It was 40-odd years in the making; a referendum to find the answer to the one-word puzzle known simply as ‘Europe’. And now we have much to think about.
‘Europe’ is an issue – no, the issue – that refused to go away, the issue that has troubled every British government since 1973 when the country joined the European Economic Community (EC), the forerunner of the European Union (EU). Now Britain has held its much-demanded referendum, and the nation’s uncomfortable relationship with Europe has brought down another Prime Minister.
Since David Cameron confirmed the date of the referendum – only the UK’s third ever – campaigning has been frantic, divisive, ugly and personal. At the heart of it was a debate based not on balance and compromise, but on emotion (and immigration).
Yet with all the votes counted following one of the highest ever voter turnouts, and a 51.9% decision to leave the EU, the country remains an EU member. A vote to leave was always going to be a leap into the unknown, and in short, what happens next is unknown. No country has ever left the EU, so there’s no precedent. Unofficial exit negotiations begin immediately, but at some point, formal talks will begin. Until the country has a new Prime Minister, the effectiveness of those early talks remains to be seen.
A vote to leave was always going to be a leap into the unknown, and in short, what happens next is unknown. No country has ever left the EU, so there’s no precedent
One fascinating aspect of the public debate was the prominence of the automotive industry. According to the UK’s Society of Motor Manufacturers and Traders (SMMT), the automotive industry accounts for 4% of the GDP of the world’s fifth largest economy, and supports 800,000 jobs in an industry that produced 1.59 million vehicles in 2015.
This is by no means a socio-political analysis of the electorate, but a quick look at the major UK vehicle manufacturing towns shows the limited influence on local voting of a locally-based global employer. Sunderland, with one of Europe’s largest car factories, and thus considerable interest in remaining within the EU, reported its count early. Verdict: leave (61.3%). Swindon, with a Honda factory, voted to leave. So too did Derby (Toyota), Solihull (Jaguar Land Rover), Ellesmere Port (Vauxhall), Luton (Vauxhall) and Leyland (Leyland DAF). Oxford, home to BMW’s Mini factory, bucked the trend with a 70.3% vote to remain.
Clearly, business interests play second fiddle to emotion, and on Europe, British emotions run high. The ‘Remain’ campaign was accused of running ‘project fear’. The outcome of the referendum has presented us with more genuine global economic fear: the FTSE is down over 7%; bank stocks have tumbled significantly; there’s been an astonishing dive in house builders’ stocks – some by 40%; the pound is down against the dollar on its worst single-day performance since 1985 – good for those exporting from the UK, but a challenge for those importing; ratings agency S&P has said the country’s much-lauded AAA credit rating is untenable; the PM has quit, and questions are being asked about the future of the leader of the opposition.
But what does this all mean for automotive industry stakeholders? For the UK automotive industry, uncertainty, certainly. As a body, the UK’s automotive industry was firmly in favour of remaining within the EU, with 77% of SMMT members supporting ‘remain’. Officially, or in a more shareholder-friendly personal capacity, top executives from foreign OEMs with local production or with significant interest in vehicle imports into the UK, said it would be better if the UK remained, even threatening legal action against the suggestion they might support the leave campaign.
80% of UK vehicle production is exported, with 57.5% heading to the EU, up over 11% on 2014. High on the to-do list for automotive industry lobbyists will be to push for tariff-free access to those markets, something for which the SMMT has already called
Leaving the EU means the end of guaranteed free trade access to the 27 other EU markets; 80% of UK vehicle production is exported, with 57.5% heading to the EU in 2015, up over 11% on 2014. High on the to-do list for automotive industry lobbyists will be to push for tariff-free access to those markets, something for which the SMMT has already called.
What it means for the European automotive industry also needs careful analysis. As well as being a major exporter of vehicles, the UK is a major importer, mostly from the EU. According to the UK’s Office for National Statistics (ONS), the EU has “consistently [accounted] for over 85% of [UK] total motor vehicle imports each year since 1998.” Almost a fifth of German car production alone comes to the UK, the public heard during the campaigning (although that figure is somewhat contentious). In prepared statements, BMW referred to a period of uncertainty, while Opel/Vauxhall called for a swift resolution of negotiations, and ongoing tariff-free trade.
It’s right to expect nervousness, caution and early jitters as the implications of the result are absorbed. Politically and economically, there is sure to be some initial instability – how unstable, and for how long, remains to be seen.
For now, nothing has changed – and everything has changed.
[divider] Martin Kahl is Editor, Automotive World
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