What does Brexit mean for UK Automotive and Industrial Policy?

Abstract

The UK’s automotive industry has been one of the ‘star performers’ of the UK economy in recent years – unlike many other manufacturing sectors. Output has increased by 60% since 2010 and there has been over £8bn worth of investment in the industry in the last four years (SMMT, 2016). The industry supports some 800,000 jobs in total in the UK. This upturn has benefitted regions, such as the West Midlands which have struggled with deindustrialisation, plant closures and the legacy of the global financial crisis (Bailey and Berkeley, 2014; Bailey et al 2015; Bailey and de Ruyter, 2015). There are many reasons for this recent automotive industry success – the skills base, cooperative working between unions and management, links with universities, a supportive industrial policy and so on. But it should also be noted that a key factor for the success has also been access to the EU Single Market. Indeed, the industry is seen as having benefitted from EU membership, and not only in accessing the single market, but also through the EU cutting trade deals with the rest of the world, in the UK influencing EU regulations, and in accessing skilled workers and European research funding and networks (KPMG, 2014). So what might Britain’s departure for the EU mean for the UK automotive sector (hereafter ‘UK auto’), and in turn for industrial policy in the UK? This chapter considers short run impacts, before turning to the effect of uncertainty on foreign direct investment (FDI) inflows, firm specific impacts, the nature of a possible trading relationship, and the need for a renewed industrial policy to support UK auto and manufacturing.