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Car manufacturing sector booming in the UK: Weaker pound boosts exports, yet Brexit worries persist

2017 has been a good year for the UK car manufacturing sector as far as production levels are concerned, with the country manufacturing cars in March 2017 at a level last seen in the year 2000. Manufacturing levels have been boosted by a strong rise in exports of cars, which has come about due to the weak pound, low crude oil prices and rising demand for British cars in the Asia-Pacific region, as well as in the United States.

However all of this has been happening among the backdrop of the ongoing UK-EU Brexit negotiations, which has created great uncertainty in the UK car manufacturing sector. Investment levels in the sector have witnessed a steep decline in recent months as investors want to be certain which direction the British car manufacturing sector will be taking before they are confident enough to start investing money into it again. If the UK is able to negotiate a free trade agreement with the EU after leaving the union then the car manufacturing sector in the country is unlikely to face any serious negative consequences. However if the opposite were to happen and a 10% tariff was imposed on cars manufactured in the UK by the EU then British cars would be at a disadvantage in their largest export market.

This risk of leaving the EU without a free trade deal coupled with the protectionist leanings of incumbent US President Trump, could result in the UK car manufacturing sector witnessing declining export levels in its two largest export destinations in the coming years. In such a scenario it is imperative that British brands seek to expand and diversify their export markets, especially by adapting to and targeting the Asia-Pacific market, where strong potential for growth exists due to the popularity of British brands. Exports to countries in this region such as China and India have already multiplied in the past couple of years, but further room for expansion exists and needs to be exploited by British brands.