– Not Brexit Or Even Trade Related, More About Tax
British car production fell 14 % in June as against a year earlier and there are therefore calls that everything Brexit must be worked out and pronto. The thing is though that this fall in production isn’t being driven by Brexit at all, it’s not even the result of trade issues. This is a domestic fall in demand largely driven by changes in tax rates. Thus quite why sorting out everything Brexit is of relevance to the issue is uncertain:
The UK car sector has issued a fresh plea for Brexit trade clarity, warning that “growth is stalling” with long-term production targets and investment at risk.
The Society of Motor Manufacturers and Traders (SMMT) said manufacturing output was 13.7% down in June compared to a year ago when voters were casting their votes in the referendum.
A UK auto production plant
That Brexit is coming, that car production is down, both of these are simple truths. It’s rather that the claimed connection between the two doesn’t seem to be there:
Almost 137,000 cars left production lines, 13.7% down on June last year, amid a decline in demand for cars in this country.
The Society of Motor Manufacturers and Traders (SMMT) reported that exports were driving production, with almost four out of five British cars shipped overseas in the first half of the year, the highest for five years.
The number of cars built in the first half of the year was down by 2.9% to 866,656, with home demand down by 9.5% following a long period of record growth.
As we can see, this is a domestic, not trade, issue. The fall in production mirrored a decline in UK car sales. Over the first six months of this year, sales were distorted by a rise in Vehicle Excise Duty in April, which prompted drivers to bring forward purchases of new cars.
It’s also a domestic issue brought about by changes in domestic taxation, actually nothing at all to do with Brexit nor even trade:
In a stark warning about the consequences of Brexit to British industry, the Society of Motor manufacturers and Traders say that a hard Brexit would mean a 10 per cent to vehicle production in the UK, which is already weakening because of the slowdown in the domestic economy.
What we’re actually seeing here is therefore the linking of a hobby horse to current events, not the explanation of the causality of current events. UK car production has fallen as domestic demand has from tax changes, this is not about Brexit.
