Brexit Chaos Continues to Drive the UK Motor Vehicle Industry into the Ditch

28 October 2019 Blog
Authors: Howard W. Fogt
Published To: Manufacturing Industry Advisor Dashboard Insights

Three and one-half years after the UK voted narrowly to exit the EU (“Brexit”), uncertainty on the timing, terms or even whether there will be an exit from the EU continues to damage UK’s motor vehicle industry – whether in terms of production, employment or future investment.  

UK Prime Minister Boris Johnson had repeatedly threatened to “crash” the UK out of the EU. His latest deadline was October 31, 2019.  His threatened unilateral rupture was rejected this week by the UK Parliament, which reaffirmed that Brexit cannot occur until Parliament debates and, then, approves the terms of any UK withdrawal from the EU.  Faced with this legislative roadblock, Johnson has requested another deadline extension from the EU to January 31, 2020, something that he had repeatedly said he would rather be “dead in a ditch” than do.  

What’s next.  On October 24, 2019, Johnson announced that if Parliament wanted an in-depth debate on Brexit, it would have to wait until after a new parliamentary election that he has called for December 12, 2019.  Assuming there is to be an election, it can occur only after a 2/3rd vote of Parliament authorizing such an early election to be called.   Assuming Parliament votes to authorize an election and assuming an election is held, Parliament may then vote on the Johnson plan.  That vote may result ultimately in its approval, its defeat or approval of an amended plan.  There might even be a new deal.  Many in Parliament insist on a second popular referendum.  

What happens next is anybody’s guess.  What is clear is that the chaos, uncertainty and delay on resolution of the Brexit question is continuing to drive the UK motor vehicle industry, unlike the Prime Minister, into the ditch.     

Negative economic consequences of Brexit, particularly for the UK motor vehicle industry are everywhere, crystal clear.  The latest survey by a leading UK motor vehicle association (“SMMIT”) conducted in early October 2019 indicated that one in three UK firm in the industry are shedding jobs, up from one in eight when the prior SMMIT survey was conducted in 2018.  Throughout the industry there is growing fear about lost profitability, increased costs, significant tariffs, reduced margins, rising unemployment.  Protracted uncertainty is causing economic contraction in the industry.  Last year, motor vehicle industry investment in new plant and equipment dropped 46.5% from 2017 and vehicle production fell to its lowest level in 5 years.   As has been widely reported, companies are voting with their feet - Honda, Nissan, JRL and Michelin are either idling/shuttering UK production or realigning their supply and distribution infrastructures outside the UK.  

Suffice to say, the continuing economic and political uncertainty caused by Brexit is victimizing the UK motor vehicle industry and its thousands of workers.  If the UK is indeed to exit the EU, the industry needs to have assurance of an orderly withdrawal and a reasonable transition period in which to adjust to the new circumstances that Brexit will bring. Stay tuned!

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