Many in Brussels will have been surprised by UK election result

Many in Brussels will have been surprised by UK election result

UK satirical magazine, Private Eye's cover this week has the strapline: "New poll shows Miliband ahead" and its ironic micky-take of just how wrong British forecasting services were will have been noted with some alarm across the English Channel in Brussels.

Last week saw the Conservative party, led by Prime Minister, David Cameron, secure a surprise, resounding mandate in the British House of Commons for the first time in 18 years, confounding almost all those polls, which were predicting a second consecutive hung Parliament.

But what does the result mean for the UK's automotive sector and what resonnance will it have ahead of wild rumours circulating concerning an advanced referendum on Britain's continued European Union membership?

Well, UK automotive body, The Society of Motor Manufacturers and Traders (SMMT) says it expects the newly-elected British Conservative government to continue supporting the automotive sector, especially as the industry secured a particular mention in the party's pre-election manifesto.

Of particular interest to the SMMT is continued support for the Automotive Council - largely viewed as enjoying cross-party political support from previous administrations of differing political hues.

In their manifesto, the Conservatives specifically said they would continue to work with the Automotive Council and newly-appointed Secretary of State for Business, Sajid Javid will have his feet held closely to the fire to ensure the sector's interests are robustly defended.

Just how important this element of UK manufacturing is to the economy is emphasised by on the very day the UK electorate headed to the polls last week (7 May), the SMMT released numbers showing the extraordinarily resilient nature of Britain's automotive bounce-back from years of recession.

Registrations rose for the 38th consecutive month in April while demand increased 5.1% to 185,778 units - the month's best performance since 2005. Year-to-date registrations for 2015 are up 6.4% to 920,366.

It's a fascinating aside, but the SMMT says all but three of the past nine general elections have coincided with a spike in new car demand in the three months immediately before and after polling day.

Notable exceptions were during the recessions of 1992 and 2010, while the 2005 election period saw registrations dip as part of natural market readjustment after hitting peak volumes in 2002.

The markets and the UK auto sector will be hoping for a similar electoral fillip this time although Britain seems remarkably tough at the moment anyway - election or not - despite the Bank of England dampening the mood somewhat yesterday revising 2015 country growth downwards from 2.9% to 2.5%.

But even given that dose of sober reality - what else would you expect from the Bank of England? - the SMMT is looking to Cameron's new administration - and the incoming Business Secretary for more of the same please stressing the vital role the Automotive Council plays.

"The UK automotive industry benefited from strong support from the previous coalition government, which through the Automotive Council and Automotive Industrial Strategy helped it to develop as a global competitor," notes the SMMT.

"Indeed, the Automotive Council was singled out in the Conservative party manifesto and has been recognised in Europe as an example of how government-industry collaboration can really work.

"The sector has cross-party backing, and we expect this support to continue under the new government."

So far so good. But there is one enormous issue looming that will perhaps rapidly start to occupy the thoughts of those at the SMMT and the automotive sector in general and it is one which appears to be coming over the horizon far more quickly than anyone could have envisaged.

Europe. The issue completely dominated the last majority Conservative government under John Major's Premiership from 1992-1997 and is constantly simmering beneath the surface of the party, whose ambivalence towards the whole 'project' reflects consistent British uncertainty as to whether we should pack our bags and leave or fight from within.

The Conservatives promised an 'in/out' referendum on Europe in 2017, but wild excitement is currently sweeping around the newly-elected MPs that the Prime Minister could confound everyone and announce a vote as early as next year.

That has really set the cat among the pigeons with parties scrambling to assess how they would respond to such a dramatic pulling forward of the referendum timetable and has apparently caused consternation among the pro-Europe camp, which will have to mount its campaign with startling alacrity.

All this is set against the backdrop of Britain's most strident opponent of European Union membership - the United Kingdom Independence Party (UKIP) - currently engaging in what appears to be civil war or "letting off steam" as its leader Nigel Farage is reported to view it - at the very moment when it may have its core issue presented to it quite unexpectedly on a plate.

But away from the 'Westminster bubble' of excitable politicians and out in the cold, hard world of business, this rush to an early referendum may set alarm bells ringing in the auto sector.

Last year the SMMT published a report into its members' views on the UK in Europe, which threw up strong backing for single market access, integrated supply chains across the Continent, EU innovation funding, harmonised technical regulations and product standards as issues, which although on paper might not sound the most electrifying, is nonetheless the bedrock on which surely any backing by the auto sector of future membership of the Brussels club is based.

This is not a blank cheque from the automotive industry however, to the mandarins in Belgium. Far from it. Indeed, the SMMT found a huge majority of its members wanted EU membership, but with reforms, something David Cameron is promising to strive to secure before putting his own backing behind an 'in' vote.

Many overseas automakers have placed themselves in the UK for reasons of political stability, industrial relations harmony (in general), low interest rates and the considerable carrot of having the European Union right on their doorstep.

The EU accounts for around half of all UK vehicle exports, with more than 500,000 UK-manufactured cars sold across the English Channel last year alone. Even more startling is the fact Britain is now the third largest carmaker in Europe behind Germany and Spain.

Now the political horse-trading can really begin. Cameron has appointed his Chancellor of the Exchequer, George Osborne as First Secretary of State, a move which many equate to seeing him effectively become Deputy Prime Minister following former incumbent Nick Clegg's Liberal Party's spectacular electoral implosion.

It appears Osborne - along with more Eurosceptic Foreign Secretary Philip Hammond - have been given the brief to put the UK's case for reform forcefully to Brussels whose Commissioners may have been genuinely surprised by the size of the new government's mandate.

The auto sector will no doubt be hurriedly preparing its own position ahead of any possible acceleration of a referendum timetable, but the European hare has now been set running once again. 

It's probably a fair bet the technocrats of Brussels let out a collective groan when they saw the UK election result - they must have hoped for a more conciliatory Labour administration's attitude to Europe with Ed Miliband as Prime Minister. 

But the reality is somewhat different and the democratic will of the people has been expressed.

Time for the automotive industry to express its own views on Europe - again - and sharpen its claws if it wants to reform from within rather than fight from outside.

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