Electric Minis – Just the beginning for post-Brexit manufacturing? - Image

Electric Minis – Just the beginning for post-Brexit manufacturing?

Car manufacturer BMW is set to begin production on an electric Mini model in UK factories. Touch Financial discusses why the move marks such a major departure from recent Brexit discourse and what it means for the future of the manufacturing sector.

What are BMW’s plans for future UK production?

In the midst of the UK government’s Brexit negotiations and the manufacturing sector – among countless other industries – waiting on tenterhooks to discover how the country’s relationship with the European Union and status within the single market will evolve after 2019, BMW has announced its intentions to build an electric version of its Mini vehicle exclusively in Oxford. The new model’s frame and interior will be constructed at the automotive company’s Cowley plant starting in 2019, after which electric motors produced in their Regensburg and Leipzig factories in Germany will be shipped to Oxford for assembly and the cars themselves made available later that year.

As reported by BBC News in July, the announcement marks a key step towards BMW’s wider goal of its electric car models to comprise 15-25% of its global sales by 2025. Of greater significance to the UK economy, however, is their provision of an investment in the “tens of millions” for the new production line, not to mention the implicit confirmation that the jobs of 4,500 staff currently employed at Cowley are safe for the foreseeable future, creating a welcome sense of certainty for those employees at a time where job security can seem increasingly difficult for domestic firms to guarantee.

Brexit fears allayed or an exception to the rule?

If nothing else, the news that Cowley – a central hub for BMW motor production until now, building 60% of the 360,000 Minis assembled per year – will form the core of electric Mini manufacturing in the coming years seems a welcome departure from much of the company’s recent Brexit-influenced rhetoric. In February the Guardian detailed BMW’s consideration of shifting the eco-friendly vehicle’s production to their German plants, owing to the present ambiguity surrounding the UK’s future outside of the EU. A representative of the firm confirmed their concern over “the prospect of the UK leaving the single market and being charged tariffs on imports and exports” as a result.

Indeed, broader discussion of the potential implications of Brexit has often veered in the direction of concern over wholescale optimism in recent months, with consultancy firm Deloitte forecasting a potential 47% exodus of EU workers from the UK in the next half-decade and the Independent revealing a KPMG study’s findings that one-third of the country’s manufacturing firms are potentially considering shifting their operations to other nations in the coming years. Such fears of skills shortages and emigrating companies extend well beyond the manufacturing sector too, with banking institutions like JP Morgan already contemplating extraditing their London workforce depending on how Brexit negotiations conclude, and 40% of video game developers entertaining the possibility of relocating this year.

Some might brand BMW’s commitment of substantial time and funds to Cowley a remarkable 180-degree turn for both the manufacturer and industry Brexit discourse, particularly given the firm’s confirmation that they “neither sought nor received” post-Brexit assurances despite rumours of Toyota and Nissan receiving government assurance to guarantee their continued investment. Local science and enterprise group The Oxford Trust tweeted soon after the announcement that the investment was “great news for technology, Oxford and the environment”, and at the time business secretary Greg Clark revealed plans for greater domestic investment in battery technology to complement this renewed production drive.

Not everyone has exhibited the same degree of optimism as to the BMW news’ ramifications for UK manufacturing, however. BBC News’ business correspondent Theo Leggett noted in his analysis of the announcement that the company may have chosen Oxford as its electric Mini production centre moreso out of practicality than confidence in its continued post-Brexit potency. The new model “will in many ways be identical to the cars already being built at the Cowley plan”, he says, with the investment itself “relatively small by auto-industry standards” and “a spanner in the works” potentially emerging what with the vehicle’s production window falling “months after the UK leaves the EU”.

Similarly Aston University professor David Bailey has warned against industry analysts viewing BMW’s investment as a turning point for the sector’s future prospects, since “the big decisions will be about future models…both at Mini and at companies like Vauxhall when they announce their new models in the next couple of years” – namely once the UK has a clearer view of how its economy will look when the planned transitional period ends and the true Brexit era begins. Admittedly BMW won’t be alone in its further UK investment, with Nissan also confirmed to increase production in its Sunderland plant, but Vauxhall’s “big decisions” are certainly still up in the air as they face a potential buy-out from Peugeot owner PSA Group.

Where next for UK manufacturing?

As for the present and future states of the overall UK manufacturing industry, experts remain largely divided on this front. The Financial Times has highlighted a notable disparity between the outlooks provided by the Office for National Statistics and the Chartered Institute for Procurement and Supply (CPI)’s purchasing managers’ index (PMI), the former showing manufacturing output as having “contracted” in Q2 2017 but the latter suggesting an “expansion in the sector” over the same window of time. Such figures are only complicated further by the CBI’s claim of factory output expanding at its fastest rate in decades last June.

What’s clearer is BMW’s perspective on the situation, their future contributions to the country’s factory productivity depending on a firm set of objectives they want to see the UK government achieve over the course of Brexit negotiations over the next two years. A representative of the manufacturer said in February that they want to see “the UK’s negotiations with the EU result in uncomplicated, tariff-free access to the EU single market in future”, with a particular emphasis on the importance of “free trade but also cross-border employment opportunities and unified, internationally applied regulations”. At such an early stage in UK-EU discussions, we can’t know for sure whether these goals will be achieved come 2019 – or indeed whether the government considers them as high-priority targets – but suffice to say that BMW’s role in UK manufacturing could soon change exponentially if they aren’t satisfied.

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