Almost three quarters (71%) of automotive businesses expect to move part of their UK operations overseas in the next three years, according to a study by independent law firm Brabners.
The new research, conducted with senior leaders from across the UK’s automotive supply chain, found that 92% viewed the EU as the most attractive destination if they were to relocate part or even all of their UK operations.
With the date for Britain to leave the EU fast approaching, the potential impact of Brexit continues to be seen as the biggest threat to the health of the industry, with three quarters (75%) of businesses highlighting it as their most significant cause for concern.
The research comes after several UK-based car manufacturers, including Honda, Nissan, Jaguar Land Rover and Ford, outlined plans to either reduce production or cut UK jobs. Meanwhile, the latest figures from the Society of Motor Manufacturers and Traders (SMMT) show automotive production slumped by 9.1% last year, hitting a five-year low, while exports were down by 7.3%.
With 51% of exporters responding to Brabners’ survey anticipating a decline in their sales to the EU in the next three years, businesses are calling on the government to ensure the UK remains part of the single market.
Caroline Litchfield, partner and head of automotive at Brabners, said: “Car manufacturing has long been a key part of the UK’s economic output, but almost seven in 10 (67%) are seriously concerned by what their operating costs will look like in three years’ time.
“While firms such as the PSA Group have made positive noises about wanting to keep their Vauxhall production in the UK, the ongoing uncertainty surrounding Brexit has clearly reached tipping point for some. As our study suggests, we shouldn’t be surprised to see more manufacturers make significant changes to their operating models in the near future.”
As well as uncovering UK car manufacturers’ contingency plans for life post-Brexit, the study also found that the free movement of labour between European countries remains a bone of contention for British employers.
As such, 96% of automotive businesses foresee recruitment being a challenge in the next three years, with the difficulty of employing workers from overseas (57%), the ability to offer career progression (56%) and the availability of skills (56%) being the main contributing factors.
Caroline Litchfield added: “To safeguard jobs and secure their future competitiveness, we can expect to see firms further diversifying their product ranges and investing in new technology, so there is a very real need for sustained investment in skills.”