British car factories turned out 120,649 units in January, down -18.2% on the previous year and marking the eighth successive month of decline, according to figures released today by the Society of Motor Manufacturers and Traders (SMMT).

Demand dropped at home and overseas but it was the latter that fell most, with exports down -21.4% to 93,781 units

The SMMT said it had been the eighth successive month of decline as 26,858 fewer units left UK factories in January, with a double-digit drop in overseas orders.

Further softening in key Asian and European markets drove much of the decline, with output destined for China down -72.3% and the EU27 -20.0%, while model changes also played a significant part. Meanwhile, manufacturing for the domestic market fell by -4.8% as political uncertainty continued to dent consumer confidence.

Mike Hawes, SMMT chief executive, said, “Another month of decline is a serious concern. The industry faces myriad challenges, from falling demand in key markets, to escalating global trade tensions and the need to stay at the forefront of future technology. But, the clear and present danger remains the threat of a ‘no deal’ Brexit, which is monopolising time and resources, undermining competitiveness. Every day a ‘no deal’ Brexit remains a possibility is another day automotive companies pay the price in additional and potentially pointless costs. ‘No deal’ must be taken off the table immediately and permanently.”

Almost a third of automotive companies responding to a recent SMMT survey said they had postponed or cancelled UK investment decisions because of Brexit, with one in five having already lost business as a direct consequence.

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Over half said that contingency plans were being executed, with more than one in ten (12.4%) relocating operations overseas and the same proportion reducing UK headcount.

Market response

However, Lloyds said that declining market production figures could be countered by potential upsides in the medium to long term.

Stuart Apperley, director and head of UK automotive at Lloyds Bank Commercial Banking, said: “Although uncertainty around the UK’s future trading relationships is proving challenging for some car makers, of arguably more significance in the long run are slowing sales in China and regulatory changes which have made diesel less viable. Manufacturers are assessing the economic viability of their plants with some choosing to cut back on capacity.

“While it’s easy to be downbeat, it’s important to remember it isn’t all doom and gloom and the sector has proven resilient in the past. Indeed out of the gloom of 2008, the UK’s automotive sector emerged with some real winners to be found. Today, UK automotive companies will be hoping they can repeat that success once the current headwinds subside.

“UK carmakers also continue to invest in new areas of growth, such as electric and autonomous vehicles, which should provide avenues for future success.”