The success of domestic industries in the UK is often defined by international performance. The trading of goods and services as part of an import/export relationship is nothing short of necessary, allowing businesses to grow their trade and access to both markets and supply pools.
The same is naturally true of the UK’s automotive industry, a leading industry responsible for over £15 billion of the nation’s GDP. Its relationship with import and export is plain to see, with cars from German, French and Chinese manufacturers amongst the most popular on our roads. But, economically speaking, things have changed considerably in recent months. What are these changes, and how have they impacted the industry?
Import in the Automotive Industry
As touched upon above, the UK is a leading importer of vehicles and automotive parts from the international automotive industry. The largest constituent part of the UK’s automotive industry is its suppliers, with thousands of showrooms selling imported vehicles.
Export in the Automotive Industry
The UK’s automotive industry may be dominated by suppliers and contracted manufacturers, but there is also a strong home-grown manufacturing sector – one typified by UK supercar manufacturers TVR and McLaren, but that extends out to the bespoke manufacture of commercial and electric vehicles.
According to the Society of Motor Manufacturers and Traders (SMMT), road vehicles are the single most valuable trade good in the UK when it comes to exports; in 2020 alone, export revenue exceeded £27 billion, illustrating the key place in international markets that UK car manufacture has.
Instability and the Future of the Market
The UK has experienced unprecedented economic turbulence over the past 12 months, beginning with a steep rise in the rate of inflation and culminating in an unexpected government budget intervention which served to sink the pound in the foreign exchange (forex) market.
The UK was already experiencing a downturn in trade as a result of its departure from the European Union, which created new barriers to trade between the UK and 27 mainland member states. The pound’s poor performance in the forex market saw it nearly reach parity with the dollar, introducing new challenges regarding imports.
As a result of the pound sinking, imports become more costly – raising prices across the board, with the potential for serious knock-on impacts for consumers. The falling pound makes exporting more valuable, but not so far as to offset new import costs.
The future is uncertain for the market, as the pound continues to falter amid government indecision and contradictory behaviour between the Bank of England and government policy. Rocky waters are assured, though, as the government prepares to double down on growth-forward po
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