Weekly News Review | 30 October 2017 | Automotive Purchasing and Supply Chain Automotive Purchasing and Supply Chain

Talking Point

UK automotive starting to feel the chill of a ‘no-deal’ Brexit?

The total failure, thus far, of the Brexit negotiators to address trade issues may be starting to have ramifications for the UK’s automotive industry. It is becoming increasingly likely that the UK will leave the European Union without any agreement on tariffs and will have to adopt World Trade Organisation rules on imports and exports. Until now, the negotiators have argued at length over issues such as the UK’s ‘divorce bill,’ human rights and the border between Northern and Southern Ireland. All important subjects, no doubt, but more important than trade issues which may define the way this country conducts its future business? I think not.

Several recent events have caused concern to the UK’s automotive industry. Firstly, there was the decision by PSA Group to cut 400 jobs at its Ellesmere Port plant, which builds Vauxhall and Opel Astra models. This was always the UK’s most vulnerable carmaker given its reliance on components delivered from the EU; only some 25% of parts are sourced from UK suppliers. The Astra is also built in PSA’s Gliwice plant in Poland. How easy would it be for PSA to switch current UK production there? The company has previously stated that the Ellesmere Port plant would continue to build the Astra until the end of its current production contract in 2021. Ominously, no guarantees have been forthcoming over the plant’s future beyond that date.

PSA has stated that the layoffs are due to a decreasing UK market for the Astra. It is not alone in this. Last week, the Society of Motor Manufacturers and Traders published figures which showed that UK new-car registrations fell by 9.3% in September, traditionally a key month in which a fifth of annual UK sales can expect to be achieved. One has to wonder if PSA’s decision is the thin end of the wedge. Already, PSA has stated that manufacturing costs at Ellesmere Port are ‘significantly higher’ than in its French operations. How much higher would they be in the event of a no-deal Brexit?

Then there was the statement from Toyota’s Executive Vice President Didier Leroy just last week demanding greater clarity over the terms of the final Brexit deal. Toyota has a substantial UK plant in Derbyshire which employs more than 3,000 workers and, critically, exports up to 85% of its production to Europe. Leroy delivered a thinly-veiled threat about the future of the plant if certain assurances were not forthcoming.

Writing this on a misty London morning, I can only hope that the fog surrounding Brexit clears, and clears quickly.

Simon

Sam Ogle

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