Essay : UK Automotive’s dysfunctional relationship with sterling

Chris Cowin recalls the profound influence fluctuations in the value of the pound have had on the fate of Britain’s car makers over the years, focusing on a few interesting chapters in history, ranging from BMC to BMW.

It’s a little-discussed factor, but probably as important as management, Trade Unions and product quality in the overall scheme of things.

Living with sterling: The elephant in the room

Triumph Spitfires for export
Triumph Spitfires for export

The list of reasons put forward to explain the trials and tribulations of Britain’s car industry, and specifically British Leyland and its successors, over the years is almost endless. Yet the role of the exchange rate gets short shrift, perhaps because it seems rather dull.

At the end of the day all one needs to remember is that when the pound is weak, that’s helpful for exporters (and British Leyland through to the Rover days was Britain’s biggest manufacturing exporter). And conversely, a strong pound makes life much more difficult.

In simple terms – profit and loss

Simply put, if somebody building cars, in Abingdon say, needs £10,000 per vehicle to break even, then if the customer is paying in US dollars that manufacturer requires $15,000 when the exchange rate is $1.50 to the pound. However, if sterling strengthens to $2.50, then they need to charge the same American buyer $25,000 – that would be a show-stopper for sales of most cars.

On the other hand, if they start off successfully selling cars to Americans at $25,000 dollars apiece and then sterling weakens by the same degree, from $2.50 to $1.50 – they can slash prices to sell more cars, or increase profits, or a combination of both. They’re laughing all the way to the bank.

That core formula always holds true, but in the real world a lot of factors cloud the picture. However, as this is AROnline rather than The Economist, let’s move on quickly to some real stories about cars which will give a chance to mention things like retailer margins, currency hedging and the offsetting impact of component imports, which make that raw example a little too simplistic.

You might now be thinking that a swing in the value of sterling from $1.50 to $2.50 and back again is fantasy land, but that’s almost exactly what happened between October 1976 ($1.53) and October 1980 ($2.42). The pound then weakened, coming close to parity ($1.00) at one point in 1985. That rollercoaster had consequences (to put it mildly) for BL, as we shall see.

Harold Wilson

The 1967 Devaluation

As often discussed on AROnline, things were bleak at BMC during 1967. But at the end of the year the company, and the British motor industry generally, received a shot in the arm when, after a long period of secret prevarication, the Wilson Government (above) bit the bullet and devalued sterling from $2.80 to $2.40 – a 14.3% devaluation – on 18 November 1967. This was within the framework of fixed exchange rates which had prevailed since the Second World War, with no change in the sterling rate since 1949 while the world, and Britain’s trading relationships, had changed massively.

Sterling’s devaluation thus applied against all other currencies and appeared, for a while at least, to be a masterstroke. BMC had been hamstrung by the combination of tariff barriers and an overvalued pound from expanding sales to Europe, which was their aim. As Alec Issigonis said in early 1968, the Mini ‘was still to be exploited on the continent’.

Now that changed, with the Mini coming down in price in all continental markets, as did other models from BMC. Filmer Paradise, who had been recruited in June 1967 to run BMC Europe, based in Lausanne, was able to oversee an impressive surge in sales spearheaded by the Mini, with the BMC 1100/1300 range playing an important supporting role. For with fortuitous timing, the revised Mk2 versions of both Mini and 1100/1300 appeared at the same time as devaluation, allowing BMC to advertise ‘improved cars at lower prices’.

Harold Wilson is thanked for enabling a price cut on the new Mk2 Mini, and other BMC models. This led to a devaluation-fuelled surge in sales in France. The base Mini came down from 7805F to the new 'Mini price' of 7090F. Via MinipassionMini
Harold Wilson is thanked for enabling a price cut on the new Mk2 Mini, and other BMC models. This led to a devaluation-fuelled surge in sales in France. The base Mini came down from 7805F to the new ‘Mini price’ of 7090F. Via MinipassionMini

BMC uses devaluation to its advantage

The actual cut in retail price seldom matched devaluation exactly, because the retail price of a car in an export market includes elements not affected by currency changes, notably retailer and distributor margins. But cuts in price there certainly were, with advertising (pictured above) sometimes crediting them explicitly to sterling’s surprise devaluation, which had been very newsworthy.

For 1968, the new British Leyland sold 216,000 cars on the European continent, representing a 54% jump on the figure achieved by all its constituent companies  – the largest of which was BMC – in 1967. That figure of 216,000 was greater than sales in all other export markets combined, and the same could be said for the British motor industry as a whole.

That underlines how, while booming Europe offered great potential for sales expansion, traditional Commonwealth markets were buying less and less from Britain by the late 1960s. This was due to local manufacturing, diversification of trading ties and the advancing Japanese. Meanwhile, British cars were confined largely to the sports car niche in North America.

Innocenti Mini Cooper 1300

The Mini at its peak

The Mini was entering its European heyday, appearing high on the all-Europe (including UK) best-sellers’ chart in the early 1970s alongside cars like the Fiat 127 and Volkswagen Beetle, the only time a British car would do so.

This supported UK production of 300,000 Minis annually at the peak, of which only half rolled out of Longbridge on their own wheels, the remainder being exported as components to one of several European locations that built the Mini.  The largest of these were Seneffe in Belgium and Innocenti in Milan – both of which are included in that production total.

