Brexit is tipping the car industry in the UK to the brink

Brexit is tipping the car industry in the UK to the brink

The British car industry has been hit with many bad news in the year 2019. Honda has been the most recent victim, having announced that it will shut down it’s Swindon auto plant that employs 3500 workers, by 2021. It comes after an announcement from Nissan which states that the firm will be pulling investment in its Sunderland plant, as well as it has announced job cuts from Jaguar Land Rover and Ford.

There are a variety of reasons to this retrenchment. Globally, there’s been a decline in car sales and a surge of production. Also, there’s the growing opposition to diesel which was previously thought to be an environmentally friendly alternative to petrol. It’s been a long time since the VW emission scandal is causing the sales of diesel cars drop.

Therefore, there are definitely more long-term, longer-term trends in playing that Brexit. However for the UK automotive industry in particular there aren’t any positives from Britain departing from the EU. In addition the handling by the government of Brexit has made it much easier for car makers from around the world to choose to quit the UK.

How did we get here?

Japanese cars first appeared in Britain in the 1970s, when the demand began to rise. The domestic car industry was not able to expand production and satisfy this demand Datsuns (now part of Nissan) gained popularity – not the least due to their high-end design and build.

Japanese automobile makers were able to gain a foothold on the market in the UK as well as across Europe and also opened purpose-built factories in the UK that were among the most efficient worldwide. While Margaret Thatcher was prime minister during the 1980s, she was adamant about Britain as an entry point towards Europe. Honda opened a shop within Swindon in the Swindon area and Nissan situated in Sunderland to get around the 10% tariff that was imposed on cars imported from countries outside of the EU single market.

Honda’s announcement of cutting down on it’s high-efficiency Swindon manufacturing plant a fascinating, but sad, reminder of the ways businesses and politicians try to justify their decisions. Honda has made it clear and stated that Brexit was not the reason behind the decision to shut down this plant until 2022. The news has been picked up by Brexiters trying to justify their decision to leave the EU or to distance themselves from the ongoing talks in progress regarding the terms of Britain’s withdrawal. It’s difficult to not see this decision currently in the context of Brexit.

In the wake of Theresa May refusing to rule out a no-deal Brexit it’s hard to not see this as one of the major factors driving Honda to reach this conclusion. Honda is determined to expand its electric car line and is currently facing the issue of where to start. Why not in its current factory? Swindon is located in the M4 corridor, which stretches through cities like Reading and Bracknell and is called Briton’s Silicon Valley – so the infrastructure for technology would surely be readily available.

However, the prospect of a UK out of the EU isn’t a good possibility for investing in the future in particular since Japan currently has its own trade agreement with the EU that includes the elimination of automobile tariffs for the next 8 years. This is an advantage that does not apply to the UK in the event of an unpopular Brexit, which remains a possibility. Therefore, the uncertainty surrounding Brexit discussions makes Honda’s choice completely sensible.

Read more: UK’s post-Brexit trade with Japan in jeopardy while uncertainty persists

It is also why Japan’s politicians have pressed for a soft Brexit ever since the referendum result. This has been increasingly vocal as the Brexit date approaches. Shinzo Abe, the Japanese prime minister, has told Theresa May that the “whole world” wants to avoid a no-deal Brexit in January.

In addition to Honda as well as Nissan, Toyota is the third largest Japanese automaker with UK operations. Toyota hasn’t made any announcements regarding Brexit in the past, and it could be related to the fact it’s mainly focused on hybrid technologies since the introduction of the Prius in the year 2000. It is more insulated from changes in environmental thought and is just launching production of the brand-new Corolla from the Burnaston facility in Derbyshire. Toyota has also stated that the decision-making process isn’t taking place over the next five or six years.

Therefore, despite attempts to minimize the impact of Brexit on the breakup manufacture of cars in the UK there is plenty of evidence that shows that Brexit – and the uncertainty over the UK’s future relationship with Europe is the final piece of the cake. Automakers across the globe have a myriad of challenges to remain profitable. They don’t require Brexit to exacerbate their problems.

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