Thousands of supply chain jobs at risk if carmakers switch UK production

INVESTMENT decisions by major carmakers on the production of up to 15 new models in the UK are ‘hanging by a thread’ unless the government secures tariff free access to the European Single Market, a new report has said.

According to ‘Brexit on our terms’, talk by government ministers of a ‘Hard Brexit’ and the uncertainty surrounding the UK’s trading relationship with Europe could deter carmakers from investing in their UK plants and see production move to Europe on models due to come in to production after 2020.
 
The report by Unite, which represents over 500,000 manufacturing workers, highlights the key investment decisions which are due over the next two years on new car models ranging from the Honda Civic to the new Range Rover Sport.
 
It is not just the unions that are concerned.

The same issues were raised during a meeting organised the Institute for Turnaround in Birmingham where senior figures from the automotive industry, together with business advisors and academics said if global carmakers were concerned about the health of the post-Brexit UK economy then they may switch production to other countries.

John Leech, head of manufacturing for KPMG, told the meeting that the first test would come in 2020 when Nissan decided where to locate production of the next Qashqai.

If the firm got the jitters then it could throw the economy of the North East – which is so reliant on Nissan – into turmoil.

He said the same scenario could arise the following year (2021) when General Motors looked at where to base production of the next Astra, which is currently produced at Vauxhall’s Ellsmere Port plant.

Fortunately, one UK-based manufacturer is not planning on going anywhere – Jaguar Land Rover.

Mike Mychajluk, Purchasing Manager – Supply Chain & External Communications, JLR, told the meeting the company remained committed to the UK.

However, the firm’s UK production capability is nearing full capacity so may be forced to look abroad for options anyway.

Unite said it was concerned that tariffs of 10% on exports and 4% on imports would damage a resurgent car industry and impact manufacturing jobs.
 
According to the report, hundreds of thousands of jobs in the UK’s manufacturing and automotive industry would be at risk if OEMs switched their allegiances to European suppliers and there are concerns that UK-based suppliers might be slow to react to change, with some firms having to put growth plans on hold until the OEMs decided on their production strategies.

David Bailey, professor of industry at Aston University explains in the report: “Automotive and engine assemblers like General Motors, BMW and Ford all import sizable inflows of components to the UK from other European Union operations.
 
“Anything which puts these trading relationships at risk, whether currency risk or higher transaction costs from having to deal with EU and UK regulations separately, reduce the likelihood of further investment.”
 
Prof Bailey also chaired a special debate at the IfT event where m,any of the same points were aired.

Elsewhere the report lays out Unite’s blueprint to protect UK manufacturing jobs, investment and employment rights. In addition to tariff-free access to the Single Market, which is worth a massive £229bn to British manufacturing.

Commenting, Unite general secretary Len McCluskey said: “The UK car industry is the most productive in the EU. Yet the uncertainty of Brexit could seriously compromise the continued resurgence of this world class industry.
 
“Dozens of decisions, including new models to UK plants, must be made in the coming months. These crucial investment decisions will determine the future of the UK’s car industry.

“Ministers’ mixed signals on tariff free access to the single market, which consumes 80% of the cars we produce, could leave our world class industry hanging by a thread.”
 
He added that the Government had to outline a clear negotiating position which was open to democratic scrutiny by opposition parties and trade unions before triggering Article 50.