With volumes like that, Mini production was enjoying impressive economies of scale, which experience showed pushed the profitability needle well into the black.

Let the good times roll

British Leyland advanced in sales again on the continent in 1969, although the benefits of devaluation were beginning to be eroded, not least by the competitive devaluation of the French Franc in mid-1969. The following year saw a slight downturn largely as a result of strikes hitting supply, but 1971 had British Leyland sell a record 247,000 cars on the European continent – never to be bettered by the company as it turned out.

BMC/British Leyland had not only cut prices thanks to devaluation, but it was simultaneously able to make more profit on European sales. That was in contrast to pre-devaluation, when the company only managed to break even on many of the models sold abroad. Combine this with increased production volume, and BMC was swinging back into profit for its fiscal year of 1967/68 (most of which was post-devaluation) after recording a loss the previous year. Many of the problems of Britain’s national champion car maker appeared to be on the mend.

Rover gets in on the act. It might have had a premium positioning but that didn't stop Rover from trumpeting a devaluation linked price cut on the 2000TC in France - as credited in the first line of the text. From 24670 F to 21800 F
Rover gets in on the act. It might have had a premium positioning, but that didn’t stop Rover from trumpeting a devaluation linked price cut on the 2000TC in France – as credited in the first line of the text. From 24,670 F to 21,800 F

We’ve been focusing on BMC/British Leyland in Europe here, but devaluation also helped other makers supply other export markets. For example Chrysler, which was in the process of incorporating the Rootes Group, clearly saw devaluation as a help in promoting the sale of British-built cars on the American market.

A competitive sterling exchange rate is likely to have influenced Chrysler in choosing the  Hillman Avenger in the early 1970s as a captive import to be sold as the Plymouth Cricket across the US and Canada, integrated into its domestic model range. This was a development with potential for huge sales, although in the end, those would be enjoyed by the Mitsubishi cars that replaced the Cricket after 1973.

Devaluation gets the credit as Chrysler reduce the price of the Sunbeam Arrow (Hillman Hunter) in the USA (the rectangular headlights of the British Hunter were not legal in the USA)
Devaluation gets the credit as Chrysler reduce the price of the Sunbeam Arrow (Hillman Hunter) in the USA (the rectangular headlights of the British Hunter were not legal in the USA)

Parallel measures on the home market

Another factor which lay behind the post-devaluation export surge was restriction of the British domestic market, which ensured companies weren’t short of cars to export. It was hard to obtain a loan to buy a car in Britain in 1969, as the Government restricted credit.

With just one million new registrations, the British market was half the size of West Germany’s. The stick element of a carrot and stick export promotion strategy wasn’t a good idea in the long term – the Germans didn’t develop a strong car industry by depriving their home market of cars – but, in 1968 and 1969, it certainly bore fruit.

Looking at the whole British car industry, 1969 would prove to be a banner year for exports which set a record at 824,000, representing 48% of total production. This was a record number of cars which would not be surpassed until the 1990s by a then massively transformed industry.

Back at the sharp end

That surge in exports allowed Britain to reclaim, if briefly, the title of world’s fourth largest car producer from France. Optimists looked to a future where British Leyland would mirror Fiat, Renault and Volkswagen by selling as many cars to European neighbours as were sold domestically.

As it turned out, that devaluation-fuelled surge soon fizzled out as rising inflation within the UK cut into any pricing advantage. An over-rapid expansion of domestic demand and strike disruption also led to a reduction in exports in 1972 – and by then the framework of fixed exchange rates had collapsed, which saw the pound climb briefly against the dollar, before starting a long slide as the Heath Government crumbled amid crisis in 1974.

Undoubtedly devaluation had worked, if only for a while. The much-mocked ‘pound in your pocket’ speech of Harold Wilson was intended to reassure British shoppers that the money in their purse would buy just as much down the shops on 19 November as it had on 17 November. This was essentially true, for bread and butter items.

The effects on imports to the UK

This was less true if those shoppers planned to buy imports, such as imported cars, which had little choice but to go up in price. That import-restraining consequence of devaluation, and of credit controls, was important for the economy as a whole and the balance of payments, which was the focus of a great deal of worry in the 1960s, explaining why devaluation was seen as necessary in the first place.

However, in the case of the British car market, where imports accounted for less than 10% of sales in 1967, that rebuff of domestic competition from imports was rather a secondary boon for BMC. That low import penetration was largely due to a protectionist 25% import tariff.

The Government was desperate to encourage economic growth, but every time the economy took off, Britain ran into the dreaded ‘balance of payments constraint’ and restrictions had to be brought in. The resulting stop-go retail environment hurt the car industry as much as any. Devaluation was intended to fix that, as was intervention in the car industry.

So, British Leyland had been created in the hope of making it more internationally competitive, and a bigger exporter.


1976: Delusion

Roll on a few years and Britain had joined the European Economic Community (EEC), which was expected to enable a major expansion in exports, concurrent with European car manufacturers increasing their British sales, within the context of liberalised two-way trade.

Meanwhile, companies like British Leyland had needed to adapt to floating exchange rates which created uncertainty in planning and pricing. The company had been rescued by the Government in 1975 and was often held up as an example of state-owned inefficiency at a time when the British state itself was seen as failing, and famously required rescue by the International Monetary Fund (IMF) during 1976.

