depreciating pound
While most of the potential effects of Brexit will not truly be known until we are further down the line in terms of negotiating how British trade with Europe and the rest of the world will work, one thing that is already being felt within the car manufacturing industry is the impact of the pound losing value.
The reason for this is that cars tend not to be manufactured in their entirety at one location, with parts such as engines being manufactured in separate countries to where the cars are assembled. As the pound has weakened since the Brexit referendum, this has made buying parts from other countries more expensive and pushed up costs for UK manufacturing plants.
Could brands start looking elsewhere?
With car companies keen to show cost effectiveness, this feeds into what may well become a problem in the UK soon – car brands deciding that having their vehicles manufactured outside of the UK would be more efficient in terms of cost, and more appealing to their investors. Performance against cost is incredibly important to major car brands, due to how competitive the market is.
As major brands on the international markets have to show efficiency to fare well as stocks for their major investors, as well as smaller scale investors with things like ETF portfolios, it makes sense that car manufacturers will be sensitive to rises in cost.
The Vauxhall manufacturing facility at Ellesmere Port is thought to be one plant that may be at risk as a result of this. Vauxhall make their Astra there, but this car is due to be replaced in 2021. The decision about where the new vehicle will be made is anticipated to be released in 2018, which of course will come in the midst of Brexit negotiations.
Groupe PSA who own GM Europe and by extension Vauxhall were behind the decision to move the Ryton Peugeot plant to Slovakia almost a decade ago – and the Ryton plant was actually showing a profit. With 2,100 people employed at Ellesmere Port making Vauxhall’s cars right now, the 2018 decision will be one that could have a massive impact on the UK industry.
There could, of course, be ways the government can reassure car brands and encourage investment by manufacturers in their UK operations. The Nissan Qashqai, whose next generation is set to be built in Sunderland, is a good example of the fact we do still have the power to gain commitment from big car brands.
However, until we know the results of the general election in June, and then the terms negotiated for Brexit over the course of the next two years, it is very difficult for car manufacturers to establish just what they will be getting if they choose to have their vehicles built here.