Five key Brexit recommendations for the UK automotive industry

Posted on 3 Apr 2019 by The Manufacturer

Over the years, the UK automotive industry has experienced huge growth as manufacturers have become increasingly integrated with companies across Europe. But with recent politics, that could all be about to change. Tom Leeson explores the issue.

Stock UK Automotive Industry Worker Factory Line UK manufacturing Drive Midlands
Several British-based original equipment manufacturers have publicly raised their concerns over uncertainty in the industry.

Despite, the deadline drawing ever-closer, the uncertainty in the  UK automotive industry around the final Brexit deal between the UK and the European Union remains stronger than ever. This is particularly true for original equipment manufacturers (OEMs) such as Ford, Honda and Renault-Nissan who have all publicly raised their concerns.

The highly complex automotive industry is one of the most important sectors to the UK economy and could also be one of the most affected by the UK’s withdrawal from the EU.

A great deal has been written on the cross-border nature of today’s automotive supply chains, with the need for as close to frictionless borders as possible recognised at both an industry and government level.

With the impending deal set to change British politics, it is important to identify the likely implications that different Brexit processes could have on the industry and how prepared organisations can be across five key business areas: supply chain management, operations and logistics, human resource management, regulations and compliance, and customer communications.

Understanding the scale of Brexit in the UK automotive industry

When it comes to Brexit, not everything is utterly uncertain. Often, it’s just the detail that is unknown. For example, it is certain that cross-border trade will change, altering customs laws and regulations.

If companies have an extended supply chain across Europe, they will need to ensure they can comply with the new regulations as well as re-visiting all contracts with their suppliers and customers in Europe to ensure that they can work to the trading arrangements.

The potential scale and impact of Brexit in the manufacturing industry was initially exposed when Honda told MPs that it imports 2 million components a day from Europe on 350 trucks and that – due to its Just in Time (JIT) inventory system – it has about one hours’ worth of stock at any given point.

Honda claimed that it would take 18 months to put proper customs administration in place and every 15 minutes of delay would cost them £850,000 - image courtesy of Honda.
It could take 18 months for Honda to put proper customs administration in place and every 15 minutes of delay could cost them £850,000 – image courtesy of Honda.

Honda claimed that it would take 18 months to put proper customs administration in place and every 15 minutes of delay would cost them £850,000. In addition, Honda pointed out that 40% of the workers building its new Civic in the UK were EU nationals.

In the current climate – with uncertainly surrounding everything from trade agreements, contractual arrangements, worker’s rights and freedom of movement – it is difficult for an organisation to make longer term plans.

Five key recommendations for the UK automotive industry

As Brexit comes into force, preparation will be key – regardless of how much uncertainty there currently is in the marketplace. By investing in a level of risk management and scenario planning, companies can adapt, whatever the final outcome of Brexit negotiations.

  1. Automotive companies should have good enterprise information management (EIM)policies in place for managing and reporting on contracts to implement changes and mitigate risks.
  2. OEMs and suppliers should invest in a strong information governance strategy to ensure compliance with any new regulatory requirements or checks.
  3. More emphasis on workforce planning and skills development is needed for the UK automotive industry to mitigate restrictions or changes to the free movement of people.
  4. Closer communication and collaboration between automotive manufacturers, partners and customers is needed to ensure a free flow of information.
  5. Automotive manufacturers need to have an improved understanding of their supply chain, particularly with respect to any new documentation and compliance requirements that might be put in place.

Brexit remains shrouded in uncertainty and that’s likely to be the situation up to the point the UK leaves the EU. But, not knowing the full extent of the final outcome is no excuse for inactivity.

It’s likely that many different processes, systems and operations will need change. For example, the UK will probably introduce new records management requirements in a push for greater deregulation. Additionally, Brexit is likely to spell an end to the free movement of labour, so all companies will need to audit their HR procedures to ensure they are able to comply with all the registration and reporting requirements that go with employing overseas workers.

There are so many things that UK organisations can be doing to prepare.

At a time when manufacturers need to plan for efficiency and innovation, anything that holds back investment in enabling technologies is a real threat. Manufacturers must begin their plans for Brexit now and use those plans as a means to create a ‘business as usual’ scenario where they can confidently continue their much needed investment and improvements.

With preparation and a solid strategy in place, the automotive sector can ensure that they are ready to meet Brexit head on.

Tom Leeson is industry strategist, manufacturing and supply chain for enterprise information manufacturing software specialist OpenText