Toyota and BMW issue a further warning to Britain
One of the most obvious downsides of the Brexit process so far is the effect it is having on the UK automotive industry. Building cars is one of the pillars of the British economy, and it feels like we are looking at the beginning of the end.
Jaguar Land Rover, the country’s largest carmaker, amassed losses of £3.4bn in the final three months of 2018. Following that, it was announced that both Nissan and Honda were withdrawing large parts of their operations from the UK in the near future. As much as pro-Brexit figures have tried to blame other factors for the downturn, it is clear to most that Brexit is the factor helping firms decide to cut their losses.
The latest warning comes from Toyota, with the Japanese company warning that a no-deal Brexit would make it “extremely complicated” to build new models at its British plants. This is yet another blow for an industry which is on the ropes.
Toyota currently operates two factories in the UK, one in Derbyshire and one in Wales, and employs approximately 3,000 people. Whilst Didier Leroy, chairman of Toyota’s European operations, stressed that the company has “no plan today to withdraw from the UK and stop production”, the implication is clear. He went on to say that a so-called ‘hard Brexit’ would be a disaster for any British company which relies on complex supply chains and just-in-time manufacturing.
“If we don’t have access to the European market without a specific border tax, it seems to be extremely complicated to think about […] introduction of another model,” said Leroy.
Where Toyota goes from here is unknown, but if we assume a no-deal Brexit, or any other form which imposes new tariffs and slows down border checks, then we can make an educated guess.
New investment in Britain’s car industry has fallen by 90% in five years according to the Society of Motor Manufacturers and Traders. Carmakers and their suppliers are delaying or diverting investment ahead of time with the knowledge of what might come, and there is no reason why this would change if a whole new raft of tariffs and checks are introduced to make the market even tougher.
This is a situation being mirrored in the service industry where employment is falling at the fastest pace for seven years. Companies are simply holding back on making new investments and new or replacement staff thanks to uncertainty and declining economic confidence. The car industry is no different.
Mirroring the concern at Toyota, BMW board member Peter Schwarzenbauer, said that the German car maker would have to seriously consider its UK future in the event of a no-deal Brexit. The company claims to be considering many options, but it is revealing that one of the first mentioned was potentially moving Mini production out of Oxfordshire.
Losing one carmaker either to bankruptcy or a move abroad might be seen as carelessness which could be explained by market factors from other parts of the world. The possibility of losing five points to a pattern, and the common denominator is Brexit. It is sometimes tempting in an age of globalisation to blame everything on inexplicable economic forces, but sometimes the most obvious answer is the correct one – Brexit is a disaster-in-waiting for Britain’s most well-known and important manufacturing sector.