The UK automotive industry has enjoyed a record year of production but will need government support to boost domestic supply chains to maintain this post Brexit, according to a think tank.
In a report Civitas said in 2016 1.7m cars were built in the UK, with 1.3m of these exported, a record figure. In March 2017 the industry saw 562,337 new cars registered in the UK, another record.
Yet as soon as the UK leaves the EU issues such as rules of origin, customs delays, tariffs and regulatory divergence could impact the automotive supply chain, potentially harming production.
“New customs arrangements could disrupt cross border supply chains or raise their cost, and rules of origin could act as a barrier which, even with a trade agreement, could see tariffs put on UK manufactured goods,” the report said.
Companies including Nissan, BMW and Jaguar Land Rover have raised concerns over the potential impact of Brexit on the UK automotive industry.
The study urges the government to invest across the UK’s manufacturing industries through the expansion of the Advanced Manufacturing Supply Chain Initiative or new initiatives.
Civitas said support the automotive industry has received in recent years has encouraged strong growth in domestic and export markets.
“This has been driven by investment that has resulted in the growth of domestic supply chains, supporting productive jobs and a creating a more stable and sustainable environment for a vital UK industry,” the report said.
However, exports of vehicles and related products were worth £32bn while imports accounted for £50bn in 2015.
“This £18bn deficit in trade is partly due to the UK automotive industry’s reliance on imports for manufacturing cars, with over half the content of British built cars being imported into the UK,” said the report.
The report said since 2011 UK content of British built cars had increased from 36% to around 41%, partly due to government support aimed directly at boosting UK supply chains.
But it added: “There is still unmet potential for domestic suppliers to expand their contribution to the supply chain and reduce the industry’s reliance on imported components.”
The Society of Motor Manufacturers & Traders calculates that as much as 80% of components could be made in the UK.
Comparisons with major car producers like Germany suggest the UK could realistically aim to source around 60% of auto components domestically, said Civitas.
Any successful attempt to boost the UK domestic automotive supply chain would particularly benefit the North East, the West Midlands and the South East, the three regions of the UK that export the most automotive goods.
New investment should aim to replicate the success of the Automotive Council, in areas such as chemicals, pharmaceuticals, aerospace, defence and power generation, by encouraging targeted and productive investment.
However, the study also quoted Jaguar Land Rover chief executive Ralf Speth, who expressed doubts the volume of car production in the UK was big enough to attract a large tier one supplier base.
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