New investment pledged to the British car industry dove by 70 percent in the first half of this year due to weak demand at home and abroad as well as the prolonged Brexit uncertainty, figures from an industry body showed on Wednesday.
The investment pledged stood at merely 90 million pounds (around 109.52 million U.S. dollars), in sharp contrast with the average annual investment of 2.7 billion pounds (3.29 billion dollars) over the previous seven years, according to the Society of Motor Manufacturers and Traders (SMMT).
British car manufacturing output fell by more than a fifth in the first six months of this year. A total of 666,521 cars rolled off production lines during this period, a year-on-year loss of 168,052 units due largely to falling demand in key markets, including Britain, exacerbated by factory shutdowns pulled forward in anticipation of the March Brexit deadline, the SMMT said.
"Today's figures are the result of global instability compounded by ongoing fear of 'no deal.' This fear is causing investment to stall, as hundreds of millions of pounds are diverted to Brexit cliff-edge mitigation -- money that would be better spent tackling technological and environmental challenges," said Mike Hawes, SMMT chief executive.
Acknowledging the industry's strong foundation, the SMMT called for an internationally competitive business environment to encourage more investment, innovation and growth in the sector.
"That starts with an ambitious Brexit deal that maintains frictionless trade and we look to the new administration to get a deal done quickly so manufacturers can get back to the business of building cars and helping deliver a brighter future for Britain," Hawes said.
It was revealed that the sector has spent at least 330 million pounds (401.68 million dollars) on contingency plans for a no-deal Brexit. Most major British manufacturers have tied up working capital stockpiling materials and components, securing warehousing capacity and investing in new logistics solutions, additional insurance and training in new customs procedures.
Automotive remains Britain's single biggest exporter of goods, with 60 percent of them going to the European Union. A no-deal Brexit would mean the immediate imposition of tariffs costing some 4.5 billion pounds (5.48 billion dollars) a year, an end to the seamless movement of goods. The just-in-time manufacturing would be thrown into chaos by any potential disruption at the border.
Britain will leave the EU on Oct. 31 after the Brexit date was postponed from March 29. Former Prime Minister Theresa May resigned after failing to win approval for her Brexit deal from the British parliament. Her successor Boris Johnson has called for a new deal with Brussels, but insisted Britain will leave the bloc without a deal on Oct. 31 if necessary.
However, there is little sign that Britain and the EU can reach consensus, as both sides are in a deadlock over the controversial Irish backstop, an insurance policy designed to avoid a hard border between Northern Ireland and the Republic of Ireland.