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 per cent since 2010 and there has been over £8 billion worth of investment in the industry in the last four years (SMMT 2016a). 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 deindustrialization, plant closures and the legacy of the global financial crisis (Bailey & Berkeley 2014; Bailey et al. 2015; Bailey & 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 from 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.

SHORT-RUN MARKET AND PRODUCTION IMPACTS

A starting point in understanding the impact of the Brexit vote on the UK auto industry is to consider its impact on the wider UK economy, both in terms of economic growth and the value of sterling. For example, a possible slowdown in economic growth is likely to impact on car sales in the UK, so at best car sales are likely to grow more slowly than otherwise and at worst may fall.