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Academic report reveals most automotive industries have ‘no mitigation plans’ for Brexit

A new report analysing Brexit’s potential impact on the UK automotive sector will today reveals that most British companies have no mitigation plans in place and that the uncertainty is stifling investment into the industry.

The research, conducted by experts at Birmingham City University’s Centre for Brexit Studies, took in discussions with senior managers in the sector and also found that business leaders believe there is very little they can currently do to prepare for Brexit.

The report reveals that all current trade scenarios would create barriers for the sector which could lead to increased costs and make the UK a less attractive place for automotive manufacturing.

Other findings drawn from the paper show that organisation’s need greater understanding of their supply chain, as Brexit will impact all tiers of the industry, and that the ‘just-in-time’ ‘just-in sequence’ nature of the industry made increased cost and longer processes near inevitable.

The report found that while some organisations have dedicated teams in place to manage Brexit specific issues, there was little connection between these groups and the wider organisation, and that they lacked a strategic output to direct the focus of their companies.

Professor Alex de Ruyter, Director at Birmingham City University’s Centre for Brexit Studies, said: “Automotive manufacturing has long been a key part of the UK’s economic output and that is particularly prevalent in areas like the West Midlands where the car industry lies at the heart of the regional economy.

“This report looks at the impact Brexit is likely to have on the sector and precisely how business leaders feel. It is telling to see that the uncertainty means most feel unable to prepare for the impact and that the inward investment needed for growth is not coming.

“The report also shares some key considerations and recommendations for businesses, which could be vital in helping them to understand how different trade scenarios may change how their organisation’s function, as well as their supply chain.”

The report makes a number of recommendations which automotive companies should take in order to effectively manage the risks associated with Brexit. The recommendations include:

  • Plan for skills development and future workforce needs to negate restrictions on the supply of immigrants;
  • Improve understanding of supply chains ahead of new documentation or requirements which may be introduced;
  • Implement robust governance strategies to cope with new regulations or checks;
  • Digitize contracts, supply chain details.

The report also assesses the potential impact on the automotive sector in various possible Brexit scenarios such as reversion to the ‘backstop’ arrangement, the Canadian model, the Turkish arrangement – which would see keep the UK in a customs union but outside of the European Economic Area – or World Trade Organisation status.

Each scenario is outlined alongside the potential short, medium and long term impacts on the automotive industry.