New investment in the UK automotive industry has dropped to just £90 million in the first half of the year, while over £330 million has been spent on Brexit contingency plans.

The latest figures from the Society of Motor Manufacturers and Traders (SMMT) show inward investment into the sector effectively stopped in the first half of the year. In the period January-June, newly pledged investment was down more than 70% to £90 million, contrasting with the average annual investment figure of £2.7 billion over the previous seven years.

While the welcome announcement by Jaguar Land Rover earlier this month was good news for the industry, it is considered an outlier as the vast majority of manufacturers have suspended plant and product spending in the UK amid ongoing uncertainty.

British car manufacturing output fell by more than a fifth in those six months, with a -15.2% decline in June marking the 13th consecutive month of negative growth.

666,521 cars rolled off production lines in the first six months of 2019, a year-on-year loss of 168,052 units due largely to falling demand in key markets, including the UK, exacerbated by factory shutdowns pulled forward in anticipation of the March Brexit deadline.

In June, output for the UK rose by 2,791 units following an anomalous -47.2% decline in the same month last year when preparation for the new WLTP emissions test impacted volumes.

The underlying trend, however, remains downward, with year-to-date production for the domestic market down -16.4%.

Meanwhile, the number of cars built for export fell by -19.8% in June and by -21.0% in the first half of the year, with just over half a million units shipped overseas given softening of key overseas markets and global trade tensions.

Exports to the sector’s top global markets fell by double digits, with the US down -12.9%, China down -53.1%, Japan -10.5% and Turkey -93.0%. Demand in the UK’s biggest market, the EU, also fell, by -15.6%. However, the EU still accounts for 57% of all UK car exports – the highest first half dependence since 2016.

The news comes as new SMMT research reveals the substantial cost to industry of no-deal Brexit preparations. At least £330 million has already been spent by the sector on contingency plans.

Most major UK manufacturers have tied up working capital stockpiling materials and components, securing warehousing capacity and investing in new logistics solutions, additional insurance and training in new customs procedures. Significantly, many manufacturers have moved annual plant shutdowns from the summer to April, a measure which cannot be repeated for the proposed October departure date.

“Today’s figures are the result of global instability compounded by ongoing fear of ‘no deal’. This fear is causing investment to stall, as hundreds of millions of pounds are diverted to Brexit cliff-edge mitigation – money that would be better spent tackling technological and environmental challenges,” said Mike Hawes, SMMT chief executive.

He added: “The industry’s foundations are fundamentally strong, however, and we’re ready to work with the new government to build on these through the industrial strategy. We need an internationally competitive business environment to encourage more investment, more innovation and more growth. That starts with an ambitious Brexit deal that maintains frictionless trade and we look to the new administration to get a deal done quickly so manufacturers can get back to the business of building cars and helping deliver a brighter future for Britain.”

SMMT

www.smmt.co.uk

Michael Tyrrell Author Michael Tyrrell Digital Coordinator

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