How will the automotive sector be affected if Britain leaves the EU?

16 May 2016

UK car companies are nervous about the upcoming in/out referendum in Britain, with 77% convinced that an exit from the EU will have a negative impact on their business (according to a recent survey conducted by SMMT).  Less than 10% of those questioned believe that leaving the EU would be better for their organisation, with 13% being unclear as to how they would be affected.

The UK motor industry is currently enjoying a revitalisation, with vehicle production on the rise and sales hitting a high of 2.6 million in 2015.  The sector plays a vital role in contributing to Britain’s balance of payments, with 80% of the cars produced in the UK last year sent for export.  Those involved in the sector believe that staying in the EU is vital for the future of the industry, especially when considering job security and investment and growth.  There is an underlying fear that Brexit would limit access to EU member markets and to a skilled European workforce.  Further, outside of EU membership, Britain would no longer have the same influence over the regulations that directly shape the industry.

The uncertainty surrounding Brexit has contributed to the British pound dropping to a seven year low. There have been warnings that if Britain were to leave the EU, exports and investments would also be hit. The weakening of the pound against the Euro means that cars in Britain are more expensive and therefore less profitable for manufacturers. This may result in manufacturers focusing their efforts on shifting excess production through other countries in the Eurozone.  Arguably this is a good thing, given the levels of pre-registered stock, short term rentals and other levers that are currently being pulled to absorb the high level of registrations that have taken place over the last few years.

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