Published Tuesday 19th March 2019

The start of the year was unsuccessful for the once prosperous British car industry, several news outlets report. According to Reuters, car production plummeted to 18.2% in January, making it the eighth consecutive month of declines. The reasons behind such drops are accredited to model changes and a weaker national and international demand.

The Society of Motor Manufacturers and Traders (SMMT) Chief Executive, Mike Hawes said: “The industry faces myriad challenges, from falling demand in key markets to escalating global trade tensions and the need to stay at the forefront of future technology.”

Brexit has impacted the manufacturing of cars and parts, placing competitive pressure on time and resources, according to Hawes. The SMMT recorded that the UK car manufacturers produced 1.52m vehicles last year, 9.1% fewer than in 2017.

Continuing uncertainty around Brexit has significantly reduced industry investment. Announced investments are at their lowest rate since 2012 when comparable data was first collated. Commenting on these findings, Hawes said: “Industry is waiting to see what happens. Business is sitting on its hands in terms of investment.”

Carmakers have modelled their business on “just-in-time” delivery. With ambiguity around how changes to customs and border controls will affect the future trading relationships of the UK, carmakers realise their delicately-balanced supply chains could be a significant burden on business productivity and could result in rising costs.

“Brexit uncertainty has already done enormous damage to output, investment and jobs,” Hawes stated.

Recent survey findings from KPMG manufacturing show that two-thirds (67%) of car parts manufacturers are considering migrating to more stable markets. This figure is significantly higher than the general average of 54% across the rest of the automotive industry. These companies are also the most likely to offshore their work within the next three years.

The stress on businesses sees many try to find ways to prepare in whatever means possible. For example, Honda announced the closure of its British factory that builds around 10% of the nation’s cars. Jaguar Land Rover reduced its workforce by 10%, predominantly implementing redundancies in the UK, after already cutting 1,500 positions worldwide in January last year. Furthermore, Ford also announced more than 1,000 UK staff cuts, mostly in the engine manufacturing plants, to pull up profits across Europe.

Steven Cooper of the KPMG stated: “Recent headlines have shown just how much the automotive sector, in particular, is feeling the pinch…”

However, it’s not just the UK automotive industry that is struggling; the global market is facing several challenges. China, for example, saw sales fall in 2018 for the first time since the 1990s. Moving into new markets or relocating work may not necessarily be the best move for your company, as the Telegraph reports that ‘relocating work is just one of the examples of the strain in the automotive sector’.

Preparation can come in the form of streamlining your costs and processes, assisted with the help of experts in procurement companies such as Expense Reduction Analysts. With years of experience across a host of purchasing sectors, we can support your company in navigating this challenging time to be a UK-based company. Get in touch with us today to find the right specialist for you and your organisational needs.