Car production and investment fall amid drop in domestic demand

Car production fell last year after a near 10% drop in domestic demand, while investment by auto companies was more than half a billion pounds lower than in 2016, new figures reveal.

Despite the decline, the 1.67 million cars built in this country was still the second highest figure since the turn of the century, said the Society of Motor Manufacturers and Traders (SMMT).

Domestic demand for new cars was down by almost 10% last year amid falling economic confidence and "confusion" over the Government's policy on diesel cars, the trade body reported.

Exports fell by 1.1%, but overseas demand continued to dominate production, accounting for four out of five of all UK car output.

The EU remained the UK's biggest trading partner, with over half of exports, while there were big increases in countries including Japan (25%), China (19%), Canada (19%) and the United States (7%).

The production figure is around 130,000 below the forecast last year from the SMMT, which urged the Government to give some "clarity" on the transitional arrangements for Brexit.

Investment by the car industry fell by a third last year to £1.1 billion, down from £1.66 billion in 2016 and well down on the average for the past few years.

SMMT chief executive Mike Hawes said the investment fall was "significant", adding: "A drop of that magnitude is a concern.

"People are waiting as long as they can for increased certainty. The UK automotive industry continues to produce cars that are in strong demand across the world and it's encouraging to see growth in many markets.

"However, we urgently need clarity on the transitional arrangements for Brexit, arrangements which must retain all the current benefits else around 10% of our exports could be threatened overnight.

"We compete in a global race to produce the best cars and must continue to attract investment to remain competitive.

"Whilst such investment is often cyclical, the evidence is that it is now stalling so we need rapid progress on trade discussions to safeguard jobs and stimulate future growth."

The SMMT has been pressing the case for free trade agreements to continue and warned that any new customs checks would add cost and cause delays and disruption to manufacturing.

Mr Hawes said he expects production levels to be broadly the same this year as in 2017.

"We still hope to maintain the inherent strength that we have, but we need certainty to invest."

Andy Barratt, chairman of Ford of Britain, said the car giant had invested considerable amounts of money in its engine plants at Dagenham in Essex and Bridgend in South Wales, with both sites supplying the global market.

He predicted "stability" for Bridgend, which has been at the centre of union fears of possible job cuts.

The SMMT also reported a 6.9% increase in engine production last year to more than 2.7 million, half for car and van plants around the world, mainly the EU.

Len McCluskey, general secretary of Unite, said: "These figures really ought to ring the alarm bells right across Government.

"Our world-class car manufacturing sector is at risk - and much of the blame for this lies directly at the Government's door.

"You cannot preside over the longest continuous fall in living standards for generations and expect the consumer economy to stay robust.

"When wages don't grow people can't buy. Big-ticket items like cars are often the first things consumers cut back on and we see that today in these concerning figures."

A Government spokesman said: "The UK's automotive industry remains a great British success story and global demand for UK designed, engineered and manufactured cars and engines remains strong.

"The UK is the third largest European car producer and has the highest productivity in Europe amongst the major automotive producing nations.

"Through our modern industrial strategy we have launched the automotive sector deal.

"This joint strategy builds on the strong partnership between the Government and the automotive industry, setting the direction and long-term priorities of the sector."