Brexit

Is Brexit to blame for Jaguar Land Rover job losses?

BY Iain Martin | iainmartin1   /  13 April 2018

For 1,000 workers on temporary contracts who will lose their jobs at the Jaguar Land Rover plant at Solihull, this will be a tough weekend. The firm will make the formal announcement on Monday.

Joel Hills of ITV broke the story. He reports that the company will blame Brexit and the sharp fall in the demand for diesel.

Inevitably, this news has been greeted with howls of outrage and declarations of vindication by opponents of Brexit.

Catherine Bearder, a Liberal Democrat MEP, said: “This happened because David Cameron called a referendum to try and keep the Tory party together. People are losing jobs because a Prime Minister put party ahead of country. Don’t forget that.”

Nick Tolhurst, an anti-Brexit campaigner, stuck it to the Brexiteers. He tweeted:

“The Jaguar Land Rover factory now closing down due to brexit will make the perfectly sized venue to host the upcoming “Brexit Museum of Sovereignty”. Its yet another fabulous “Brexit Boost” we can all be proud of.”

The plant is not closing, although 1,000 temporary positions are being lost out of a workforce of 10,000 at Solihull, with production being cut across two plants in the Midlands.

Is this down to Brexit? It seems pretty clear that uncertainty about the future trading relationship with the European Union is having some impact on business decisions and confidence. Prominent Remainers tend to overstate the impact. Prominent Brexiteers want to deny there is any cost.

But, it seems implausible that Brexit killed those jobs in light of what has been going on the British car industry in recent years. A bubble of car credit has been inflated in the UK, to the concern of financial regulators and the Bank of England. You don’t need to look far for the physical manifestation of this consumer binge.

Jaguar Land Rover cars are everywhere, on just about every street you drive or walk down in the UK. A luxury brand, once unobtainable, has gone mainstream. And no wonder . The cars are highly desirable, beautifully designed, and well-made. They’ve also become ubiquitous in an era of pay squeezes while being very expensive. The sporty F Pace costs £53,000 with all the add ons, but they are hardly a rare sight. Even in not particularly affluent areas you will see many drivers in an “Evoke” – the “budget” Land Rover that starts at £30,000. Something doesn’t add up.

The truth is, there is epic overproduction in the motor industry facilitated by the easy availability of finance. In the US the warning lights have been flashing for some time. Auto loan delinquencies rates are worse than during the financial crisis.

In the UK, in March it was revealed that the Financial Conduct Authority is investigating the explosion in car finance and PCP deals. The amount lent increased at an unsustainable rate of 20% per year since 2012. It simply could not go on, and workers in companies that have been insufficiently alert to financial reality will, sadly, feel the pain. Those running said companies will, no doubt, on the whole, be fine.

If Jaguar Land Rover sales have fallen by as much as a quarter in the last year, might it be that the company made far too many cars, failing to realise that the credit party on car finance was coming to an end?

Another complication is the diesel disaster. Jaguar seems to have been too slow in reacting to a change in consumer behaviour after the revelations that new generation diesel was not as good for the environment as had been claimed by the government and industry. Sales have slumped, amid concerns about pollution.

Brexit may well be one factor in consumer behaviour when it comes to car purchases. But if the management at Jaguar Land Rover tries to shift the blame, their assertions should be treated with scepticism.