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Brexit Vote Means Uncertainty for UK Auto Factories

July 14, 2016

Several UK car factories face an uncertain future following Britain’s vote to leave the European Union, according to PA Consulting Group research. A period of uncertainty during talks between the UK and the EU over Brexit may prompt some overseas carmakers with UK plants to place their investment in model upgrades elsewhere in the world.

If the UK’s access to the single market is deemed inadequate, some UK factories could close, because they would be uncompetitive. Plants run by Honda and Toyota are most at risk of closure after Brexit, according to the research.

The UK exports over 1.2 million cars per year with over half going into the EU. The research suggests that, if current high levels of uncertainty following the Brexit vote continue, demand and sales could fall by 5% to 10%, according to the researchers.

The researchers have broken down the status of UK automotive factories into three categories:

The leavers: Plants run by Honda and Toyota are most at risk of closure after Brexit. They are highly reliant on exports to Europe and have relatively low margins and profitability. Combined, they account for approximately 20% of the vehicles made in the UK.

The question marks: Mini and Vauxhall. Although they have a strong British heritage, especially Mini, they have EU options.

The stayers: Jaguar Land Rover.

“The current lack of certainty about tariffs places a question mark over the future of a significant number of UK plants and jobs,” said Tim Lawrence, head of manufacturing at PA Consulting Group. “As the supply chain investment tends to move with Original Equipment Manufacturers’ volumes, the impact on UK jobs and the economy will be felt beyond the automotive industry. This uncertainty also comes at a time when automotive technology is changing fast. A lack of overseas investment in new technologies, such as autonomous and electric vehicles, could have a long term impact on the competitiveness of the UK industry.”

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