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Brexit is a key factor behind crisis facing British car manufacturing

Posted by Warwick Business School at 19 February 2019, 23:40 CET |
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Christian Stadler, professor of strategic management at Warwick Business School, is the author of 'Enduring Success: What Can We Learn from the History of Outstanding Corporations?' He is also an expert on the car manufacturing industry.

The announcement that Honda will close its Swindon plant in 2021 is a huge blow to the British automotive industry. The headline figure is currently 3,500 job losses, but thousands more workers across the supply chain will lose well paid jobs that will be very hard to replace.

"Despite attempts to play down the significance of Brexit, it must have been a factor. Car manufacturers have repeatedly warned the Government about the threat Brexit poses to British industry.

"We have already seen job losses at Jaguar Land Rover and Nissan has scrapped plans to build the new X-Trail at its factory in Sunderland.

"Honda faces the same challenges as fellow Japanese car maker Nissan. The global economy is slowing down, which has hit key markets such as the US and China.

"The crackdown on diesel engines has also hit sales and will continue to do so as car manufacturers face fierce competition to bring a new generation of greener vehicles to market as quickly as possible.

"These difficult conditions will put pressure on companies to be more competitive with their prices. That is bad news for British car manufacturing if vehicles are subject to new tariff after Brexit, which is looking increasingly likely, as Japan's new deal with the EU could soon make it cheaper to build cars elsewhere.

"Most likely we will see Japanese companies consolidating more of the manufacturing process at home.

"Also, the supply chain for most British-made cars crosses the Channel several times as parts are shipped back and forth, so any delays at the border after Brexit could severely disrupt the industry's 'just in time' production method.

"Companies from Japan and other countries were attracted to Britain because it gave them easier entry to the lucrative European market, through an English speaking country. At the moment, there is no deal in place to continue that after Brexit.

"The UK will not be able to strike better trade deals than it currently has before it leaves the EU, so it starts to look like a less attractive place to build cars."

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