Red Alert On UK Automotive Sector

  • Jan 31, 2019 GMT
  • Team Kalkine
Red Alert On UK Automotive Sector

The United Kingdom automotive sector exhibits signs of heightened caution as the manufacturers grow sceptic ahead of UK’s impending departure from the European Union. The performance indicators for 2018 as posted by the Society of Motor Manufacturers and Traders (SMMT), the most influential trade association, indicate a downward and worrisome phase for the automotive industry.

The UK automotive companies are specifically pressurising the government to avoid a no-deal Brexit since the uncertainty has already hampered investments and jobs. The recent figures by SMMT suggest that the fresh inward investment in the sector reduced by almost 50% in 2018 year-on-year to just GBP 588.6 million. The dampening of investments has been caused mainly by lack of clarity towards the future of the trade relations with the EU post March 29 as well as a weak global macroeconomic landscape.

According to the SMMT released data, the UK car production output for home and overseas markets plummeted from 336,628 and 1,334,538 in end-2017 to 281,832 and 1,237,608 in 2018, indicating a decline of 16.3% and 7.3% respectively. Overall, the industry has experienced second consecutive decline and a five-year low of 9.1% year-on-year amidst multiple challenges.

The declining domestic production can be attributed to other contributing factors such as regulatory changes, the current uncertainty over future diesel policy and taxation, as well as weakening consumer and business confidence since the 2008 financial crisis.  In addition, the shrinking of exports stems out of slowdowns in some of the major international markets like the European and Asian economies. Particularly, the exports to China fell by 24.5% while the demand in EU reduced by 9.6%, yet the 27 EU nations still constitute the larger part of UK exports, i.e. around 52.6%.

Despite the slump in the north, the demand from consumers in the west grew indicating favourable export and taxation policies. The premium models manufactured only in the UK led to exports rising by 5.3% to the United States as Americans spent open heartedly amidst large tax cuts.  Similarly, Japan and South Korea remained lucrative markets as exports grew by 26% and 23.5% respectively.

Lately, the industry giants Jaguar Land Rover and Nissan also registered tumbling outputs by 15.6% 10.7% respectively. Earlier this month, Jaguar also announced 4500 job losses as it closed off various factory units.

Since, UK is currently part of the EU’s single market trade agreements and customs union regime with all international economies including Japan, Korea, Canada and Turkey; it immensely benefits from the frictionless exchange of goods and services. However, it cannot be predicted as to what will be the fate of the industry after the two units implement the split. No deal could definitely put a great threat to more than two third of UK automotive’s global trade.

Preceding the current phase, the UK automotive sector has had sustained growth with a turnover of GBP82 billion and exports worth GBP44 billion, accounting for 12.8% of the UK’s total exported goods in 2017. It is a strong component of the UK economy.

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