However, as an example of the ‘self-correction’ a fluctuating exchange rate could bring, the fall in sterling which those economic difficulties prompted resulted in windfall gains for British Leyland. These flattered the figures and perhaps masked the seriousness of the company’s plight.

British Leyland in profit

Despite everything, including an atrocious spate of strikes, 95% state-owned British Leyland Limited posted pre-tax profits of £70.6 million for the 1975/76 financial year. The truck and bus side was raking in the profits while car-making division Leyland Cars was still posting losses, but those losses had shrunk massively from £109 million in 1974/75 to £25 million in 1975/76, despite a loss in UK market share.

The reason was clear. The 1975/76 financial year was – exceptionally – a 15-month period, as British Leyland shifted its financial year-end from September to December. Therefore, those numbers covered all of 1976 – a year in which sterling had started off at $2.00 but slumped to $1.80 in May and reached a low of $1.53 in October. That represented a near 25% devaluation in a seriously short period of time.

This gave anyone involved in the marketing of the company’s cars overseas the flexibility to price more competitively. As a consequence, the company enjoyed higher export sales than otherwise, made more profitably – that explains why 257,000 cars were exported in 1975 and that figure increased to 320,000 in 1976.

Pile them high and sell them cheap. The TR7 was priced to sell in the USA in 1976, which a weak pound made possible.
Pile them high and sell them cheap. The TR7 was priced to sell in the USA in 1976, which a weak pound made possible

Planning for North American growth

The grand design to build a corporate sports car in a dedicated plant (Speke No.2) in huge volumes for the North American market began to look a little more credible. Triumph TR7 sales in the USA jumped from 6000 in 1975 to 16,000 in 1976, and were helped by aggressive pricing (above).

Far higher production volumes of up to 60,000 cars annually had once been discussed, which was the kind of sales volumes the Datsun 240Z/260Z achieved in the USA in the 1970s. But the TR7 was at least selling in substantial numbers during that period of ‘pricing to sell’. During its lifetime, 65,000 TR7s would be sold to Americans, just beating the TR6, but falling behind the cheaper and longer-lived Triumph Spitfire.

Rubber-bumpers or not, the MGB and Midget were also enjoying a purple patch in America at the time, helped by affordable pricing which put them on the shopping lists of American students and teenagers.

Sales boom in the USA

When Jaguar volume was added to MG and Triumph, British Leyland sold 65,000 cars in the USA during 1976. This was a new record and something achieved profitably – although, as Michael Edwardes later concluded, even with sterling at that historically very low level, the sports car business in the USA was only marginally profitable. Growth continued into 1977 which would prove to be the best year ever for the company in the USA, with close to 70,000 cars sold.

However, those figures pale into insignificance when one remembers the Ryder Plan, which the company had adopted as a guide following rescue, believed job losses in the British factories could be avoided through a huge expansion of sales on the European continent. Ryder prescribed a doubling of 1973’s continental sales volume to 400,000 cars annually and the capture of around 4% of total continental sales by 1980.

This was hopelessly optimistic, and the actual outcome was closer to 1%. With the Mini not getting any younger, sales of the company’s big-seller on the continent were unlikely to expand. The Morris Marina and Austin Maxi had shown themselves of limited appeal to continental Europeans. Meanwhile, although the Princess and Rover SD1 ranges were expected to generate conquest sales across the channel, cars that large would never contribute big numbers towards that 400,000 target.

The future in the Allegro’s hands…

So, the heavy lifting was left to the Austin Allegro, conceived as a ‘car for Europe’. It was built both at Longbridge, which had capacity for up to 5000 Allegros per week, and at the Seneffe assembly plant in Belgium which was tooled up to supply Allegros in impressive numbers to continental customers.

In addition, the Italian-built Innocenti Regent could potentially top up supply Europe-wide, as the Innocenti Minis had been doing. Allegros were expected to become as common a sight across the continent as mainstream models from Fiat or Renault – or as the Mini. And British Leyland was ready to build them. The best laid plans…

Allegro aspirations. A great deal hung on the Austin Allegro in Europe in the 1970s. And Leyland Cars did its best to boost sales through sales promotion and competitive pricing.
Allegro aspirations. A great deal hung on the Austin Allegro in Europe in the 1970s. Leyland Cars did its best to boost sales through sales promotion and competitive pricing


In a nutshell, and for reasons discussed at length elsewhere on AROnline, the Austin Allegro wasn’t up to the formidable challenge British Leyland laid on its shoulders. But with sterling so low during 1976, and with the much improved Allegro 2 cars correcting some of the criticisms of the original, the battle was not seen as completely lost.

Empowered by the weak pound, and the final phasing out of all tariffs, Leyland Cars cut prices in markets like the Netherlands giving Allegro sales a jolt, while huge sums were spent on sales promotion activities in many countries. In a sense, state-backed Leyland Cars was exploiting the financial flexibility the low pound gave to buy market share, or attempt to do so.

The Benelux countries had seen a near doubling in Leyland sales to 40,000 cars between 1973 and 1975, with the Allegro almost matching sales of the Mini, showing there were grounds for hope. Even the Germans could be persuaded to buy 3000 Allegros in 1976.

Austin Allegro

A false dawn

Although it disappointed, the Austin Allegro could claim approximately 150,000 continental customers during its lifetime – this was the lion’s share of approximately 210,000 sold overseas in total, with exports accounting for around one third of all production.

