Ongoing Fears –Brexit and the Car Industry
The UK decision to leave the EU has already shown signs of impacting the car industry negatively, even though these are early days. Indications are that the great uncertainty in almost every sector of the economy has caused negative sentiment as far as investor confidence is concerned – therefore it follows that the vehicle industry has shown signs of slowing down, seeing the first spate of retrenchments. Fears of recessionary times are already prompting calls for the Bank of England to cut the cost of borrowing and come up with incentives to boost lending.
The used car markets stability has largely remained for the moment and this is reflected in the valuation of individual used cars (for example, CarBuyingGroup valuations are a good indication).
SMMT (Society of Motor Manufacturers and Traders) recently released figures showing that the first six months of 2016 represent a 13% improvement over figures for the same period in 2015. Of these cars almost 80% were exported to various overseas markets – the majority of which are EU countries. However, with Brexit, Mike Hawes (SMMT’s chief executive) is quoted as saying, ‘’…the (first half of 2016) increase in production output is the result of investment decisions made over a number of years, well before the referendum was even a prospect’’ and that , ‘’These decisions were based on many factors but primarily on tariff-free access to the single market….’’ He says that it is extremely important that Theresa May’s government, ‘’…will have to do a deal that safeguards a number of sectors…tariff free and without the bother of doing the administration.’’
Even though the industry has experienced its best first half in terms of production figures in 16 years, fears are growing that it is under threat following Brexit – and with no firm indication of any negotiations in place to soften the blow upon severing the ties with the EU, uncertainty prevails. Most recent surveys – not only by the SMMT – by, among others the British Retail Consortium and RICS (the Royal Institution of Chartered Surveyors) indicate that jobs are being shed and that the demand for construction has slowed down. That obviously means that prospects for growth have weakened.
More Negative Sentiment
The July CMCI (Chemical Markets Confidence Index) shows that petrochemical markets have all become quite negative in their outlook for future growth as predictions point to a downturn in the car industry. Investors are more likely to hold back until at least such a time that the EU and the UK have shown the way forward in terms of financial arrangements. The car market will not escape this uncertainty – the market will slow down, both in terms of manufacture and sales.
The Immediate Future
For now there is not much the industry can do except ride out this uncertain period until government and the EU have negotiated agreements to take things forward.