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How Will Brexit Affect the UK Automotive Industry?

  • by: Alexandra Catan
  • On: 24, Apr 2018
4 min read

How has the vote to leave the EU already affected the UK car industry, and how is Brexit set to impact UK Automotive businesses in the future?

UK Car Sales Have Already Fallen

UK car sales fell by 8% last year – UK car sales had been steadily rising, with record car sales of 2.7million in 2016, until 2017 which saw 2.5 million cars sold. The British car industry saw a reel of negative press in the past month: Jaguar Land Rover made 1,000 staff redundant, Vauxhall reduced their number of dealerships, and Nissan announced the staff cut of 10% of staff at its giant Sunderland site, which were all attributed to a reduction in car sales.

However, analysis from the Society of Motor Manufacturers and Traders (SMMT) asserts that the decline in UK car sales is not due to Brexit. Many consumers are discouraged from buying new cars because they worry about economic uncertainty, but thousands are also confused over the potentially harmful and costly effects of diesel due to pollution and the introduction of diesel taxes.

Despite the recent decrease in volume, industry experts assert that 2017 was a highly successful year for the industry. After 2016, last year’s car sales were the highest figures in the past five years, proving that the industry continues to grow.

Automotive Business Growth Is Threatened

In the case of many sectors across the UK, the exact impact of Brexit on the Automotive and Motorsport industries remains unclear through continued negotiations on tariffs, customs unions and free movement of people.

SMMT analysis suggests that EU tariffs on cars could add £2.7 billion to imports and £1.8 billion to exports annually by pushing up the list price of cars imported to the UK by an average of £1,500 if brands and retailers are unable to absorb additional costs. Over half of British car exports are sold in the EU, which imposes a 10% import tariff on vehicles from outside the bloc. The British Automotive industry is similarly dependent on vehicles imported from the EU: UK Motorsport currently relies on EU-produced cars, particularly in the Formula 3 and Formula 4 championships.

Although the close relationships between the Automotive supply chains of the UK and EU are causing concern during Brexit talks, positive results from negotiations would further cement the vital position of British Automotive manufacturers to the UK and global industries. UK Automotive businesses contribute over £80million billion to the UK economy every year. Despite the slight dip in recent sales, the UK’s 2,500 Automotive suppliers continue to be vital to the UK economy, and 2017 the industry performed better than in 2015, 2014 and 2013.

The UK Automotive industry accounts for 12% of total UK export of goods, and over 160 countries import UK-built cars, with this demand preparing UK manufacturers to continue to supply overseas customers long after Brexit. The SMMT is fighting for an industry Brexit deal as close as possible to existing EU regulatory and trading frameworks, including a sustained membership of both the single market and the customs union; with the UK looking towards a ‘Soft Brexit’ as the country nears closer to the deadline, the Automotive industry must wait for a confirmed trade deal to begin a plan of action.

Impact of Brexit: Automotive Employment & Skills Shortages

The UK car industry currently employs 900,000 people – the recent fall in sales has delivered job losses for engineers, technicians and executives working in the Automotive industry, as global brands tighten their budgets. However, with over 5,000 open jobs in the Automotive sector as of April 2018, the industry will offer plenty of Automotive jobs over the next few years for those with the skills and experience.

Automotive Engineers and Motorsport Technicians will also be in higher demand due to greater innovation in Automotive technology. OEMs and industry professionals predict a huge increase in demand for electric and autonomous vehicles in the next eight years. New research reveals that 8 million autonomous vehicles with Level 3, 4 or 5 autonomy will be shipped in 2025, which will require thousands of Engineers and Technicians to build the infrastructure that will design and build these vehicles in a very short timeframe.

On the other side of the industry, Automotive manufacturers and suppliers could be worse affected by the existing skills shortage. In Q4 2017 22% of UK Manufacturing and Engineering business leaders reported skills shortages at technician level as their most urgent business problem. The UK will have to work harder to promote the UK Automotive industry as an attractive prospect to potential talent pools, both in the UK and abroad, to avoid missing out on key skills and to engage the talent needed for innovation and success.

How Can the UK Automotive Industry Survive Brexit?

The UK Automotive industry can guard against a negative Brexit deal by positioning itself as a global hub for Automotive and Motorsport innovation. The UK Automotive industry is investing £4 billion each year in automotive R&D., and the latest Government Budget also announced a dedicated £540million to support the increased popularity of electric cars, including more charging points, to fuel the popularity of electric cars and make sustainable Automotive technology more accessible to UK consumers.

Innovation will also attract the next generation of Automotive Engineers from the UK, when combined with innovative ways of marketing the benefits and exciting opportunities of Automotive careers to young people and currently untapped talent pools, such as those from diverse or disadvantaged backgrounds.

Partnering with schools, colleges and universities to better market Automotive careers and transforming your recruitment strategy in response to the outcomes of Brexit are the beginning of the solution to the Automotive skills shortage, and will help businesses to harness skills rather than lose talent to Automotive manufacturers abroad.

Find out more about our technical recruitment services for the Automotive and Motorsport industry.

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