Several UK car factories face an uncertain future following Britain’s vote to leave the European Union, according to PA Consulting Group research.
A study by PA addresses concerns that the UK auto sector could be harmed by prolonged uncertainty concerning trading arrangements between a post-Brexit UK and the EU.
The consulting firm said that a period of uncertainty during talks between the UK and the EU over Brexit may prompt some overseas carmakers with UK plants to place their investment in model upgrades elsewhere in the world.
PA noted that if the UK’s access to the single market is deemed inadequate, some UK factories could close because they would be uncompetitive. Plants run by Honda and Toyota are most at risk of closure after Brexit, according to the research.
The UK exports over 1.2m cars per year with over half going into the EU. The research suggests that, if current high levels of uncertainty following the Brexit vote continue, demand and sales could fall by 5-10%.
PA maintains that plants run by Honda and Toyota are most at risk of closure after Brexit because they are highly reliant on exports to Europe and have relatively low margins and profitability. Combined, they account for approximately 20% of the vehicles made in the UK.
However, PA also says there are question marks concerning Mini and Vauxhall because although they have a strong British heritage, especially Mini, they have EU options.
Jaguar Land Rover, however, is described as a “stayer”.
Tim Lawrence, head of manufacturing at PA Consulting Group, says: “The current lack of certainty about tariffs places a question mark over the future of a significant number of UK plants and jobs. As the supply chain investment tends to move with Original Equipment Manufacturers’ volumes, the impact on UK jobs and the economy will be felt beyond the automotive industry.
“This uncertainty also comes at a time when automotive technology is changing fast. A lack of overseas investment in new technologies, such as autonomous and electric vehicles, could have a long term impact on the competitiveness of the UK industry.”
Toyota’s European chief has said – in response to questions about the effects of the Brexit referendum result – that investment decisions for its UK manufacturing plant are set for the next six years. He said a first priority is for stability and that “we will have to wait and see what the outcome of the [UK-EU exit] negotiations will be and based on that, longer term decisions will be made, but in the short- and medium-term I don’t see any change.” He then defined the medium-term as six years in terms of Toyota’s model cycle plans.