Is Toyota Next-In-Line To Leave Britain

Following the announcement by Honda that it would close a car manufacturing plant in Swindon, southwest England, the automotive industry is under the looming threat of a similar decision by another Japanese carmaker – Toyota. Many industry leaders and commentators have warned of the same, considering Nissan had also announced its plan to leave the country, citing uncertainties from Brexit.

Toyota decided to establish its plant in the UK in 1989 at the invitation of the then Prime Minister, Margaret Thatcher. There are currently two manufacturing plants in the UK, with a total investment of £2.75 billion. The plants are Burnaston in Derbyshire, which is a vehicle manufacturing plant, and Deeside in North Wales, which is an engine manufacturing plant. The company employees approximately 3,000 members. Britain’s exit from the EU is particularly disappointing for carmakers like Toyota because earlier the PM had convinced them to set up in the United Kingdom as their European hub. 

Toyota had warned earlier about the impending negative impact if Britain leaves the EU without a deal. The company’s executive vice-president, Shigeki Tomoyama, acknowledged that the company’s factory in Burnaston, central England, employing around 2,500 colleagues, would face enormous disruption in the event of hard-Brexit. The plant manufactures 600 vehicles per day and operates under the "just-in-time" system which demands a fluid flow of crucial components from the EU, putting production of £10 million worth of cars a day at risk as the management has warned that the firm would have to stop production in the plant if the car parts are not imported from the EU.

The Business Secretary has also warned the lawmakers that unless parliament finds a consensus to reach a deal, the uncertainty resulting from Brexit will hamper business plans and impede investments in the economy. He notes that leaving customs in the absence of a trade deal would be a “disaster” for the economy and called for certainty “as soon as possible”. In a speech to the parliament, he highlighted the plight of Britain’s manufacturers who do not have the certainty regarding future trade, representing two-thirds of the total trade. He further implored the parliament to bring the matter to a conclusion without any further delay. He also warned that Honda’s decision to leave the country was just tip of the iceberg and would seem minuscule by the economic hit of a no-deal Brexit.

He also took a dig at Brexiters, targeting a commonly used rhetoric - 'project fear' – who question the adverse projections that have been made in-case of Brexit. Using the example of manufacturing operations and employment, he described as 'project reality'. He further implored lawmakers to reach a deal to give the industry a much-needed air of clarity.

The auto sector is particularly vulnerable to Brexit, with the industry fretting upon the tariffs on cars and vehicle components they would have to face when UK leaves the EU. Another fear is that the smooth flow of car parts between factories in the EU and Britain would be disrupted due to the imposition of checks at borders.

Investments into the industry have already plunged since the results of the referendum. The Society of Motor Manufacturers and Traders recently noted that investment of £589 million in 2018 was nearly half than the previous year, while the average investment in recent years was about £2.5 billion.

 

Conclusion

The auto industry has taken a severe hit in recent times due to uncertainties arising from the post-Brexit relationship of the UK with the bloc. Clarity on future tariffs and trade agreements are required before new investments are made and falling investment numbers can be halted.