The impact of Brexit on the automotive sector Contents


49.Freedom of movement within the EU has been beneficial to the UK automotive sector, which values highly the ability to transfer high skilled people from one plant to another at short notice with no bureaucratic barriers. The ability to move employees from one plant to another through intra-company transfers is core to the business model of many multinationals operating in the UK.146 At present, between 7 and 10 per cent of the total workforce in the automotive sector are estimated to be from EU countries,147 but the proportion in some companies in the supply chain may be as high as 30 per cent.148 In general, car manufacturing requires higher level skills from EU countries than the automotive retail sector.149 The shortage of UK engineers is well established. The Automotive Council has reported that the 5,000 current vacancies were having a “significant impact” on business operations.150 Witnesses told us that it was important to maintain access to “top-class engineers, aerodynamicists, vehicle dynamics engineers”151 from other European countries. For the automotive sector, jobs that feature on the Home Office shortage occupation list include product design and development engineers.152 The SMMT report that this skills gap is projected to increase because of the ageing workforce and insufficient numbers coming through the system.153

50.The Government is taking steps to address the most critical skills gaps, not least via the Automotive Industry Partnership for Skills and support for more engineering apprenticeships.154 These long-term measures are welcome and essential: the development of a stronger pipeline of domestic engineering talent will be vital to offsetting any adverse impact on supply arising from Brexit. However, in the short term, they are unlikely to make up the shortfall if there is serious leakage of skilled Europeans up to and after the date of departure from the EU. Not all companies routinely keep updated statistics on the number of EU nationals in the workforce, but we heard anecdotal evidence that firms are already struggling to retain people.155 Any increase in difficulty in recruiting skilled workers from EU countries is unlikely to be easily compensated by heavier recruitment from non-EU foreign countries, which is much slower.156 This is an issue which will be pertinent to many sectors, although the broader issue of immigration policy lies outside the scope of our inquiries.

51.The Government’s commitment to protecting the rights of EU citizens residing in the UK should help to mitigate the immediate impact of Brexit on skills retention in the automotive sector.157 In this context, we welcome the increased clarity and assurance provided by the phase 1 Negotiations Report on EU citizens’ rights and the repeated statements from the Government that it wishes to retain access to skilled EU workers in this country. The automotive sector is affected, not only by the general concerns of EU citizens around the impact of Brexit on their future status working here, but by the longer-term impact on our ability to attract the necessary skills from the EU. The Government is now not planning to publish a White Paper on immigration until after the Migration Advisory Committee has reported on the impact on the UK labour market of Brexit and the alignment of immigration policy with the Industrial Strategy, which is expected to be in September 2018.158 The report should provide more detail on the nature and consequences of engineering shortages for a number of sectors. For the automotive sector at least, skills shortages are already well known and should influence negotiation objectives. In determining its negotiating objectives on freedom of movement and subsequent immigration policy, the Government should prioritise ensuring that our key manufacturing sectors such as automotive retain sufficient access to essential skills to ensure that gaps can be filled adequately with UK workers.

146 SMMT (BRA0005), Vauxhall Motors (BRA0016)

147 HM Government, Automotive sector report, para 28; SMMT (BRA0005)

148 SMMT (BRA0005), Q83 [Hawes}

149 National Franchised Dealers Association (BRA0010), EEF (BRA0013)

150 See Report by the Automotive Industry Partnership, February 2016

151 Q18 [Wilson]

152 Home Office, Immigration Rules Appendix K: shortage occupation list (accessed 8 December 2017) Table 1

153 SMMT (BRA0005)

154 HM Government, Automotive sector deal, 10 January 2018

155 Q83 [Hawes]

156 Q82 [Wilson], EEF (BRA0013)

157 Migration Advisory Committee, commissioned by the Government, Press Release, 27 July 2017

158 Rt Hon Amber Rudd MP, Home Secretary, on the BBC Today programme, 6 February 2018

28 February 2018