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Auto manufacturers like General Motors, Ford and BMW are having a fit of the vapors as Britain’s referendum on European Union (E.U.) membership looms.

But Garel Rhys, emeritus professor of Motor Industry Economics and director for Automotive Industry Research at the Cardiff Business School in Wales, says they should calm down. Any realistic examination of the possible ramifications of Britain voting to leave the E.U. on June 23 – now know by the shorthand “Brexit” - points to a verdict of “Not much to see here. Move on please.”

Rhys said Britain’s automotive market, the second biggest in Europe behind Germany, has a trade deficit of $26 billion, so if it decides to pull out of the E.U. the business is so valuable the current participants will be desperate to make sure it continues. This effectively means free trade will go on.

In 2016, E.U. auto production reached 16 million vehicles, with 1.6 million made in Britain. Annual sales in Britain were over 2 million. Britain exports 80 percent of its production, led by Toyota, Nissan and Honda, and imports 85 percent of its new cars, primarily BMW, Mercedes, Audi, VW, FCA , Renault and Peugeot.

According to Rhys, German-owned companies and German-based production accounts for nearly 40 percent of the British market, more than twice the share of British factories themselves.

“The British car market is more important in numbers to the German economy than it is to the British,” Rhys said in an interview.

Ties that bind

Rhys said his research shows it would take a severe economic jolt to persuade auto companies to cut and run from Britain if Brexit happens.

Rhys has examined in detail the nuts and bolts of all the big manufacturers’ operations in Britain, and rated them in terms of their dependence on the country, which he calls “anchorage.”

Tata-owned Jaguar Land Rover (JLR), based in India, is most firmly rooted to Britain amongst the big operators, while luxury and high-end brands like BMW’s Rolls Royce, VW’s Bentley, Aston Martin and McLaren would definitely stay. Nissan, with its massive operation in Sunderland, England, isn’t likely to move, while General Motors’ Vauxhall plant near Liverpool is the least firmly established. France’s Peugeot closed a plant in Britain in the 2007, but this was a screwdriver operation with little local skills infrastructure.

Rhys looked at issues like the supply chain, local research and development, skills base and industrial work practices. He points out that being in the E.U. is not a guarantee against factory closures, pointing to long-established plants in Belgium which were shuttered, often in favor of those in eastern European countries.

“JLR  is the main center for production in the world," Rhys said. "All the R&D and design is in the U.K. It’s going to be here for another 10 years, despite its Indian ownership. Nissan isn’t suddenly going to up sticks and go. That would risk the global enterprise. (BMW’s) Mini has medium to high anchorage. GM’s factory near Liverpool makes a lot of cars but imports a lot of components from elsewhere and probably has the least amount of anchorage,” Rhys said.

Ford no longer makes cars in Britain. Its van-making plant was moved to Turkey in 2012, which is outside the E.U., where it proceeds to sell, tariff-free, into the E.U. Ford has been among the most panic-stricken of the major manufacturers, predicting doom and gloom for the auto business if Britain leaves. BMW has also argued strongly for Britain to remain in the E.U. GM held back initially, saying this was a political decision for Britons to make, before recently changing its mind and urging a “remain” vote.

E.U. hasn’t helped Toyota much

“Toyota has only medium anchorage with only half the plant working and one line mothballed. Being in the E.U. hasn’t helped them,” Rhys said. “The same with Honda; one line is mothballed, but for them it’s the only plant in Europe so that gives them medium anchorage. Rolls Royce, Bentley, Aston Martin, by the nature of the beasts these have high anchorage. The same goes for Formula 1 racing; high anchorage.”

Rhys thinks the automakers’ case for declaring possible disaster is pretty thin.

“This is based on fear of uncertainty, trying to reduce the unknown. But if they did a proper risk assessment, the case for going out is not much different from staying in,” Rhys said.

This doesn’t square with the opinion of many political and corporate leaders who are aggressively suggesting that if Britons are stupid enough to vote to leave the E.U., the sky will fall.

Relatively benign consequences

BMI Research weighed in with its view that Brexit would be a problem, but not for very long.

“Brexit would lead to a worsening of their (the auto industry’s) sales and balance sheets for up to two years after the June referendum. However the net effects after this short-term dip would be relatively benign,” said a BMI Research report published last week.

“Over the longer run, as the UK pound finds its footing and uncertainty over trade and investment arrangements with the E.U. is gradually resolved, we expect the net effects to be balanced,” BMI Research said.

Rhys said whatever the result of the referendum, Britain’s auto industry will thrive, and there’s a range of self-interest to make sure this happens.

“It might not all be sweetness and light, but even if the U.K. is outside the E.U., the powerful hitters in Europe will make sure car industry and car makers and finance will still operate. It’s not in anybody’s interest not to do that,” Rhys said.

He also points to the automotive industry’s shocking record as a predictor of economic developments, with its shrill insistence that disaster awaited Britain if it deserted the European Exchange Rate Mechanism in 1992, and if it didn’t join the Euro single currency in 2002. Both times the industry’s advice was ignored. Both times prosperity ensued.

Auto columnist Neil Winton, based in Sussex, England, covers the European auto industry.

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