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The U.K.’s $100 billion autos industry can’t survive without Europe

The U.K.'s $100 billion autos industry can't survive without Europe

Having failed to prevent a vote for Brexit, the British auto industry is now turning to the U.K. government for help limiting the economic fallout.

Industry leaders say that Britain must fight to preserve their access to Europe’s single market. If ties to the trading bloc are completely severed, they warn, British factories won’t be able to compete with global rivals or match recent growth rates.

With 814,000 jobs across the U.K. depending on automakers, the industry will have a strong voice in negotiations over Britain’s future relationship with the European Union.

But securing access to the single market without making other concessions will be a tough job for the government.

EU leaders have already said the U.K. will not be able to access the single market without accepting free movement of people. But the campaign to leave the EU was based largely on the promise that the free movement would stop.

Related: Brexit winners? Johnnie Walker and Lucky Strike

The stakes are high for foreign automakers that are heavily invested in the U.K.

Nissan (NSANF), which is part owned by the French government, operates a massive factory in the northeast city of Sunderland. Germany’s BMW, which owns Rolls-Royce and Mini, also builds cars in the country. So does Bentley owner Volkswagen (VLKAF).

Nissan has poured roughly £3.85 billion ($5.2 billion) into the U.K., while its Japanese rivalsToyota (TM) and Honda (HMC) have each invested around £2.2 billion ($3 billion).

Analysts are now worried that some of the automakers will be forced to ditch the U.K.

Koji Endo, managing director of Advanced Research Japan, said that a 10% tariff on exports to Europe, coupled with a tariff on imported parts, would mean “there is no way that Toyota and Honda can sustain their production site in U.K.”

Johan van Zyl, the chief executive of Toyota’s European operations, said the company supports its U.K. operations, but warned that future decisions will be dependent on the terms of Brexit.

Related: 7 cities that could steal business from London

The car manufacturing sector is vitally important to the U.K. It contributed £18.9 billion ($25.5 billion) to the country’s economy last year, or roughly 5% of total gross domestic product.

In total, it produced nearly 1.6 million vehicles in 2015. The majority were exported: 44% went to the EU and 33% were shipped elsewhere in the world, while only 23% were sold in the U.K.

Related: Vodafone says it might leave the U.K. after Brexit

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, said it’s not just about tariffs. The British car industry also needs workers from the EU.

“Skill shortages [in the industry] mean there must be no barriers to employing skilled workers from outside of the U.K.,” he said at the International Automotive Summit on Wednesday. He estimated that 5,000 job vacancies across the U.K. are currently unfilled.


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