U.K. June Vehicle Output Hits 18-Year High, But Industry Wary of EU Exit

U.K. automakers notched their 11th consecutive month of production growth in June, as the build grew 10.4% to 158,641 units, highest level for the month since 1998.

But the Society of Motor Manufacturers and Traders says the Brexit vote to leave the European Union has the industry uncertain about its relationship with its biggest market.

A survey of SMMT members finds 57.1% of respondents believe leaving the EU will have a negative impact on their business, while just 8.3% foresee it being positive and 27.7% are uncertain about the impact.

The June performance closed the industry’s best first half in 16 years, with 897,157 vehicles rolling off production lines. That’s up 13% on the same period last year, as billions of pounds in new-model investment paid off.

Exports drove volumes, with year-to-date demand up 14.9% to 695,139 units, while production for the domestic market grew 7.1% to 202,018.

Some 77.8% of vehicles built in the U.K. are destined for more than 100 overseas markets, but most are shipped to other countries within the EU.

The SMMT says the sector is part of a complex, highly integrated European and global supply chain and depends on significant cross-border trade in components. While local content of U.K.-built cars is growing, 59% of vehicle components are imported, predominantly from mainland Europe.

Some 66.4% of those surveyed, representing component suppliers, vehicle manufacturers and importers, are most concerned about the potential negative impact of tariffs, customs charges or other barriers between the U.K. and the EU single market.

The same percentage is wary of losing access to EU trade deals, with 66.1% worried they will be bound by regulations in their prime export market over which they have no say. A total of 63.6% fear the loss of access to the EU-wide skills market.

The U.K. automotive manufacturing workforce of 169,000 people includes many skilled EU nationals recruited to fill vacancies the local labor force could not meet.

SMMT CEO Mike Hawes says the lack of certainty regarding the future status of these workers in the U.K. was cited as a concern by 59.7% of those surveyed, along with the potential for a drop in sales (52.7%) and investment (46.1%), with larger companies showing the most concern about the latter.

“U.K. automotive is globally competitive with overseas demand for British-made products increasing, not least in Europe, which is by far our largest market,” Hawes says in a statement.

“The latest increase in production output, however, is the result of investment decisions made over a number of years, well before the referendum was even a prospect. These decisions were based on many factors but, primarily, on tariff-free access to the single market, economic stability and record levels of productivity from a highly skilled workforce.

“To ensure the sector’s continued growth, and with it the thousands of jobs it supports, these must be priorities in future negotiations.”

Meantime, U.K. commercial-vehicle manufacturing fell 21.7% to 7,686 units in June, with the SMMT saying the market had rebalanced after a particularly strong performance a year earlier.

“Disruption to fleet renewal patterns triggered by type-approval changes last year meant manufacturing output spiked by more than half in June 2015,” Hawes says.

“As a result, this year’s June performance was always going to be negative, so the drop is no surprise. The market remains at a high level, buoyed by continuing resurgence in key EU markets, with more than half of U.K. CV output sold overseas.”

Engine production rose 6.3% in June to 242,011 units for a first-half total up 7.5% at 1.36 million.