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Brexit and the Automotive Industry

Here at Borough, we have been working with automotive manufacturers across the world for years, but Europe has always been an important market for us.

The vote to leave caught us all by surprise and our Germany-based sales agent Henning was indeed shocked at the decision, despite Article 50 not having been triggered yet.

There appear to be plenty of businesses worried about what the UK leaving the EU will mean for them, with some companies already putting the wheels in motion for significant changes. The automotive industry is one that could see some of the biggest shifts in the UK; from component manufacturers through to the car giants themselves.

Just recently week, German car-maker Opel has warned it will have to cut hours for its factory workers, citing slowing sales after the UK's Brexit vote.

Brexit Image

A Huge Industry

In a report by the Society of Motor Manufacturers and Traders, £69.5 billion of turnover and £15.5 billion in value is added to the UK economy by the automotive industry - every single year!

Around 799,000 people are employed in the industry - including those who work across the wider sector, not just manufacturing. In 2015, over 1.5 million cars were produced in the UK. These figures alone go to show that this is one of the biggest and most important industries in the country.

With 11.8% of the UK's total exports being in this industry, the decision to leave the EU could well prove a tumultuous one.

Impact on the supply chain

The entire supply chain is already feeling the effects of the Brexit vote, but mostly it's rumour and supposition - we are continuing to take enquires for both injection moulding and chrome-plating.

Of course, the recent drop in the value of Sterling has ensured our exports to the continent are currently very competitively priced. The situation is worse for importers and if suggestions that the pound might drop further when Article 50 is finally triggered, are true, importers could really struggle.

Those companies like Borough, exporting components across the globe may find that the exchange rate works in their favour in the short term, but much will depend on free trade agreements with the European Union. New markets might open up for high quality components with many new trade agreements already at the early stages of discussion.

Impact on UK-based car manufacturers

The same is true for the manufacturers in the UK, with many importing components from around the world, which has led to them seeing a decrease in profit margin as the pound dropped.

There may also soon be an impact on employment in car manufacturing if the laws on migration are tightened. Car factories are filled with skilled workers from around the world, many of whom face an uncertain future as we wait to see what deal the UK strikes with the EU.

The issue of migration is a tricky one, but must be handled carefully if we're not to throw the baby out with the bath water. Borough has certainly benefitted from highly-skilled migrants making the UK their home and place of employment.

Taking a Stand

It was interesting to see in the run-up to the vote that many car manufacturers, including BMW, backed the remain campaign, for the sake of the British car-making future. For Borough, both Rolls-Royce and Mini here in the UK feature components moulded and plated in our Southend facility, so we are inextricably linked to the issue and echo the automotive sector's call for sensible heads post-Brexit.

While much of the 'news' may be speculation and bluster, with politicians on both sides vying for an advantage, the vote to leave could have a very real impact on jobs in the UK and we really need to get on with the next steps.

I suspect that the world's largest car manufacturers will plot their way successfully through these troubled waters and we see this is an opportunity for Borough to become an even more important member of the global automotive supply chain. 

Written by David Brereton at 14:00

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