Tim Lawrence, head of manufacturing at PA Consulting, discusses the impact of Brexit on the UK automotive and manufacturing sectors. The article presents the views of five industry experts on how UK manufacturers can prepare for Brexit and what scenarios they are likely to face.
Tim says: "The first reality businesses must face is that, whatever form it takes, Brexit will happen – and it will severely impact the UK’s automotive and manufacturing sectors. Automotive, in particular, is a complex supply chain, which often crosses borders many times, and every time it does, tariffs will apply. Few companies will want to take that hit for long. The price of cars will rise, which will mean fewer cars sold."
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He adds: "Advocates of Brexit talk of offsetting any loss of EU business with free trade opportunities around the world but UK car manufacturers are heavily reliant on the European market, so I can’t see much of an upside. UK-based businesses need to reposition their supply chains, looking at improving performance in UK factories or relocating some or all of their supply chain. I can see UK-based manufacturers such as Nissan, Vauxhall and Toyota, which are reliant on the export market, going into Europe."
Tim goes on to explain: "Firms need to plan for border changes. Ending free movement adds time, both ways, in this complex chain. If that hold-up is a day or two, it might be workable, but if it’s longer it will have enormous consequences. Then there’s labour. There’s a labour shortage in manufacturing – different skills are needed and this is a problem for SMEs that can’t pay a premium to get people in.
"The motor industry is already undergoing upheaval as it moves towards electric vehicles, and Brexit brings extra pressure. UK businesses must prepare by running different scenarios of what all this will mean over the next three to five years and thinking creatively about overcoming challenges. They need to hope for the best – but prepare for the worst," he concludes.