Referenda are rare – for good reason; single-issue democracy is laden with risk, oversimplifies complex issues, and throws up surprises. It is difficult to think of any (other) developed country that either is in – or would contemplate plunging itself into – a lengthy period of economic and political uncertainty at a time of national economic growth and stability.
That there was no preparation before the referendum for what would happen after the referendum is astonishing. But “Britain has had enough of experts,” said the Leave campaign. Those experts – including the Institute for Fiscal Studies, IMF, OECD, Bank of England and UK Treasury – warned of economic chaos in the event of a Brexit. True, Brexit hasn’t yet happened, but the days that followed the ‘leave’ vote and Britain’s decision to ‘take back control’ provided chilling insight into life on the outside.
Don’t worry about stock market volatility now – worry instead when future investments are delayed, or diverted elsewhere
A knee jerk reaction, it may have been, but it was significant. And it showed the UK’s susceptibility to volatility, while the rest of the world watched as the EU slid deeper into crisis.
The UK, and specifically for this column, its automotive industry, find themselves in limbo, having achieved hard-earned growth and stability. Vehicle manufacturers have issued carefully worded statements: for now, it’s business as usual, they say; we’ll work with government to secure the best outcome; we’re committed to existing investments; the UK and Europe remain important for our company.
But longer term? We don’t know.
There will be no rapid retreat: automotive investments are long-term decisions that cannot be quickly undone, factories are not simply moved, and production cannot easily be transferred to another country.
Good news! Brexit won’t impact existing automotive investments.
Good news – for the near-term. Don’t worry about stock market volatility now – worry instead when future investments are delayed, or diverted elsewhere.
That the UK government will fight for the automotive industry is clear – it was cited by Remain and by Leave, and at the 2016 SMMT International Summit, (current) UK Business Secretary Sajid Javid reaffirmed his commitment to the UK automotive industry.
Whether OEMs and suppliers will reaffirm their commitment is less clear. The UK needs to be declared safe, viable and competitive. That cannot happen until trade negotiations conclude, which cannot begin until Article 50 is triggered, which will not happen until at least September when the country has a new Prime Minister, and which may still not happen until after a likely general election, which may not be before October – or later.
The industry’s frustration is clear: it was in favour of remaining in the EU. Now, instead of the status quo, it faces the ad lib
Were the UK a small, insignificant automotive outpost, plans would already be under way to shift operations elsewhere.
But the UK is not a small, insignificant automotive outpost. Thanks to major investment, its strong manufacturing and supply chain network is a key part of its stakeholders’ European and global operations.
It is highly unusual for top automotive industry executives to struggle in a press conference with questions on strategy. At the SMMT event, JLR’s Group Strategy Director Adrian Hallmark, and Toyota Europe President and Chief Executive Dr Johan van Zyl – booked before the referendum – were left fielding questions about business in Britain after Brexit, armed only with a “We don’t know.”
The automotive industry’s frustration is clear: it was in favour of remaining in the EU. Now, instead of the status quo, it faces the ad lib.
[divider] Martin Kahl is Editor, Automotive World
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