Overall, sales of Leyland cars on the European continent which had slumped dreadfully during 1974 and 1975, staged a recovery in 1976 and again in 1977, when almost 200,000 were sold which was still below the 1971 level but at least heading upwards. The size of the total market was expanding as the recession of 1974/75 receded, which helped.

However, the growing focus on price to shift the product saw Leyland Cars, or at least its Austin Morris products, increasingly adopt a value brand position in continental Europe. Advertising increasingly banged the bargain-pricing drum. This was all very well while sterling remained low, but it left the company horribly exposed to an appreciation of sterling.

And appreciation there came.

1979-81: Petro currency

Britain’s North Sea oil first started coming ashore during 1975, with new discoveries of oil reserves quickly making it clear the United Kingdom was likely to become a net oil exporter in the 1980s, a development some saw as almost divine providence for a country which had struggled with chronic balance of payments problems for decades.

International commentators, who had tended to write the country off, now had to qualify their scorn, and during 1978 Margaret Thatcher – as leader of the Opposition – embarked on an international speaking tour, pointing out how taxation of anticipated oil revenues would enrich the British state in the decade to come.

As the penny started to drop, sterling started to climb, reaching $1.90 during 1977 and continuing to climb during 1978. Then, in early 1979, the Iranian Revolution led to a jump in the global price of oil. This was bad news for sales of the thirstier cars built by BL Cars.

Beyond that, such a game-changing development increased the value of the oil already planned for extraction from the North Sea, and made many more oil fields viable, multiplying up the expected gains, so that sterling became effectively a petro-currency.

Margaret Thatcher

A change in Government

When combined with the impact of the May 1979 election of a Conservative Government, and its consequent policy of high interest rates to combat inflation, a fire was lit under the pound. It rose inexorably to reach a peak of $2.42 in October 1980, representing an appreciation of more than 40% since 1976.

This was catastrophic for BL and it’s no surprise that boss Michael Edwardes was in an angry mood at the November 1980 CBI Conference where, referring to North Sea oil, he said it ‘might be better to leave the bloody stuff in the ground’.

By that time he’d been struggling with a high pound for a while. Appointed in late 1977 when British Leyland was making hay in the USA and at least moving the metal in Europe, he’d seen the appreciation of sterling wreak havoc with the business. The ‘brink’ he pictures BL as then occupying in his book Back from the Brink was made far more precarious by the strengthening of the pound.

The profits dry up

BL, in fact, reported a small pre-tax profit for 1978, but losses mounted in line with sterling during 1979. Edwardes was forced to request £300 million from a very reluctant Conservative Government at the end of the year – this was in part to cover those losses, but also to fund the new products the company desperately needed, which it had no way of financing without outside help.

With the Government as paymaster, the British taxpayer was, in effect, subsidising the supply of motor cars to Americans – cars the Americans didn’t seem to want any more. For although BL accepted a swing into loss in North America, it had no choice but to increase prices which reduced demand.

The MGB roadster, for example, had shot up from $4795 in 1976 to $6550 in 1979. The Jaguar Rover Triumph division which, when created in 1978, was expected to be a money-spinner had become a millstone – for all the cars sold in North America (including MG) fell under that division.

The Triumph TR8 - A victim of the strong pound. Americans loved them, and were prepared to pay top money. But with the TR7 racking up losses in North America due to sterling's strength, both TR7 and TR8 were killed.
The Triumph TR8 – A victim of the strong pound. Americans loved them, and were prepared to pay top money. But with the TR7 racking up losses in North America due to sterling’s strength, both TR7 and TR8 were killed

The V8 deathknell

The stars were definitely not aligned for the Triumph TR8 and Rover 3500 (SD1), both introduced to North America in 1980. While the TR8 received rave reviews and could cope with what amounted to premium pricing, the TR7 could not. And it was not economic to build the TR8 in isolation once the TR7 was killed off in 1981.

Meanwhile, the Rover had to be priced in the same ballpark as competitor cars and was almost certainly being sold at a loss. When weak demand resulted in discounting, the plan to build tens of thousands of Rovers for America crashed in flames with only around 2000 sold.

Like the TR8, the Rover was withdrawn after 1981, which was something of a tragedy given the huge resources devoted to federalising the car.

The career of the (SD1) Rover 3500 in North America was not a happy one. And when discounting was introduced to shift them (as seen here) it had become a loss-generating fiasco. Both Rover and Triumph left America after 1981 and Jaguar Rover Triumph Inc. became simply Jaguar Inc.
The career of the (SD1) Rover 3500 in North America was not a happy one. And when discounting was introduced to shift them (as seen here) it had become a loss-generating fiasco. Both Rover and Triumph left America after 1981 and Jaguar Rover Triumph Inc. became simply Jaguar Inc.

The European plan comes unstitched

Moreover, on the European continent, a value brand positioning was simply unsustainable, and one consequence was a near-total withdrawal of BL from the car market in Scandinavia, where profit margins were always tighter at the best of times.

British Leyland was market leader in Denmark in 1970 with approx. 20% of sales, but in 1980 it sold almost nothing to the Danes, the Swedes or the Norwegians. Sales for the whole European continent slumped towards a dismal 100,000 cars annually in the early 1980s – far below the aspirations of Ryder.

