In 2016, one of the great fears was that Brexit would be a catastrophe for the UK car industry. It was ironic that the first result of the referendum was celebrated wildly in Sunderland, of all places, the home of Nissan UK. In 2016 and 2017, the plant's output reached a record 500,000 vehicles. Last year it was down to 282,000. This is still the largest car factory in Britain, representing 36% of the UK’s total production. It simply reflects the overall decline in national motor vehicle output, which fell from 1.7 million at the time of the referendum to just shy of 780,000 in 2024. That's almost one million fewer cars!! Now, I’m not going to put all the blame on Brexit, but it would be fatuous to claim that quitting the EU’s single market has had zero impact.
In October 2016, Mike Hawes, CEO of the Society of Motor Manufacturers and Traders (SMMT) said this:
"British-built cars are in demand across the world as demonstrated by the double digit growth in exports this year, resulting in more than a million cars produced for international markets. The vast majority of cars manufactured here in the UK are destined for abroad and future growth will depend on securing our international competitiveness and the barrier-free access to major global markets that has enabled UK Automotive to thrive."
Well, we didn't secure 'barrier-free access' to our main export market, as we know, so the industry hasn't 'thrived'. 2016 was, in fact, the high point.
Last year, exports of motor vehicles from the UK were 603,565 units, a fall of about 40% over nine years and a record low going back to 1999.
The SMMT web page tells us:
"Despite the fall in car production, the 2024 figure was still just above the recent low point that was recorded in 2022 but there is no denying that the trend is moving in the wrong direction. There was a fall of -8% in cars for the home market and a reduction of -15% in exports; the latter figure was a new record low of just over 603,000 vehicles (our time series goes back to 1999). The export ratio of 77% was the lowest since 2015; the European Union accounted for 54% of UK car exports (by units), with the USA next on the list at 17%, followed by China which took 7%."
Not only is total production down by 40% since 2016, but the proportion going for export is 77%, the lowest since 2015. The EU took 54% of the total in 2024, around 325,000 vehicles.
So, when the BBC reported on Thursday that UK car production has now hit the lowest level since 1953, it was hardly a surprise to most of us, although some in Sunderland who were cheering in the early hours of 24 June 2016 may have found the news a bit bewildering.
I noted that the BBC report carried some comments from Mr Hawes, who is still the CEO of the SMMT. I quote:
Mr Hawes said that the government's target of 1.3 million vehicles per year by 2035 was "quite some ambition from where we are", adding that "we clearly require at least one, if not two, new entrants to come into UK production" to hit the target.
Two things. First, the UK government doesn't expect car production to get back to 23% below 2016 levels for another ten years! Talk about gloomy. As if that wasn't bad enough, he also suggests that 'two new entrants' into the UK market would be needed to achieve it. I know he was opposed to Brexit and spoke out against it, but where does he think two new entrants are going to come from? Who in 2025 could make an economic case for building a new car-making plant in Britain?
Modern volume car production is about numbers, large factories, and economies of scale. No European manufacturer will build a plant here just to serve the UK market. And no global maker will do it to serve the European market in totality. It simply wouldn’t make sense.
In the former case, it would be dividing production between two locations (crazy) and in the latter case, it would mean exporting the vast majority of production across an EU border with possible tariffs depending on local content and all the associated paperwork. Nissan has been forced to do it because they were already established when Brexit happened. It is not through choice.
They certainly wouldn’t build a plant in Sunderland or anywhere else in the UK today, after we have left the single market. It would be built inside the single market. Nothing else would make economic or logistical sense.
Margaret Thatcher persuaded Nissan to invest here in 1984 partly if not wholly because of the single market. I assume there was some government money and of course, the English language, but the SM certainly played a significant role in the decision. Since then, 10 million cars have rolled off the Nissan production lines.
Amid global uncertainty, Nissan in Japan posted a £3.8 billion loss last year and announced seven plant closures, Sunderland isn't on that list, but 250 workers are being made redundant to 'improve efficiency and resilience.' The North East is fortunate that Nissan invested so much in the area that it essentially made it all but impossible to shift production into Europe. But the future looks far less certain today than it did in 2015.
Brexit has not benefited Sunderland, and it won’t benefit the UK car industry as a whole.
Despite these major problems, Reform UK, effectively Nigel Farage's personal political movement, has a healthy lead in the polls in the North East. Reform is on 30%, three points ahead of Labour. It appears a third of the electorate on Tyneside are unable to join the dots connecting Farage with the disaster of Brexit, the current state of the great wealth generator in their own backyard, the overall decline in the UK car industry, and the subsequent loss of tax revenue eroding public services.
If Nissan ever decide to drastically slim down operations in Sunderland or shut up shop entirely, I have no doubt that the workers who cheerfully voted for Brexit in 2016 or intend to support Reform at the next election, will think they have been betrayed by others.
What is it about the UK that makes us not necessarily bite the hands that feed us, but simply make the lives of our benefactors more and more difficult?
