Weekly News Review | 1 August 2016 | Automotive Purchasing and Supply Chain Automotive Purchasing and Supply Chain

Talking Point

Brexit ruins the party

Global manufacturers have been over-the-moon with their European sales figures of late, finally overcoming the region’s financial difficulties that have strained so many OEMs over the years. In addition to UK car production reaching a 16-year high, it seems that the industry has been enjoying some well-deserved celebrations. However, the party is already over, thanks to Brexit - surprise, surprise. OEMs such as Ford, the largest car brand in the UK, are warning of dramatic losses stemming from Brexit, with Bob Shanks, Ford’s Chief Financial Officer predicting a $200 million loss this year for the company. These losses will continue to increase, stretching to around $500 million next year, which will be detrimental to the automaker's recovery in Europe.

Following the announcement of its disappointing results last week, Ford is already considering closing a number of factories in both the UK and in other European countries, while raising prices to cushion the $1 billion blow over the next two years. Unless the UK can conclude its Brexit negotiations quickly and effectively, other automakers are going to share the same notions, cutting jobs and investments - something of which the UK is in dire need. The country is putting at risk one of its most important industries, providing so many job opportunities which has especially fuelled the creation and development of the ‘Northern Powerhouse’. By ousting the colossal investments in areas such as Sunderland, home to Nissan’s most efficient site in Europe, the entire northern segment would crumble; with the departure of David Cameron, who knows what will happen to George Osborne's project?

The UK must hope that other automakers do not follow suit, as vehicle manufacturing has been the main drive in the country’s exports, though it must come to the realisation that it does not own any of these foreign businesses, who have the freedom to leave when they please. The elevated economic risk for both manufacturers and suppliers in the UK is too high for most, so the UK must find a way to make the region attractive again. It is then vital that Brexit negotiations break down the introductions of tariffs and long trade deals which would ensure that efficient and cheap trading occurs in and out of the region. The effects of Brexit can be suppressed if done correctly. However, if tariffs are put in place, business in the region will change forever.

Alex Kreetzer

Alex Kreetzer - News Editor

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