The Morris Marina in Denmark - 1979. This kind of 'value brand' positioning and pricing was madness when the pound strengthened after 1978. BL simply walked away from the Danish market (even with the Mini). Though there was a limited comeback during the '80s.
The Morris Marina in Denmark – 1979. This kind of value brand positioning and pricing was madness when the pound strengthened after 1978. BL simply walked away from the Danish market (even with the Mini) – although there was a limited comeback during the 1980s

We’re concentrating on cars here, but of course the truck and bus side of BL, and Land Rover, were also subject to the same pressures. We now know that from mid-1981 onwards sterling began to fall back against the US dollar. The new Reagan administration saw the dollar strengthen which was one reason, while the UK started to cut its still sky-high base lending rate (from 14% to 12% in March 1981) which was another. The latter development saw a welcome weakening against European currencies as well.

If BL had known that, and perhaps it could have been predicted, then the company might not have taken such drastic action in the face of the overvalued pound. But, under pressure from ‘Hawks’ (notably Keith Joseph) in the new Conservative Government, who demanded action to stem losses as a condition of continued subsidy, BL announced a radical Recovery Plan on 10 September 1979. This would involve 25,000 redundancies and a number of plant closures. It was a plan forced upon the company by the high pound.

Effectively giving up on exports

A general retreat from the export business, which was almost bound to generate losses in that period, was involved. This was evident from where the axe fell in the Recovery Plan. Canley, which built the TR7 and Spitfire mostly for America, was for the chop, although TR7 assembly would continue at Solihull for a while.

Seneffe was under a cloud, as BL clearly didn’t need that production capacity in Belgium when the limited number of cars sold to Europeans could be supplied direct from the UK. A high level of UK content prevented Belgian assembly from offering much salvation from the consequences of a high pound.

And most famously, MGB assembly at Abingdon was to end, with the MGB being portrayed as a major loss-maker – the intention was that the factory would be re-purposed, perhaps (rather humbly) to help unpack kits of parts for the Triumph Acclaim.

Externally, the Triumph Acclaim was almost pure Honda Ballade - only the smallest of details differentiated the two, and that was the case in European markets, too. (Photograph: Rene Winters.)

The Japanese advantage

Those Honda-supplied kits looked good value, as the strong pound made imports more competitive. They ensured the Triumph Acclaim with its split Anglo-Japanese make-up would be insulated against exchange rate fluctuations, a phenomenon offsetting the impact of a high pound. This would be repeated in years to come on many other cars built in the UK by Japanese firms, but not MG Rover, fatally.

That MGB announcement is often referred to out of context, as a standalone act of vindictiveness. But in reality it was part of that comprehensive Recovery Plan, which was endorsed by the workforce in a ballot (87.2% voted for it). The sports car business of BL essentially became a sacrificial lamb, for the decision to kill off the TR7 and TR8 was taken just a year later. Only in light of that sacrifice was the Government willing to grant BL the money requested for 1980, followed by a much bigger request of £990 million in the 1981 Corporate Plan.

Put another way, the Government had been persuaded it made sense to subsidise the production of volume cars primarily for the British market (Metro, Maestro and Montego) which had an important role in helping the balance of payments (as import substitutes as much as anything) and would keep the workforce of the two main plants of Longbridge and Cowley in jobs, maintaining the core of a British-owned volume car industry.

BL: Too big to fail

It was tacitly accepted that was unlikely to be very profitable, if at all (and it wasn’t for most of the 1980s) – but, essentially, the company was too big a business to let fail. However, the Government wasn’t persuaded it was worth subsidising the fickle and peripheral business of building sports cars for export – ‘if you can’t make money doing that, why do it?’ people in Whitehall might have mouthed.

The one big exception to the above was Jaguar which, despite huge losses being incurred during 1979-1981 thanks largely to the strong pound, was reprieved. It’s said that Norman Tebbit and Denis Thatcher being ‘Jaguar men’ helped.

The Conservative Government essentially accepted that, even as the sports cars were sacrificed, Jaguar should be preserved. The Government funding granted to BL in 1980 and 1981 to secure a future for the ‘LM’ cars (Maestro and Montego) also secured the future of the XJ40 and AJ6 engine. Jaguar was kept in the nest while MG and Triumph were thrown out.

The fall of sterling makes all the difference

Such strategic thinking proved wise because, once sterling started falling against the US dollar in late 1981, Jaguar moved rapidly into the black, soon earning bumper profits on its US business. This was no bad thing, as it was all that was left of the BL sales presence in North America. However, tragically, only Jaguar had been permitted to ride things out until a better future arrived. The sports cars, with the benefit of hindsight, could also have enjoyed a very successful decade in the 1980s once sterling fell – if they’d still been around.

Jaguar’s American sales numbers mushroomed, impressive when one considers this was all on the back of the Series III XJ6 which was basically a very old design, flanked by the XJ-S – the Series III XJ12 was not sold in the USA after 1979. From just 3000 cars in 1980, Jaguar sold 24,500 in the USA in 1986.

Taking into account the value of a Jaguar compared with the Spitfires and Midgets of the 1970s, that resulted in Jaguar largely substituting in revenue terms for the exit of all other BL models from the American market. The UK Automotive sector had backed a winner it appeared, with Jaguar also doing well in places like West Germany.

