What Does Brexit Mean for British Automakers?

Last week, we examined what the United Kingdom’s unprecedented decision to leave the European Union meant for the short-term future of the luxury industry (and asserted that disruption won’t stop us from staying the best limo service in Los Angeles and across the globe). Of course, this monumental historical event is too big to sum up in a single blog entry, so this week we’re revisiting the topic, this time through the lens of another sector near and dear to us—that is, the auto industry.

As we mentioned last week, British luxury brands, particularly fashion houses, have referendum-sized headaches in anticipation of possible tariffs and trade barriers that will fall into place once Britain has officially separated from the EU. The problem for fashion houses is that the majority of their talent, raw materials and labor are sourced outside of the UK, in EU countries like France and Italy. As an EU member, Britain has enjoyed free trade with the rest of the Union, but could see those privileges restricted as a result of the Brexit vote.

For the British auto industry, the threat of trade barriers could be even more dire. You see, the British auto industry is complicated. The UK didn’t join the European Union until 1973, and up until then, its automobile brands were proudly based in Britain, and did their manufacturing there. Once the UK joined the EU, trade barriers opened up, allowing a freer flow of goods between borders, including automobiles. Rather abruptly, Britain learned that it was—to put it plainly—a terrible automaker. British consumers flocked to options from other automakers, particularly German ones.

As a solution, British brands were largely bought by foreign ones, based in both America and the Continent. However, by the 1990s, these brands still had manufacturing bases in Britain—for example, Honda continues to make the Civic in Swindon, England. Thanks to the relaxed trade borders between Britain and the rest of Europe, this intertwined industry landscape didn’t pose a problem. But now, Britain’s withdrawal from the EU poses a host of complications.

Britain’s auto industry relies heavily on exports. 80% of the automobiles made in Britain this year were exported, and over half of them were exported to countries in the rest of Europe. Now that businesses that own British brands and manufacturing bases stand to encounter trade barriers and taxes, they may opt to relocate their facilities outside of the UK to avoid hurting their margins. However, this would hurt Britain’s auto industry and economy as a whole—and is probably easier said than done.

Is there a silver lining to this otherwise cloudy outlook? In short yes, if hesitantly. First, the Brexit process won’t happen overnight. It takes years to disentangle a country from a major political and economic bloc. Second, even if the foreign auto industry largely vacates Britain, the gap left may push the country towards unprecedented innovation. For now, though, we’ll have to settle into uncertainty. We’ll been keeping an eye on the auto industry, so follow us on Facebook and Twitter for updates from the best limo service in Atlanta.