Success thanks to access

The UK’s automotive industry and its all-important supply chain has been the driving force behind the the UK’s manufacturing sector.

Over £8bn has been invested in UK automotives in the last four years. There are many reasons for this – the skills base, cooperative working between unions and management, links with universities, a supportive industrial policy in the sector has been the key to its success.

But it should also be noted that a key factor for the success is also access to the EU Single Market.

Around 80 per cent of cars made in the UK are exported and around 50 per cent of those go to the EU.  It’s our most important market and access to it is critical for many of our manufacturers, thereby supporting sales and facilitating supply chain growth.

EU bargaining power in trade negotiations is also key to improving access to international growth markets, thereby helping major exporters such as Jaguar Land Rover.

A third argument for continued membership centres on regulations and standards. Here the UK needs a powerful voice at the EU level to make sure that the specific needs of the UK’s auto industry are considered. This includes the recent European auto skills strategy supported by the the EU, unions including Unite and the UK auto manufacturers.

This is a key argument that those in favour of exit fail to take on board.  With so many UK auto exports going to the EU, even if (a big if) the UK were to leave and still have some sort of access to the Single Market, producers in the UK would still have to meet European regulations so as to sell into Europe.

That would mean having to anyway follow European regulations rather than helping to shape them, which might mean German of French firms shaping them for their own benefit.

At the moment, UK-based niche firms like Bentley, Aston Martin and Jaguar Land Rover can benefit from the British government having a seat at the table when regulations are thrashed out that impact on the industry.

Lose that voice

They would lose that voice if the UK was no longer a member.

On that, the UK’s auto industry has actually benefited from the government managing to soften tough EU carbon emission regulations for its smaller niche manufacturers.

Sometimes Norway and Switzerland are held up as possibilities as to what arrangements post Brexit could look like.  Norway has access to the single market but has had to accept curbs on its sovereignty.  Indeed, it has implemented thousands of EU regulations since it signed its last trade agreement in the 1990s. Yet Norway has no input into shaping this legislation.

Other arguments for remaining in the EU include ensuring access to EU funding that has boosted R&D and innovation at automotive firms and universities in the UK, and the free movement of labour which enables UK-based firms to combine domestic and international talent (which is especially important giving skills shortages in the UK industry).

Of course, that doesn’t mean that the EU can’t be improved, such as through the simplification of regulations and reducing complexities for firms operating in the EU.

But it does suggest – as the Society of Motor Manufacturers and Traders has noted – that when it comes to auto “being part of a strong Europe is critical for future success”. Indeed, the SMMT is right to note that “if we are to maintain this position and increase access to growing global markets, the UK must play a key role in shaping EU policies, budgets and regulations”.

In the run up to the referendum, the future of the UK in the European Union remains the focus of much debate.  But when it comes to the auto industry at least, it seems that there are some strong arguments for the UK staying in and helping to shape the future of the industry.

Professor David Bailey works at the Aston Business School