As the latest car figures show that uncertainty over Brexit is helping to drag down sales, motor manufacturers fear the industry’s revival over the past couple of decades could be put at risk by Britain’s departure from the European Union.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said: “A lot of people have spent the best part of decades turning round the industry, when you think back to how it was characterised in the 70s, 80s and into the 90s. It is very different now. It has had very difficult times and it is a cyclical industry, and there is a fear that that success could be put at jeopardy.”

He said investments could be curtailed and the industry – which was overwhelmingly in favour of remaining – was also facing a multi-million pound bill for planning for the consequences of Brexit.

Before the referendum a survey of the SMMT’s 700 members, which include manufacturers such as Jaguar Land Rover, Nissan and Toyota as well as small and medium sized supply chain companies, found that 80% wanted Britain to stay in the EU, with only 10% backing leave. Hawes said the vote was “a shock to everybody,” and now “people have gone beyond bewilderment” to try and work out what the potential impact will be.

The German car industry won't press Merkel to give the UK a good EU deal, the European market is more important to them

“There is significant cost because every company has to do a certain level of modelling and planning for risk,” he said, warning that smaller companies did not always have the resources to do this work.

While impossible to quantify precisely, Hawes said the cost must be multi-millions of pounds already, including for consultants advising on Brexit implications. This work is almost entirely negative, he said, because it involves looking at future possibilities all considered worse than the frictionless relationship the industry currently has with the EU.

And even though the effects of Brexit might not be immediate, that did not mean they could be shrugged off.

“We always said there will not be an immediate closure of plants because the investments are fixed for many companies,” Hawes said. “The impact is always going to be more gradual, and you are seeing that now: prices going up, demand is softening, investment decisions are on hold.”

New investment in the UK was also at risk, he said, due to overseas companies facing questions about whether Britain will have new tariffs and bureaucratic customs barriers, and the “intangible” factor of whether they would feel welcome: “If you weren’t currently producing in the EU and you were looking to expand your presence into the EU, you probably wouldn’t come to the UK first and foremost.”

Since the decline of British-owned car companies in the 1980s, the UK automotive industry has been rebuilt by overseas manufacturers investing in operations based on frictionless integration of products and people with other European countries, and no tariffs or regulatory barriers. SMMT’s most recent figures state that 814,000 people are employed in the UK industry, which in 2015 turned over £72bn and exported £34bn worth of products, with 56% of car exports and 65% of components going to EU countries. Recently the SMMT announced that investment in the first six months of this year had reduced to just £322m, from a total of £1.66bn invested last year and £2.5bn in 2015.



Nissan staff work on production line at the company’s assembly plant in Sunderland, UK. Photograph: Bloomberg/Bloomberg via Getty Images

Hawes said that while the huge investments made by major manufacturers make it unlikely they will leave, there was a risk of smaller suppliers, which are more “fleet of foot,” leaving the UK.

“It would just be utterly demoralising to lose so many of those advantages and the progress we have made, and that is the general feeling in the industry,” he said. “We will rise to the challenge but ideally we want to have as many of the benefits as we currently enjoy because that has helped make the industry successful.”



Hawes said the debate about Britain’s relationship with the EU and discussion since the referendum betrayed ignorance among politicians, citing the use of the phrase “access to the single market,” which he said meant being outside it, facing customs and regulatory barriers.



“There was a lot of language bandied around, and in the prime minister’s speech to the party conference [in October] she said we want business to ‘trade with and [operate] within the single market’ – how you are going to square that circle I don’t know.”

Hawes said he does not believe people have understood that Britain’s free trade deals with 57 other countries through the EU’s current agreements will also fall away after Brexit. And he found particularly frustrating the “misguided” view expressed by some prominent leave campaigners that the German car industry would press chancellor Angela Merkel to give the UK a good EU deal, because they export in significant numbers to Britain.

“We consistently said do not expect that. The European market and to a certain extent the European project is more important to them than the UK, so they want to safeguard the four freedoms which benefit them. If any sector has really benefitted from growth and development across Europe, it’s the German car industry. It is frustrating and it also reveals a lack of understanding of the way markets operate.”

Asked if Boris Johnson or Nigel Farage, who both made that argument during the referendum campaign, had discussed it with the car industry first, Hawes said they had not.

The government’s engagement with business has changed “a little” since the election, he said, and “the arguments are landing better.” The SMMT called last month for Britain to be kept in the single market and customs union until any new trade agreement with the EU is actually implemented, but he said the industry view is still that any new arrangement will be worse than being in the EU.

“From our point of view we would be better off to stay. If the electorate decide they maybe didn’t understand the economic arguments or didn’t appreciate how severe the impact was going to be and we need to revisit this, then we will make clear again what the situation is.”