An incredible turnaround…

With a weak pound flattering profits, Jaguar – almost left for dead a few years earlier – suddenly looked to be a very healthy business by 1983. This is why it was moved to the top of the list for privatisation, implemented in 1984. That, of course, robbed BL of what had become a useful profit stream and also reduced their export ratio, for Jaguar had become primarily an export marque – 80% of 1985 production went overseas.

By that time, the BL export ratio (% of production exported) was looking very weak indeed. As the white line on the chart below shows, from exporting around half of car production measured in units in the early 1970s, BL had seen that figure contract dramatically by the early ‘80s. The shrinking of exports prompted by the strength of sterling after 1978 must take much of the blame.

Production (shaded area), Exports (columns) and Export Ratio % (Line – measured on right-hand scale) for cars (including CKD kits) built by British Leyland and successors – 1968-2005

As seen on that graph, exports endured something akin to a heart attack from 1978 onwards, with the fall in the export ratio line exaggerating things a little, because the 1980 introduction of the Austin Metro saw production aimed at the domestic market increase. Nonetheless, for Britain’s biggest car maker to be exporting only 20% of output, ten years after joining the EEC and with a proud history of sending cars around the globe, was something of a national embarrassment.

Not just that. BL’s running down of exports had been mirrored across the industry, with the strong pound of 1978-81 undoubtedly a factor. It helped kill DeLorean although that was trivial compared to the near total cessation of exports by GM’s Vauxhall – with the brand itself disappearing from all export markets in 1981 – and with Ford and Chrysler/Talbot also exporting far fewer cars. Talbot exports were mostly made up of low-value Paykan kits for Iran which only just counted as ‘cars’ for statistical purposes.

The sun sets on exports from Ford, GM and Chrysler/Talbot

Those multinationals were running down their UK operations anyway, certainly as a source of exports. However, the strong pound of 1978-81 hastened the process, with consequences for the unemployment figures. Vauxhall’s factories would begin exporting again much later, despatching cars badged Opel and Holden overseas, but by then the economic situation had changed dramatically.

The UK was only exporting 200,000 cars annually in the early 1980s, one quarter of the 1969 level and just one sixth of the 2016 figure. That, combined with imports expanding to take more than half of the British market, resulted in truly dreadful deficits on trade in cars being posted by the UK in the early 1980s. This was a development which the strong pound encouraged of course.

Government policy towards the car industry became shaped by the need to reduce those trade deficits, which were a drain on the economy. In the long-term they succeeded, because in 2012 the UK trade deficit on cars was eliminated completely, if temporarily, for the first time since 1973 – but that’s the subject for another article.

Rover 75 launch image

1994-2000: Rover and BMW

No discussion of the impact of the exchange rate on BL and its successors would be complete without delving into the period of BMW ownership of Rover. But many discussions of BMW’s ownership of Rover fail to mention the exchange rate aspect and, as such, they are woefully incomplete.

This is a topic where emotions run high, so it’s probably best to stick to the raw facts. By this time the key exchange rate was the pound against the Deutschmark, as all the major continental European currencies were linked to the Deutschmark through the Exchange Rate Mechanism (ERM), and nearly all of Rover’s exports were to the European continent.

So, when the pound strengthened against the Deutschmark from 2.2DM in 1995 to 3.2DM at the peak in 2000 (a 40% plus appreciation), it couldn’t fail to have an impact similar to the pound’s comparable strengthening against the dollar 20 years before, as discussed above.

European sales stymied

The BMW plan for Rover, involving export of reasonably priced cars to the European continent, was essentially holed below the waterline. In 1995, boss Bernd Pischetsreider (below), had declared with fateful optimism that ‘Britain has become the most attractive location in Europe for car production’.

That was when sterling was still weak against European currencies, having effectively suffered a forced devaluation at the hands of the markets in the 1992 ERM fiasco. However, if Pischetsreider had consulted the history, he’d have seen that what goes down, can easily go up.

Unlike Japanese competitors built in the UK, Rovers had predominantly UK-sourced content, so there was little to offset the impact of a high pound once it started rising in 1997. In a parliamentary debate held in the dying days of BMW’s ownership of Rover, the UK content of the company’s vehicles was cited as 89% – although that’s likely to have included Land Rover as well as Rover cars. On the new Rover 75 saloon, UK content was still over 70%.

All very awkward - BMW's ownership of Rover became so, once the pound grew much stronger against the Deutschmark. Bernd Pischetsreider is pictured in 1994.
All very awkward: BMW’s ownership of Rover became so, once the pound grew much stronger against the Deutschmark. Bernd Pischetsreider is pictured in 1994

It had been oh so promising

After acquiring the company for £800 million in 1994 (double that when absorption of Rover’s debt is accounted for), BMW had built up Rover sales on the continent by giving the Rover franchise to their dealers, with Rover sales in West Germany alone growing from 8000 in 1993 to 32,000 in 1997, with the objective of 2% Rover market share in Germany often cited.

Additionally, for a period BMW was actively looking at the creation of an ambitious three-pillar manufacturing empire which would also have included Chrysler – that’s something which now tends to get forgotten in discussions of BMW’s strategy for Rover. However, that plan was torpedoed by the Daimler-Benz merger with Chrysler in 1998.

On top of that reversal, from 1998, exports to the European continent had to endure price increases due to sterling’s strength which, of course, reduced sales volumes. Consequently, the surge in Rover exports to Europe which occurred during the early years of BMW ownership went into reverse, as shown on that graph. And while export sales were down, so was their profitability – entering loss-making territory.

