Effects of Brexit on the Automotive Industry of the UK

Running head: BREXIT’S IMPACT ON UK’S AUTOMOTIVE INDUSTRY
Effects of the Brexit on the Automotive Industry of the UK
Name of Student
Institution

BREXIT’S IMPACT ON UK’S AUTOMOTIVE INDUSTRY 2
Effects of Brexit on the Automotive Industry of the UK

BREXIT’S IMPACT ON UK’S AUTOMOTIVE INDUSTRY 3
Introduction
A sector which has been hardest hit by the secession is the automotive despite being
very important in the UK’s manufacturing industry. As per reports, the sector contributes
close to one percent of the United Kingdom’s total output and about 9.4% of the
manufacturing output (Moravcsik & Andrew, 2012). The sector employs close to 169,000
people as direct employees most of whom are situated in the West Midland’s manufacturing
hub. When compared to the other sectors in the industry, the automotive sector has been the
most productive in the UK. It contributed to 13% of all the goods which are exported by the
United Kingdom, a second largest portion in the country. The sector, however one of the
most closely integrated in the EU (Bailey & De Propris, 2017). It has numerous and complex
supply chains stretching throughout the European continent. Due to the effectiveness of its
connection, large multinational companies chose to manufacture their vehicles specifically
for the EU market. An example of this is the Nissan Corporation which set up manufacturing
plants in the UK in order to create the market specific products for the European Union. A
large manufacturer such as Nissan can readily switch its production between plants in the
different countries of the block, but the decision usually depends on numerous factors which
will be highly applicable in the Brexit situation. In this study, we shall be exploring the
impacts which the Brexit will have on the economy of the United Kingdom, and specifically
the Nissan Company, one of the biggest players in the automotive industry of the United
Kingdom.
Analysis of the theory about the EU integration
The integration of the European Union brought together 28 countries of Europe but
with possible extensions to other regional trade agreements (Van, Overtveldt, & Johan,
2011). The level of integration of the European Union has been analysed from numerous

BREXIT’S IMPACT ON UK’S AUTOMOTIVE INDUSTRY 4
angles and perspectives since the early studies most of which focused on of the derivative
issues such as the increased relevance of trade blocks. The process of the European
Integration is based on a strategy which is time honoured of partially integrating policy
functions and institutions in a number of areas. These areas initially included coal and steel,
then trade and later on, a common currency among the states (Krugman, 2016). There were
high expectations that more integration would follow in other areas over time. The strategy
was a major approach to the Institutional integration of Europe in the 1950s. This was after
the failure of a more ambitious community of defence and politics which was purposed to
include a common armed force, common budget as well as a common legislative and
executive institution. Hence, the path of gradual and partial integration was adopted, taking
effect especially on the technical and economical areas with expectations of much deeper and
more political integration (Pierson & Paul, 2010).
The gradualist strategy has been successful for the EU as it was applied with large
economics of scale and low heterogeneity costs of the preference and traits across different
populations. In an example, the EU created a common market for all the manufactured goods
in the region. In addition, the addition also led to creation of dangerous and inefficient
institutional settings (Spolaore & Enrico, 2013). Example of it is the euro which was brought
about without the participation of the institutions which were historically associated with
successful union of money. The imperfections and shortcomings of the European Institutions
were widespread and institutionalized due to the expectation of the associated problems of
the previous steps would be fixed in due time by further integration. The commercial
integration and monetary integration would be followed by one which is more institutional
and political. This was referred to as a “chain reaction” towards an “Ever Closer Union.” (Tel
& Verdun, 2009)