U.K. Auto Industry Worries Brexit Will Cause Economic Damage

Mar 11, 2019
Originally published on March 11, 2019 7:12 am
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Britain's parliament has another vote planned for tomorrow on how the U.K. will leave the European Union. One fear about leaving Europe is that it will harm the British economy, but you don't have to wait for Brexit to see that harm. NPR's Frank Langfitt reports on the British auto industry.

FRANK LANGFITT, BYLINE: So this is a giant warehouse that's owned by a logistics company called Espack. It mostly handles parts for a Ford engine plant just up the road. And right now, it's a hive of activity. I'm watching forklifts going back and forth, people packing up pallets. But, you know, it's not as busy as it was even just six months ago.

BOB WILLIAMS: I'm Bob Williams. I've been working for Espack for the last 10 years.

LANGFITT: Williams says shipments to the Ford plant, on which the warehouse depends, have been falling in recent months. That plant makes engines for Jaguar Land Rover, but the contract wraps up at the end of the year. Layoffs are expected. And Ford has warned that if the U.K. leaves the EU with no deal, it would be catastrophic.

WILLIAMS: The Ford plant in Bridgend is getting smaller. That's bound to have an impact on anything that's automotive in this area.

JORGE ESCALADA: U.K.'s auto industry is struggling with big problems. Demand for diesel cars in Europe has plunged since the Volkswagen emissions scandal. Sales in China have fallen seven straight months. Jorge Escalada, who owns Espack, says uncertainty around Brexit only makes things worse.

ESCALADA: Obviously there is a lot of fear about Brexit and a lot of fear about, you know, different things happening in the automotive industry.

LANGFITT: British automotive supply chains are deeply integrated with Europe. But after Brexit, parts traveling back and forth could face tariffs. There are less than three weeks to go before the U.K. is scheduled to leave the EU, yet no one has any idea what Brexit will look like. Escalada has been reaching out to other businesses, such as e-commerce, to diversify.

ESCALADA: We need constantly to be adapting to situations. And we need to constantly be reinventing in ourself. We enjoyed, you know, a period 15 years of growth. And if we have now to start all over again, we will do it.

LANGFITT: The Welsh auto industry, which employs 18,000 people, faces problems beyond Ford. Schaeffler, the German auto parts firm, is closing a plant here and another in the English port city of Plymouth, citing Brexit as a factor. Only a small percentage of the goods Schaeffler produces in the U.K. actually stay here, while the vast majority are exported to Europe. Peter Wells is a business professor and auto specialist at Cardiff University.

PETER WELLS: Whenever a company makes investment decisions, it looks across its whole portfolio of locations and capabilities and decides where best to put those investments. Schaeffler has a - plenty of choice and, in that context, then it becomes much more difficult for the U.K. plants to win further work.

LANGFITT: Foreign investment in the auto sector here was down by nearly half last year. In fact, 70 percent of automotive businesses in the U.K. are considering moving some production overseas in the next several years, according to a survey by Brabners, a British law firm. The most likely destination? The EU. David Bailey says the next few weeks are crucial for the U.K. auto industry. Bailey's a professor at the Aston Business School in Birmingham.

DAVID BAILEY: If there's no deal, there will be a huge hit for the U.K. car industry. A big chunk of it will be wiped out. And potentially, we'd see levels of output not seen since, well, maybe even going back to the 1970s.

LANGFITT: The other choices before Parliament this week, delaying Brexit or backing Prime Minister May's deal, are better, but neither provides what the industry desperately needs - some clarity on what Brexit will actually look like.

Frank Langfitt, NPR News, Bridgend, Wales.

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