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No-deal Brexit could send car manufacturing output back to 'dark days' of 1980s

·Head of Yahoo Finance UK
The car industry is suffering from Brexit uncertainty. Photo: Reuters
The car industry is suffering from Brexit uncertainty. Photo: Reuters

British car production fell for the 10th consecutive month, tumbling by 14.4% in March, according to figures released by the Society of Motor Manufacturers and Traders (SMMT).

The major trade association said that production for both home and overseas markets crashed by double digits, down by 18.1% and 13.4% respectively.

Chart: SMMT
Chart: SMMT

The group warned about the impact Brexit uncertainty is having on car production already, and said the worst-case scenarioBritain leaving the EU without a deal—could send the industry back to the “dark days” of the 1980s.

Brexit uncertainty has been rife since the UK voted to leave the European Union on 23 June 2016. There has been little progress in the three years since in establishing what a new deal with the EU will look like, or if the UK will leave with a deal at all. Britain originally was meant to leave the bloc on 29 March this year.

By default, if the UK fails to agree to a new agreement by the deadline for Brexit, then the country will crash out under a ‘no-deal Brexit.’ Despite UK prime minister Theresa May sealing a deal on the terms of the divorce with the EU, the UK’s parliament rejected the agreement several times.

This forced May to ask the EU for a Brexit extension, meaning Britain is now due to leave the EU by 31 October at the latest. However, there is still a chance the UK could leave without a deal.

READ MORE: Uncertainty deters Brits from EU travel as Thomas Cook holidays drop

The SMMT said that if Britain left without a deal, it would have to trade with the EU on World Trade Organization rules. It forecasts that car production in that scenario would “fall around 30% on recent levels to just 1.07 million units by 2021, a level consistent with the dark days of the mid-1980s.”

“Despite the extension, the Brexit clock is still ticking and a devastating ‘no deal’ remains a threat. This new period of limbo does not end the havoc for industry, with investment stopped and expensive factory shutdowns moved to avoid a Brexit deadline that has itself now moved,” said Mike Hawes, chief executive of the SMMT.

“Just a few years ago, industry was on track to produce two million cars by 2020 – a target now impossible with Britain’s reputation as stable and attractive business environment undermined.

“All parties must find a compromise urgently so we can set about repairing the damage and diverting energy and investment to the technological challenges that will define the future of the global industry.”

READ MORE: Key UK investor Japan is ‘bewildered and disappointed’ by Brexit