Not only that, the UK market became much more attractive for importers, who had the flexibility to discount while still reaping bumper profits – that, in turn, cut into Rover’s domestic market share, again implying losses as production was cut.

Inward investment suffers

There’s more… The huge £1.7 billion cost of a planned overhaul of Longbridge, to be financed largely by inward investment from Germany, also swelled when expressed in DM as sterling appreciated. As did Rover’s mounting losses. Loving Rover had become a losing game, for BMW anyway, and the company’s shareholders became increasingly rebellious over the costs of supporting ‘the English patient’.

It was that pincer movement of exchange-rate driven pressures that Bernd Pischetsreider chose to complain about at the launch of the Rover 75 in 1998. It was a magnificently clumsy choice of time and venue, but the point he was making was valid. Both for the Rover 75 – intended to be built primarily for export to Europe. And for Rover overall.

Rover was almost certainly the manufacturing enterprise most exposed, when its scale is taken into account, to exchange rate fluctuations. And the New Labour Government swept into power in 1997 appeared to be decidedly relaxed about letting the value of the pound rise.

Banking issues

The incoming Government was seemingly oblivious of the impact on the Rover Group. Other manufacturers, among them Toyota, were also complaining formally about the situation. The Government’s hands were tied to a degree, with the Bank of England now setting interest rates independently, following Chancellor Gordon Brown’s decision to hand over that decision-making process.

The central bank was setting interest rates high by European standards, with the control of inflation in a booming economy the priority. This explained sterling’s strength, but it was far from ideal from an exporter’s standpoint. There were actions Government could have taken to ease the pain for Rover, and its German parent, but it failed to act.

Sometimes merely signaling that policy is aimed at reducing the value of a currency can start it sliding. But of course weakening the pound isn’t much of a vote winner, despite the beneficial impact on manufacturing industry and the people who work in it – until they go on holiday to Spain anyway.

A rare German failure

Had Pischetsreider been successful in jolting the Government into action that weakened the pound, he would have been hailed as a hero. Not just at a relieved Rover, but across much of manufacturing industry – but his efforts were to no avail, and the rest is history. That history involved BMW unloading the Longbridge-based part of the Rover car business to the Phoenix Consortium in 2000, following which the company was renamed MG Rover.

The Government had dragged its feet on offering BMW aid for its plan to overhaul Longbridge, which would have safeguarded 14,000 jobs directly, even though Ford-owned Jaguar had been granted £72 million in 1994 to help overhaul Castle Bromwich. BMW had been asking the Government to contribute 12% of the cost of the Longbridge overhaul, and such aid might have sweetened the pill of heavy losses even if sterling’s level remained unchanged. Ultimately, it might also have persuaded BMW to hang on. Unfortunately, by the time a package was grudgingly put on the table, events had moved on significantly.

MG Rover was, of course, subsequently faced with exactly the same problems as BMW before, and presided over a steep drop in the export ratio (as shown on that graph) in parallel with falling domestic sales and production until their demise in 2005. Very late in the day, the pound began sliding, trading in what would have been in pre-Euro days the 2.7 DM–2.9 DM range during 2005 and 2006, and lower still in 2007. Unfortunately, that relief came too late, rather as it had done for the MG and Triumph sports cars a generation earlier.

Mini R50 buying guide

Over to Plan B

Meanwhile, BMW switched to what was effectively Plan B for manufacturing in the UK, retaining part of Cowley (plus Swindon and Hams Hall) and using them to build 4.5 million MINI-badged cars to date which, as premium-priced vehicles, are much less affected by exchange rate issues.

Nobody buys a MINI because its cheap. Nor do they buy a Range Rover because it’s cheap, which explains why BMW had no trouble selling the Land Rover side of Rover Group to Ford in 2000, complete with the ready to go new Range Rover (L322). That looked like a very viable business, irrespective of the strong pound.

In a sense all that mirrored how the German motor industry had itself reacted to exchange rate shocks in the past, for they had them too – notably in the early 1970s when the end to fixed exchange rates saw the Deutschmark appreciate strongly. They went premium.

Faced with a similar challenge in the 1980s, the Japanese instituted a radical drive to redesign vehicles and reduce their cost of production.

Hedging one’s bets

By the 1990s, the practice of currency hedging had become much more widespread, through which companies can contract with a bank to lock in an exchange rate for a period going forward. But while that can protect a company from short term fluctuations, it can’t cancel out a more long-term realignment of currencies. So, although hedging could have protected Rover from a short-term blip in the value of sterling around the time of Tony Blair’s 1997 General Election victory, it couldn’t protect the company when that blip in values turned into the ‘new normal’.

And it didn’t. As Chris Brady and Andrew Lorenz explain in their book ‘End of the Road’ which covers the BMW-Rover saga in forensic detail, BMW had locked in a 2.40DM exchange rate for Rover through hedging. But that cover expired in June 1998, shortly before the Rover 75 launch, when ‘Hurricane Sterling’ as they call it hit with a vengeance, for the actual exchange rate was already flirting with 3DM.

Of course the import of BMW cars to the UK from Germany was made extremely profitable by the strength of the pound over the same period. And some argue BMW should have tolerated big losses at Rover in light of those off-setting windfall profits. But it’s fair to say the company’s shareholders and the business press didn’t take that view, faced with one highly profitable, and one heavily loss-generating business in the UK.

