With investment down 80% in past three years, industry faces ‘death by a thousand cuts’

This article is more than 1 year old

This article is more than 1 year old

Car production in Britain could collapse by almost half by the mid-2020s in a no-deal Brexit scenario, with plant closures triggering job losses across the country, according to an Oxford University study.

Matthias Holweg, an automotive expert at Oxford, said Britain leaving the EU without a deal and trading on World Trade Organization terms would trigger a big fall in output.

According to the study, car production has already slipped by about 9% since the EU referendum in 2016. Production volumes have fallen from more than 1.7m cars per year to less than 1.5m, but could drop further to about 900,000 a year in 2026 if Britain leaves without a deal.

Holweg said the UK’s current volumes of production could not be sustained under a WTO trading regime with the EU, as higher levels of border friction and tariffs would render UK car manufacturing less competitive.

Car plants across the country would at first be starved of investment before their owners eventually closed them. The study found that investment has already dropped by about 80% over the past three years.

“This would invariably lead to a hollowing-out of the UK’s component supply chain, effectively condemning the automotive industry to a slow ‘death by a thousand cuts’,” said Holweg, professor of operations management at Oxford University’s Saïd business school. “The great and present danger is that the decisions on where to produce new models will continue to go against the UK.”

The study comes after several international car manufacturers have announced UK plant closures or job losses since the Brexit vote, with the risk of border disruption to their just-in-time business models among significant reasons.

Big carmakers such as Jaguar Land Rover, Ford, Toyota, Nissan and BMW have issued warnings about the impact of a no-deal Brexit. Trends in the global car industry, including new vehicle emissions tests and slowing demand in China, have also had an impact.

Job losses from the closure of Honda’s Swindon plant could exceed 7,000, given the impact on companies in its supply chain.