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British car production falls at quickest pace since recession

Agencies | Updated: 2020-02-03 11:24
Workers are seen on the production line at Nissan's car plant in Sunderland, Britain. [Photo/Agencies]

LONDON-British car output dropped last year at the fastest rate since the 2008-9 recession, hit by slumping exports and diesel demand. The fall spurred an industry body to call for an ambitious post-Brexit trade deal to protect the sector.

Production fell by an annual 14.2 percent to 1.3 million cars in 2019, the third consecutive annual slide. Some automakers' decision to close factories for additional days in case of Brexit-related disruption also hurt sales, according to the Society of Motor Manufacturers and Traders.

Investment last year, however, nearly doubled to 1.1 billion pounds ($1.5 billion) due to a decision by Jaguar Land Rover to build electric vehicles in Britain.

"It is essential we re-establish our global competitiveness and that starts with an ambitious free trade agreement with Europe," said SMMT Chief Executive Mike Hawes.

The global sector has been hit by declining sales in key countries such as China, the world's biggest auto market, and the need for investment in electric models.

In Britain, exports were hit worst, with demand down 26.4 percent from China and 17.7 percent from Japan.

The UK's biggest exporter of goods is now seeking the closest possible relationship with the EU, its largest market, where over half of auto exports are sent.

When Britain leaves the EU on Jan 31, a transition period will come into play for the rest of the year during which time little will change. But politicians will then need to negotiate future partnerships to take effect from 2021.

Output is forecast to fall only marginally in 2020, but a series of investments are due which will affect future levels.

Peugeot warned last year that a decision to keep open its Ellesmere Port car plant in Cheshire is dependent on Britain's future relationship with the EU. Production following the warning dropped 20 percent in 2019.

Nissan is due to begin making its new Qashqai vehicle at its Sunderland factory, where output dropped 22 percent.

The company has warned that any tariffs or extra duties would put its entire European business model in jeopardy. Prime Minister Boris Johnson is keen to use Brexit as an opportunity to improve trade with the United States, to which 19 percent of exported cars are sent.

But the industry is focused on maintaining frictionless trade with the Europe.

"The US is not our priority compared to the EU," Hawes said.

Thorny issues remain over whether British and EU components can continue to be counted together in trade deals. The sector has warned that regulatory divergence could cost billions and lead to some models not being sold in Britain.

"If the cost of compliance can't be met by the margin you are going to make on total sales in the UK, then you say'I can't afford to engineer that model for the UK market,'" Hawes said.

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