Slumping UK demand drags down car production figures - but demand for British built engines is still rising

As a result, the number of cars built in the UK fell in November compared to a year ago amid a continuing reduction in production for the home market. And that is bad news for the scores of manufacturing and engineering companies in the West Midlands that rely on the UK's carmakers for their bread--and-butter work, supplying components for the auto industry supply chain.

Just under 161,500 cars left UK factories, down by 4.6 per cent on the same month in 2016, after a huge 28 per cent drop in domestic demand – the biggest decline of the year.

Exports rose by 1.3 per cent, reported the Society of Motor Manufacturers and Traders (SMMT), which revealed that almost four out of five of the 1.5 million cars built this year have gone to one of 160 global markets.

In better news for the West Midlands, British-built engine demand continued growth in November. It is a key industry for the region, with Jaguar Land Rover's £1bn engine factory on the i54 site in Wolverhampton and BMW's engine plant at Hams Hall near Birmingham.

Engine manufacturing in the UK grew 11.4 per cent in November to 279,532 units. Both domestic and export demand was up, by 20.8 per cent and four per cent respectively.

So far this year more than 2.5 million engines have rolled off UK production lines.

Mike Hawes Mike Hawes, SMMT chief executive, said: "2017 has been a very robust year for UK engine manufacturing, with huge investments into new facilities and engine models delivering impressive dividends both at home and overseas. To attract future investment and ensure continued global success, government must safeguard the business conditions we currently enjoy and provide clarity on our future trading relationships with the EU and other key markets."

Turning to car production, Mr Hawes added "Brexit uncertainty, coupled with confusion over diesel taxation and air quality plans, continues to impact domestic demand for new cars and, with it, production output.

"Whilst it is good to see exports grow in November, this only reinforces how overseas demand remains the driving force for UK car manufacturing.

"Clarity on the nature of our future overseas trading relationships, including details on transition arrangements with the EU, is vital for future growth and success."

The dip in car demand in the UK has raised concerns, but even in a normal year, more than three quarters of cars made in the UK go for export, although with companies such as Jaguar Land Rover it is regularly as high as 80 per cent given the demand for its luxury vehicles in major markets such as China and the USA.

Although nearly all carmakers in the UK are foreign owned, it is still a major production country for Nissan, Honda, Toyota Vauxhall and BMW's Mini as well as for luxury brands like JLR, Bentley, Aston Martin and Rolls-Royce.

Reacting to the latest production figures, Alex Buttle, director at the car buying comparison website Motorway.co.uk. said: "This is a stunning fall in domestic demand and pretty much sums up the last six months for an industry reeling from punitive diesel taxes and crumbling consumer confidence.

"The fact that manufacturing levels fell just 4.6 per cent last month, when domestic demand dropped off a cliff, shows just how reliant we are on exports.

"And that's probably more worrying than faltering demand, as right now we have no EU trade agreement and zero clarity over trading agreements with countries outside the EU.

"The UK car industry is teetering on the edge, and the economic landscape is unlikely to improve in 2018 with Brexit uncertainty ramped up to another level."

The figures also sparked a warning from unite Unite. Assistant general secretary Tony Burke said: “This is awful news in the run-up to Christmas for the British car industry and the UK economy. The continued falling demand in the UK market because of Brexit uncertainty and falling wages is yet more evidence of the government’s economic incompetence.

“When other economies around the world are motoring ahead, the UK is stuck in the slow lane hobbled by the biggest squeeze in wages since the Napoleonic era. Meanwhile uncertainty around Brexit is leaving motor manufacturers stalling on the investment needed to maintain Britain’s world leading status in car making.

“The motor industry is the jewel in the UK’s manufacturing crown, sustaining communities with decent well paid jobs. Government ministers need to rid themselves of their economic complacency and tackle falling incomes which are putting people’s wallets and the UK economy into reverse.”