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Honda closure triggers fears of crisis in UK car industry

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Honda closure triggers fears of crisis in UK car industry

Automobiles

Honda closure triggers fears of crisis in UK car industry

Carmakers warn of dangers of ‘hard’ Brexit as clock ticks down to EU exit deadline

Honda is expected to confirm the plant's closure by 2022, which could affect 3,500 jobs

As the clock ticks down on Britain’s departure from the EU with no deal in sight, the country’s car industry is braced for its biggest blow in more than a decade with the closure of a big manufacturing plant.

The decision by Honda to shut its Swindon factory by 2022 throws into doubt 3,500 direct jobs, at a site responsible for about one in every 10 cars made in the UK last year.

Thousands more jobs are at risk in the supply chain and associated businesses.

It will be the first closure of a car factory since Peugeot pulled down the shutters on its facility near Coventry in 2007 and the collapse of Rover two years before.


It is the latest bad news in a sector considered a beacon of British manufacturing, which was until recently enjoying a renaissance.

Industry groups are stepping up warnings to ministers over the failure to agree a deal with the EU. Dame Judith Hackitt, chair of the EEF manufacturers’ organisation, is set to warn on Tuesday that a no-deal scenario “is not a prospect our sector can counter”.

“The clock has almost run down and it is now essential that the pantomime in parliament ends,” she will say at an event attended by Philip Hammond, the UK chancellor, and Greg Clark, business secretary.

For the car industry, Brexit is another burden as falling demand for diesel engines in the wake of the VW emissions scandal and flagging consumer confidence have weighed on sales and triggered job cuts.

At the same time, carmakers have been vocal with warnings about the disruptive effects of a “hard” divorce from the bloc, because their extensive supply chains rely on frictionless trade to deliver parts and components.

The country’s largest carmaker, Jaguar Land Rover said it would have to find 4,500 redundancies last month, with most in Britain.

Nissan then reversed its post-referendum decision to build the X-Trail vehicle at its Sunderland plant in part because of the decline in diesel sales across Europe.

But the end of the Swindon site is the starkest sign yet of crisis enveloping the industry.

“It’s a big shock,” said David Bailey, a professor of industrial strategy at Aston University. “But it’s not a surprise. Many of us have been warning for several years of the risks to UK automotive over Brexit, that we needed to nail down the uncertainty as soon as possible.”

The impending closure also calls into question the government’s attempts to forge an industrial strategy based around high-value manufacturing to boost productivity.

It comes as investment into the car sector has plummeted, despite the need for greater expenditure into electrification and driverless technologies that are set to transform the industry.

Levels were down by almost 50 per cent last year to £588m, according to the Society of Motor Manufacturers and Traders, a trade body, which said that manufacturers had “sat on their hands” ahead of the UK’s departure from the EU.

At the same time, production dropped to its lowest level in five years, with 1.52m cars made in UK factories in 2018. Output in December 2018 was 78,106 cars, a drop of 22 per cent compared with 12 months earlier.

Honda said on Monday it was “not able to make any comments regarding speculation” after the matter was first reported by Sky News.

Justin Tomlinson, the Conservative MP for North Swindon, said in an emailed statement that Honda had been “very clear”.

“This decision has been made because of global trends and is not related to Brexit. The Turkey factory will also close as all European market production is being consolidated to Japan where the company is based.”

One possible factor behind the Swindon closure could be the signing this month of a free trade agreement between Japan and the EU under which Brussels has pledged to slash tariffs on cars from 10 per cent to zero by 2027.

With the UK’s future trading relationship with the bloc unclear, it could prove less complicated — and costly — for Honda to manufacture at home and export directly to the EU.

Even so, the spectre of Brexit loomed large over the decision. In an interview last year, Honda Europe senior vice-president Ian Howells described it as “unprecedented in terms of its total impact”.

Attention will now turn to other car factories that may be at risk if the economy deteriorates or if trade between Britain and the EU is hampered by customs checks and tariffs.

The Vauxhall plant in Ellesmere Port in Cheshire, which produces the Astra model, has long been viewed as vulnerable and its French owner PSA Group has said it will make a decision on its future in 2020.

Toyota has warned that its Burnaston site in Derbyshire, which employs 2,500, could close temporarily if Britain leaves the EU without a deal because it would be unable to source the parts needed to build its cars.

Ford said last week it had repeatedly urged the government not to leave the EU without a deal, in response to reports it had warned Theresa May it could move production overseas.

“Such a situation would be catastrophic for the UK auto industry and Ford’s manufacturing operations in the country,” the carmaker said, adding it would take “whatever action is necessary to preserve the competitiveness of our European business”.

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