Without Brexit deal UK output could decline to 2016 levels group says Getty Images

Without Brexit deal, U.K. output could decline to 2016 levels, group says.

U.K. Output Continues Decline, Automakers Fret Over Communications Gap

Industry insiders say they were blindsided by the government’s recent announcement to ban the internal-combustion engine by 2040.

U.K. car output fell for the third month in a row in June at the same time as concerns heighten over the need for government Brexit plans to secure industry investment, jobs and growth.

The month’s production fell 13.7% to 136,901 units, leaving first-half output down 2.9% at 866,565, still the second highest in 12 years.

However, the Society of Motor Manufacturers and Traders says production for export continued to underpin volumes, with overseas demand for British-built cars falling a marginal 0.9% in the first six months, with 683,826 cars shipped overseas. The percentage of production bound for export now stands at 78.9% – the highest in five years.

First-half demand from the home market fell 9.5% to 182,830 units, in line with forecasts after a long period of record growth.

The SMMT says although there is much uncertainty, the latest independent forecast by AutoAnalysis predicts production will rally in the second half.

However, the manufacturers’ group says softness both in the U.K. and certain key export markets may see the 2017 forecast revised downward.

The SMMT says with concerns mounting over Brexit and the effect of the ongoing uncertainty on investment, the analysis also suggests failure to secure a deal – or, at the very least, an interim arrangement maintaining current trading conditions – could cause output to fall further in 2019. With a Brexit deal in place, U.K. production is forecast to rise close to 2 million units annually by 2020.

SMMT CEO Mike Hawes says supply-chain disruption caused by “hard” border controls as the U.K. leaves the customs union, and price increases driven by World Trade Organization tariffs, could result in a 10% hit to production, taking volumes back to 2016 levels.

“World-class engineering, productivity, strong government collaboration and massive investment in the past few years have helped U.K. automotive become a global success story,” Hawes says in a statement.

“At the heart of this has been the free and frictionless trade we've enjoyed with the (European Union) – by far our biggest customer and supplier.”

Hawes says Brexit uncertainty is not helping investment, and growth is stalling.

“The government has been in ‘listening’ mode but now it must put on the table the concrete plans that will assure the future competitiveness of the sector.

“Investors need certainty so, at the very least, the U.K. must seek an interim deal which maintains single market and customs union membership until we have in place the complex new agreement sought with the EU.”

That uncertainty is deepening, as The Telegraph newspaper in London reports senior auto industry executives complaining they were blindsided by the government announcement of the ban on sales of gasoline and diesel cars and vans by 2040.

“We have had no formal discussions with government in the past week,” Hawes says an industry luncheon. “We are still waiting – like many others – to see what the formal proposals are.”

The newspaper says the row over the clean-air plan fuels a sense in the car industry – which employs 814,000 people, has a £77.5-billion ($101.4-billion) annual turnover and accounts for 12% of the country’s goods exports – that it is being ignored by the government over its concerns, especially about Brexit.

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