Carmakers slash factory investment to spend on Brexit preparations

Only £90 million of new investment was committed to automotive plants in Britain in the first half of the year as the industry diverted spending of at least £330 million to Brexit preparations.

Figures from the car industry show that commitments of inward investment in factories all but dried up in the six months to the end of June, compared with an average investment of £2.7 billion a year over the past seven years.

There were only a handful of spending commitments on new projects, adding up in aggregate to £90 million, according to the Society of Motor Manufacturers and Traders.

During the period Honda announced the closure of its site in Swindon and Ford of its engine plant in Bridgend. In contrast, the SMMT said that incomplete data from its members on preparation for a March Brexit, which has been postponed until October, identified spending on stockpiling, extra warehousing, insurance and shutdowns of at least £330 million.

However, since June 30 the industry has received a boost, with Jaguar Land Rover announcing plans to invest £1 billion in turning its Castle Bromwich factory in the West Midlands into an electric vehicle manufacturing plant.

The society’s figures also show that factory gate output has fallen by 20 per cent this year, including a 15.2 per cent year-on-year drop in June, and that three in ten vehicles coming off assembly lines have diesel engines, despite the backlash against diesel cars.

Mike Hawes, chief executive of the SMMT, said: “These figures are the result of global instability compounded by fear of no-deal. This fear is causing investment to stall, as hundreds of millions of pounds are diverted to Brexit cliff-edge mitigation, money that would be better spent tackling technological and environmental challenges.”

Factory shutdowns normally scheduled for the summer were brought forward to April by some carmakers in preparation for a Brexit transition. That accounts for some of the 20 per cent slump in production from 834,000 cars to 666,000 cars in the first six months. The 15 per cent fall in output in June represents the underlying decline in production, according to Mr Hawes.

CBI says that UK is not ready for a no-deal Brexit in October

The Confederation of British Industry (CBI) has warned the government that neither the UK nor the EU is ready for a no-deal Brexit on 31 October.

“While the UK’s preparations to date are welcome, the unprecedented nature of Brexit means some aspects cannot be mitigated,” said the CBI.

It has published practical steps it says the UK, EU and firms can take.

A government spokesman said the UK has increased the pace of planning for no-deal.

The CBI had previously said leaving the EU with a deal was essential to protect the economy and jobs.

New prime minister Boris Johnson has made Michael Gove responsible for planning a no-deal Brexit.

Mr Gove has said the UK government is currently “working on the assumption” of a no-deal Brexit.

He said his team still aimed to come to an agreement with Brussels but, writing in the Sunday Times, he added: “No deal is now a very real prospect.”

‘Hampered’

The CBI’s report What Comes Next? The Business Analysis Of No Deal Preparations advises what measures businesses can take to reduce the worst effects.

The advice is based on a study of existing plans laid out by the UK government, European Commission, member states and firms.

“And although businesses have already spent billions on contingency planning for no deal, they remain hampered by unclear advice, timelines, cost and complexity,” the CBI says.

“Larger companies, particularly those in regulated areas such as financial services, have well-thought-through contingency plans in place, though smaller firms are less well prepared.”

The report is based on thousands of interviews with firms of all sizes and sectors, including 50 trade associations, covering all areas of the UK economy.

The CBI says that in a no-deal Brexit some 24 of 27 areas of the UK economy would experience disruption.

The UK had been due to leave the EU on 29 March, but former Prime Minister Theresa May asked for an extension and the date was pushed back to 31 October.

A UK Government spokesperson said: “This is a constructive contribution from the CBI, acknowledging the importance of all businesses preparing for no deal on the 31 October.

“While we have done more to prepare than this report implies, since the new Prime Minister was appointed the Government has stepped up the pace of planning for no deal. The Chancellor has confirmed all necessary funding will be made available for vital no deal preparations. This includes funding for a major nationwide communications campaign to ensure that people and businesses are ready.

“Crucially, while there is more to do, the CBI observes that the UK is ahead of the EU in planning for no deal.”