U.K. Auto Industry Said Not Ready for Brexit

An academic study has revealed the U.K. automotive industry is ill-prepared to cope with a “no-deal” Brexit.

Business experts at the Birmingham City University’s Centre for Brexit Studies say they discovered most companies have no mitigation plans in place and the uncertainty is stifling investment into the industry.

Senior industry managers told researchers they believe there is little they can do at the moment to prepare for the U.K.’s exit from the European Union next year.

Other than remaining in the EU single market, all current trade scenarios would create barriers for the auto industry, leading to increased costs and making the U.K. a less attractive place for automotive manufacturing, the researchers conclude.

The study also found organizations need to better understand their supply chain, because Brexit will impact all tiers of the industry and the “just-in-time,” “just-in sequence” nature of the industry will make increased costs and longer processes almost inevitable.

While some companies have formed dedicated teams to manage Brexit-specific issues, there was little connection between these groups and the wider organization and they lacked a strategic output to direct the focus of their companies, the study shows.

“Automotive manufacturing has long been a key part of the U.K.’s economic output, and that is particularly prevalent in areas like the West Midlands where the car industry lies at the heart of the regional economy,” says Professor Alex de Ruyter, director at the center. “This report looks at the impact Brexit is likely to have on the sector and precisely how business leaders feel.

“It is telling to see that the uncertainty means most feel unable to prepare for the impact and that the inward investment needed for growth is not coming,” he says. “The report also shares some key considerations and recommendations for businesses, which could be vital in helping them to understand how different trade scenarios may change how their organizations function, as well as their supply chain.”

Recommendations for auto companies in the report include:

The report also assesses the potential impact on the automotive sector in various Brexit scenarios such as reversion to the so-called backstop arrangement, the Canadian model, the Turkish arrangement – which would keep the U.K. in a customs union but outside of the European Economic Area – or World Trade Organization status.