Daily Management Review

UK's Brexit Gloom Increased By Honda’s Plant Closure


UK's Brexit Gloom Increased By Honda’s Plant Closure
The decision of the Japanese car manufacturing company Honda to close down its only manufacturing unit in the United Kingdom in 2021 has dealt a blow of Britain which is already under pressure with the uncertainty surrounding Brexit.
Honda also adds on the list of car makers that have already announced to reduce the operations in the YK amidst rising concerns over a no deal Brexit, which they say that it would severely disrupt their supply channels.
The Honda plant is situated in the town of Swindon and the importance of the plant can be gauged form the fact that the unit churns out over 10 per cent of the total cars that are made in Britain. However in recent years, the unit has had some serious issues. 
The closure would leave more than 35000 Honda employees at the unit jobless.
Soon after the news broke, a public message was given out by local lawmaker Justin Tomlinson, of the ruling Conservative Party, wherein he said that he has had a word with the company and that the closure of the plant was not because of Brexit insisted the lawmaker,  who was a Brexit supporting member of parliament.
"It is a reflection of the global market," said Tomlinson. "They are seeking to consolidate production in Japan."
"I'd like you to understand this is not related to Brexit,” said Honda president Takahiro Hachigo while speaking to reporters in Tokyo.
The chances that Britain will leave the European Union without a deal in March increased after UK Prime Minister Theresa May delayed a vote in the parliament over Brexit related deal that she had drawn up. According to oddschecker.com, the odds in favour of a no-deal Brexit have shortened to 2/1. On the other hand, a bet against UK banks is being placed by Steve Eisman, the trader whose prediction of the 2008 crisis was dramatized in the film The Big Short.
Earlier in the month, plans of build the X-Trail SUV in the northeastern town of Sunderland in the UK was cancelled by Honda's rival Japanese carmaker Nissan. This Japansese company did not mince any words and clearly stated that the decision was significantly influenced by the uncertainty around Brexit.
Imposition of customs checks and tariffs as products enter and leave the UK would be the most likely results if there is not formal deal on trade between the EU and the UK when the former leave the later. Most of the car makers in the UK have what is known as the ‘just in time’ manufacturing system and which means that the English channel is crossed several times by the supply chain for most British cars.
A no deal scenario would be "catastrophic for the UK auto industry and Ford's manufacturing operations in the country", said the United States carmaker Ford last month.
On the other hand, in a statement, Mercedes Formula One chief Toto Wolff said on Monday that if there is no deal before the UK leaves the EU, it could be a "nightmare scenario" for motorsports teams based in Britain. "The way we get parts and services is just in time at the last minute ... taxes would massively damage the Formula 1 industry in the UK," Wolff said.