Car production down by more than a fifth amid Brexit fears

Car production fell by more than a fifth in the first half of 2019 largely due to falling demand in key global markets and fears over a no-deal Brexit, according to an industry body.

And the Society of Motor Manufacturers and Traders (SMMT) also reported inward investment into the sector “effectively stopped” in the first half of the year.

Output dropped by 20.1% in the first six months of the year compared with the same period in 2018, while there was just £90 million of newly-pledged investment between January and June.

The trade association published new research indicating that more than £330 million has already been spent by the automotive sector on contingency planning for the UK withdrawing from the EU without an agreement.

Money has been spent on stockpiling materials, securing warehouse capacity, additional insurance and training in new customs procedures.

There have been 168,052 fewer cars built in UK factories in the year to date, with demand at home and abroad falling by double digits.

Manufacturing for domestic buyers has fallen by 16.4%, while overseas orders are down by 21%.

Exports account for four out of five cars made, which the SMMT said emphasised the importance of maintaining free and frictionless trade.

The overall decline of 15.2% in June marked the 13th consecutive month of negative growth.

Some of the reduction has been caused by manufacturers bringing forward summer shutdowns to April in anticipation of the previously expected March date for Brexit.

SMMT chief executive Mike Hawes described the 20.1% decrease in production for the first half of the year as a “significant drop”.

The figures are “the result of global instability compounded by ongoing fear of no deal,” he said.

The SMMT said the £90 million of newly-pledged investment in the first half of 2019 compared with an average annual total of £2.7 billion over the previous seven years.

“The fear of no deal is causing investors to sit on their hands,” Mr Hawes told reporters.

“There is political uncertainty, there is economic uncertainty.

“The worst outcome would be no deal. That is what they fear. That is why they are not investing.

“This obviously comes at a time when we need that investment.

“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.”

A series of blows have hit the sector in recent months, with Honda announcing that it will close its Swindon factory in 2021, and Ford saying its Bridgend engine plant in South Wales will close in September 2020 with the loss of 1,700 jobs.

Earlier this week the owner of Vauxhall, PSA, warned that the car giant will cease production at its Ellesmere Port factory if Brexit makes it unprofitable.