What is Brexit?
The European Union or EU is a partnership between 28 European countries that allows free trade and work opportunities across their borders. Under the union a business could be set up anywhere, but under common laws, and technical and safety standards. With its own parliament, laws and currency (used by 19 of the member states) the EU grew to be the world’s largest trading block.
‘Brexit’, is the word coined for Britain Exiting the EU. Critics of the EU felt it created too many regulations and robbed countries of control over their own affairs. Britain was always sceptical of the EU and had never fully embraced it, like the other countries did. For example, it refused to join the Schengen Zone which eliminated internal border controls for overseas visitors and it didn’t adopt the common currency, the Euro. This skepticism was further amplified during the 2008 economic recession where the EU took a deeper hit and had a longer recovery period than the US. Some countries like Greece neared collapse. While Britain which uses the Pound rather than the Euro wasn’t hit as hard, many wondered how long before the EU membership would pull the UK into some kind of financial meltdown or would force them to have to bail out some countries wrecked due to bad EU policies.
Under the EU membership residents are allowed to travel and work in any member state. This created a mass migration of people from poorer to richer countries. Many in the UK felt this discriminated against its own people and left them disadvantaged when it came to employability due to the low pay scale that migrant workers were accepting.
Thus amidst heavy debates, Britons voted to leave the EU by the slimmest of margins. Most attribute this decision to the migrant issue rather than sound economic sense. Once announced, markets began to tumble with the opinion globally being that this was a bad economic decision.
What is the impact on the auto industry?
Going by indications from most of the auto manufacturers the decision could prove to be a big blow to the interconnected European auto industry. Britain exports nearly 80 percent of its automobiles, of which 57.5 percent goes to the EU. And of the 90 percent of light vehicles that are imported by Britain, 80 percent are from the EU. According to global research firm LMC Automotive, Germany will see the greatest volume adjustment, losing 1,30,000 units compared to the previous base case.
Even before the vote many manufacturers had openly favoured Britain staying in the EU. Remaining a part of the European Union would have allowed unrestricted access to the world largest single market and the ability to shape technical regulations for the EU.
A number of SMMT members (Society of Motor Manufacturers and Traders – which represents the UK automotive industry) are of the view that since they extensively trade with the EU, any barrier to this would be bad for business. They believe that leaving the EU would weaken their position for international trade negotiations and isolate them from winning contracts abroad. Another member said, “UK access to the EU is one significant reason for our location in the UK. As engineering services company, unrestricted recruitment of skilled EU labour is an important strength.”
Some others cited fears that leaving the EU only puts trade barriers in place, making growth harder and providing opportunities for EU-based competitors. They also fear that they would not be eligible for EU research grants and collaborative projects while their competitors would be. Another risk of exiting the EU is that “Global OEMs will not invest in new models, while the UK’s involvement in a European supply chain will become harder.”
What is Brexit?
The European Union or EU is a partnership between 28 European countries that allows free trade and work opportunities across their borders. Under the union a business could be set up anywhere, but under common laws, and technical and safety standards. With its own parliament, laws and currency (used by 19 of the member states) the EU grew to be the world’s largest trading block.
‘Brexit’, is the word coined for Britain Exiting the EU. Critics of the EU felt it created too many regulations and robbed countries of control over their own affairs. Britain was always sceptical of the EU and had never fully embraced it, like the other countries did. For example, it refused to join the Schengen Zone which eliminated internal border controls for overseas visitors and it didn’t adopt the common currency, the Euro. This skepticism was further amplified during the 2008 economic recession where the EU took a deeper hit and had a longer recovery period than the US. Some countries like Greece neared collapse. While Britain which uses the Pound rather than the Euro wasn’t hit as hard, many wondered how long before the EU membership would pull the UK into some kind of financial meltdown or would force them to have to bail out some countries wrecked due to bad EU policies.
Under the EU membership residents are allowed to travel and work in any member state. This created a mass migration of people from poorer to richer countries. Many in the UK felt this discriminated against its own people and left them disadvantaged when it came to employability due to the low pay scale that migrant workers were accepting.
Thus amidst heavy debates, Britons voted to leave the EU by the slimmest of margins. Most attribute this decision to the migrant issue rather than sound economic sense. Once announced, markets began to tumble with the opinion globally being that this was a bad economic decision.
What is the impact on the auto industry?
Going by indications from most of the auto manufacturers the decision could prove to be a big blow to the interconnected European auto industry. Britain exports nearly 80 percent of its automobiles, of which 57.5 percent goes to the EU. And of the 90 percent of light vehicles that are imported by Britain, 80 percent are from the EU. According to global research firm LMC Automotive, Germany will see the greatest volume adjustment, losing 1,30,000 units compared to the previous base case.
Even before the vote many manufacturers had openly favoured Britain staying in the EU. Remaining a part of the European Union would have allowed unrestricted access to the world largest single market and the ability to shape technical regulations for the EU.
A number of SMMT members (Society of Motor Manufacturers and Traders – which represents the UK automotive industry) are of the view that since they extensively trade with the EU, any barrier to this would be bad for business. They believe that leaving the EU would weaken their position for international trade negotiations and isolate them from winning contracts abroad. Another member said, “UK access to the EU is one significant reason for our location in the UK. As engineering services company, unrestricted recruitment of skilled EU labour is an important strength.”
Some others cited fears that leaving the EU only puts trade barriers in place, making growth harder and providing opportunities for EU-based competitors. They also fear that they would not be eligible for EU research grants and collaborative projects while their competitors would be. Another risk of exiting the EU is that “Global OEMs will not invest in new models, while the UK’s involvement in a European supply chain will become harder.”