Industry Trend Analysis - 'Cliff Edge' Brexit Scenario: Severely Damaging For Autos Before Redirection - JAN 2018

BMI View: Given the UK autos sector ' s dependence on the EU for sales, components and labour, a ' cliff edge ' Brexit would be severely damaging to the industry in the short term of up to five years. The UK government could eventually redirect the industry towards other export markets and increased local content, but the drop in exports to the EU would be a large hole to fill.

In a scenario where the UK fails to reach an 'exit agreement' with the EU before its withdrawal in March 2019 and reverts to WTO trading rules - the so-called 'cliff edge Brexit' - we see the impact on the Autos sector falling into three main categories: domestic demand; export weakness and resulting investment cutbacks in the sector; and the cost impact. In the case of each we have assessed the worst case scenario for the industry, the emergency measures that could be taken in response, and the resulting base case scenario. These are summarised in the table below.

Domestic Demand

Already Negative
UK - Consumer Confidence Indicator
Source: European Commision

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