UK economy shrinks after Brexit car plant shutdowns

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UK economy shrinks by 0.3% as a result of the Brexit (British exit from the European Union) poll. This has been the biggest fall in the monthly GDP of Britain since 2016. The unexpected departure of the nation from the European Union has caused the economy to contract sharply.

UK economy shrinks after Brexit car plant shutdowns

This has also been the biggest decline in the car manufacturing sector, in the country’s history.  Most of the motor manufacturer implemented planned shutdowns since April, anticipating the disruption in trade. According to The Society of Motor Manufacturers and Traders (SMMT), the number of cars manufactured has been reduced to half.

Motor manufacturing has collapsed by 24%, the biggest collapse since 1995 while transport production has suffered the biggest monthly plunge since 1974. BMW’s mini, Rolls-Royce, Peugeot’s Vauxhall, and Jaguar Land Rover has temporarily halted production since April.

Land Rover had shut down all three of their manufacturing plants and their engineering plant in April.  In the past 6 months, that was the second shutdown. The company announced that, if Britain left the European Union without a free trade deal, all their UK plants would shut down and at least 40,000 other jobs would cease to exist.

Honda had also halted their production for six days and had declared their plan to close down their Swindon plant fully by 2022. If that happens, 3,500 more jobs would be lost.

UK car manufacturers have struggled to cope up the with demands for exports from China and other foreign lands, and from rigid restraints on diesel engines, several manufacturers said they would temporarily halt manufacturing due to Brexit.

The Chief Economist at KPMG UK, Yael Selfin, apprehends more months of weak growth:  “The hangover that’s followed the UK’s original exit date is proving stronger than anticipated. Today’s figures signal the UK economy is likely to experience more subdued growth for the rest of the year, marred by Brexit uncertainty.

“The significant drop in car manufacturing, and in broader manufacturing activity at the start of Q2, point at more than just a reversal of the stock building effect seen as businesses prepared for an expected Brexit in March.

The annual growth rate of the country’s economy has been reduced to 1.3%. Before the Brexit poll, the growth rate exceeded 2%, annually.

The construction sector has also been affected by bt the unexpected drop; it fell by 0.4%.  The service sector has managed to be in the flat plain.

The Office for National Statistics has accused production shutdowns and the undoing of some Brexit stockpiling for the sharp decline. Rob Kent-Smith said : “GDP growth showed some weakening across the latest 3 months, with the economy shrinking in the month of April mainly due to a dramatic fall in car production, with uncertainty ahead of the UK’s original EU departure date leading to planned shutdowns.

“There was also widespread weakness across manufacturing in April, as the boost from the early completion of orders ahead of the UK’s original EU departure date has faded.”

Josie Dent, an economist from the CEBR also fears that Brexit stockpiling will weigh down the economy in the coming months: “Today’s data paints a sobering picture. Unless the economy makes a significant comeback, we are likely to see negative growth in the three months to May. However, early indicators suggest that this is unlikely, as manufacturers are using up goods they stockpiled in the first three months of the year instead of producing new ones”