German jobs threatened by Brexit, says Deloitte

Consultancy firm's study says German automakers would be hardest hit

Published: June 23, 2017, 10:30 PM
Updated: June 27, 2017, 3:16 PM

UK within Europe

A lot has been said about the effect Brexit would have on the British auto industry and the choice of affordable vehicles in the isles, but a recent study is highlighting a potential negative effect on auto sales and jobs in continental Europe.

A study from consulting firm Deloitte is saying that European manufacturers could see as much as a 20% decline in sales — equal to the decline in sales during the financial crisis of 2009 — if Britain opts to exit both the European Union and the Single Market (where there is free movement of goods without border restrictions), referred to as the “Hard Brexit.”

There is fear that the German auto industry would be particularly hard hit because one in five cars produced in the country is exported to the UK (nearly a million German made cars were bought in Britain last year).

Deloitte says 60,000 German auto jobs depend on those sales, and that 18,000 would likely disappear in the event of the full-market Brexit.

“As market leader in Europe and with the UK being its second biggest market in Europe, the Brexit negotiations and the respective outcome are very important for the Volkswagen Group,” a Volkswagen spokesman told China’s Xinhua News Agency. “We are monitoring the developments closely. However, at this point in time, it is only possible to speculate about the impacts and consequence.”

However, Deloitte sees a positive outlook (albeit brief) for the British auto industry initially through the positive sales influence of a cheaper pound sterling, though the consultancy firm points out that gains would be quickly wiped out by higher production costs, tariffs and delivery challenges (through increased border controls that would slow the movement of parts and components into the UK).

“British” brands such as Mini and Jaguar, and even the London Taxi Company, are foreign-owned (by Germany’s BMW, India’s Tata and China’s Geely, respectively), which means they rely on the reduced costs of imported components in making their domestic finished products. Deloitte ascertains that as the pound declines, the cost of those components would rise.