One in three firms in the UK automotive industry are cutting jobs due to escalating fears of a no-deal Brexit, according to a survey from the Society of Motor Manufacturers & Traders (SMMT).
The survey found that 80.3% of UK automotive businesses fear leaving the EU without a deal will have negative consequences for their future prospects. Some 79.6% are worried about the impact on their profitability, while two thirds said that no-deal would impact their ability to win overseas business. A similar number said they would be unable to invest in their UK operations.
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One in 10 surveyed businesses said they had already divested from their UK-based operations and 13.4% are relocating operations overseas. Overall, over three quarters of firms say that there has already been a negative impact on business even before the UK has left the EU.
Almost half have spent money on stockpiling and warehousing to mitigate against the risk of border delays and production stoppage and SMMT’s 2019 UK Automotive Trade Report calculates that a ‘no deal’ Brexit would knock £50,000 a minute off the sector’s economic contribution.
Meanwhile, a third have made adjustments to logistics and shipping routes, and 26.8% have been forced to invest hard-won profits in new customs infrastructure, despite a recognition that such systems cannot guarantee against border delays in the event of ‘no deal’.
Mike Hawes, SMMT chief executive, said: “As the Brexit clock ticks ever closer to midnight, this survey reveals the bleak future that awaits this vital sector in the event of ‘no deal’. Damage has already been done: investment is haemorrhaging competitiveness being undermined, UK jobs cut and vast sums wasted on the impossibility of preparing for ‘no deal’. Make no mistake, every day ‘no deal’ remains a possibility is another day of lost investment, another day that makes it harder to recover investor confidence in the UK.
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By GlobalData“As yet, the damage is not irreversible. But we need a deal. A deal that, in the short term, enables a “business as usual” transition for as long as it takes to negotiate and implement the future trading relationship. In the longer term, that deal must replicate all of the benefits we currently enjoy which means an ambitious deal that delivers free and frictionless trade. UK jobs, innovation, trading strength and economic growth all depend on the automotive sector so we urge all parties to get a good deal done before it is too late.”
Stephen Dawson, financial services sector head at Shoosmiths LLP, said: “This consultation doesn’t come as any surprise to the industry – we have been expecting action from the FCA since we sat down with them in recent weeks. Clearly the principal impact will be for both brokers and motor finance providers creating something of a level commission playing field, with the ultimate aim of benefitting consumers.
“I am delighted that firstly that there are no proposed changes on the rules for creditworthiness assessments. In the context of commission however, and a ban on discretionary commission models, the challenge in this market is not necessarily commission itself, but more so the discretion afforded to brokers in setting the rates that directly affect the cost of motor finance for consumers.”
