How Will Brexit Affect the Automobile Industry?
Having been pasted across UK headlines for the past two years, Brexit has taken centre stage in the current political debate and will likely continue to do so in the run up to March 2019 (the date the UK leaves the EU).
Whilst there has been much speculation as to how Brexit will affect the wider UK economy, it is likely that some industries will feel the effects more than others. Here are some considerations about how Brexit may affect the automobile industry.
More Expensive Cars
Currently, the UK enjoys tariff free trade/free movement of goods with other EU member states, making obtaining the parts for car manufacturing fairly easy and cost effective. When the UK leaves the EU, however, this will likely change, as the parts needed to manufacture cars will be more expensive with tariffs added on.
This will almost certainly make new cars more expensive to buy, and mean that less people can afford them. It could also mean that car manufacturers will have to shoulder a fair amount of the costs arising from Brexit, which may mean trouble for their employees, too.
Moving Headquarters
It has also been well documented that some companies are moving their headquarters out of the UK as a result of Brexit fears. Jaguar Land Rover, one of the largest UK car manufacturers, has warned that Brexit could cost them £1.2bn of profit per year, and that it may well move its production from Birmingham to Slovakia.
This could lead to a significant loss of UK jobs within the company, and there are many other companies facing similar considerations. As such, it is fair to say that the automobile industry as a whole faces a tumultuous period as Brexit negotiations continue.
Used Cars
Perhaps one winner within the automobile industry will be the used car sector. Given that new cars will likely be increasing in price, many individuals and businesses may look to the likes of AA and other used car dealers, who offer more affordable, second hand cars.
Since used cars have already been manufactured, their production costs cannot increase, and so they are likely to remain affordable, at least in the short term. If demand for second hand cars does increase, though, it may be enough to push their prices up.
If one thing is certain with Brexit, it is that nothing is certain. Much now depends on how negotiations play out, and what the deal between the UK and EU (if one is reached) may look like. It may be that the government manages to protect the automobile industry, but car manufacturers undoubtedly face a nervous wait in the coming months.
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