It’s not the best parallel, but it would be rather like saying Rover themselves a decade earlier should have tolerated the big losses being made by the failing Sterling (Rover 800) business in the USA around 1990, because they were making off-setting profits selling Range-Rovers to Americans. They didn’t take that view.

And of course the scale was very different. BMW could sell 70,000 BMW cars in Britain in a good year (for importers) like 1999. Rover built around 400,000 annually, half for export, during the period of BMW ownership. So those German cars would need to reap extremely high profits per unit, simply to cover the losses at Rover, which were being put at £2,000 per car by 1999.

One hears a lot of interpretations of the above events, my favourite being the theory BMW was simply miffed about exchange rates in 1998 because the profits they were supposedly siphoning back to Germany from Rover were worth less when converted to Deutschmarks after sterling’s appreciation. The reverse would have been true in fact – but, in reality, Rover was chalking up huge losses which amounted to approx. £600 million in 1998. Repeated in 1999.

In reality, it was in many ways a replay of what happened at BL 20 years earlier. Back then, exchange rate pressures resulted huge losses and plant closures including Abingdon, Canley and Seneffe, despite BL effectively being in public hands. Understandably, there’s still a lot of bad feeling about foreign-investor BMW around Longbridge. That’s similar to the bad feeling about foreign-investor BL around Seneffe (below), which closed in 1981 after 15 years of volume Austin Morris assembly in Belgium. There are parallels…


Conclusion: It’s been quite a ride

Well, if you’ve stuck with this so far, thank you. The key takeaway from this is probably that the British motor industry, and the BL thread specifically, has been the victim of external events as much as internally-generated problems over the years.

One was the weakness and volatility of the British domestic market during the 1960s, which led to poor profits and an investment drought which was the root of many problems. That weakness was itself partly a function of an over-valued pound, as we’ve seen. But another huge challenge was coping with an exchange rate prone to major shifts capable of undoing the best laid plans.

People can blame Stokes (below), or Edwardes, or the Trade Unions, or the lack of a hatchback on the Allegro for the troubles of BL – but a great deal of those troubles can be blamed on the exchange rate which the company was essentially powerless to influence.

Mini development story

As mentioned above, both the Germans and the Japanese had to adapt to a very strong currency in their time, but they did so through bringing huge investment to bear and through falling back on a reputation for quality and reliability. No longer do people buy Japanese cars because they’re cheap for instance.

In addition, the backing of an industrial landscape where component suppliers could be expected to do the same, and where disruptive strikes were a rare occurrence, were major advantages the Germans and Japanese enjoyed. For much of its history the British car industry wasn’t in a position to respond to a strong pound in quite the same way.

In the modern era, the exchange rate is as crucial as it’s ever been, in a sense, for the UK exports around 80% of the cars it builds with the number exported breaking all records as recently as 2016 (1.35 million) and even in 2023 coming close to matching the figure achieved in 1969 with so much sweat and tears.

Range Rover (L460) front view

But the internationalisation of component sourcing, combined with the fact that three of Britain’s four biggest manufacturers fall within a much bigger multi-national car manufacturing enterprise, means the offsetting import of components largely neutralizes exchange rate swings. Even Jaguar Land Rover imports a great deal of componentry and even steel, despite the UK being its global manufacturing hub.

On top of this, the cars being built by certainly Jaguar Land Rover, and BMW-MINI, as well as all the specialist firms, are a lot more premium than the average British car of the 1960s and ’70s. Their global sales less price sensitive as a result.

That’s why the depreciation of the pound which occurred in 2016 made little difference to the car industry, in stark contrast to a comparable devaluation in 1967. Not directly, but it has reduced the cost of inward investment which, all else being equal, is likely to encourage such investment. The £600 million overhaul of Cowley announced by BMW in the autumn of 2023 – £75 million of which is to be financed by the UK Government – will be costing the parent company considerably less in euros than it would have done before 2016.

So, when the pound falls, it can have a silver lining – even today.

Dr Milan Nedeljković, The Rt Hon Kemi Badenoch MP and Dr Markus Grüneisl
Dr Milan Nedeljković, The Rt Hon Kemi Badenoch MP and Dr Markus Grüneisl at the announcement of BMW’s investment into Cowley

With thanks to Miguel Plano,, Andrew Ryan 

Chris Cowin


  1. Great article Chris!

    I was thinking of writing something similar, but you beat me to it and did a better job than I could have possibly have done.

    I am currently wading my way through Dominic Sandbrook’s books on the post-War history of Britain and it makes gripping if depressing reading.
    Basically, in a nutshell, the dream of a ‘land fit for heroes’ or a ‘New Jerusalem’ was over by November 1964 when Harold Wilson’s Labour Party took office. There was no money in the piggy bank, there was a balance of payments deficit and sterling was under attack from currency speculators. The new Government was forced to introduce deflationary measures from the outset, yet set up a new Department of Economic Affairs under the alcoholic George Brown to plan economic growth. From the Government’s point of view, a weak pound might mean exports were cheaper, but it also meant that imports such as oil, were more expensive, and that could stoke inflation.

    Shortly after re-election the Government faced another Sterling crisis and in July 1966 introduced even tighter restrictions, after rejecting devaluation. The intention was to force business to focus on increasing exports by restricting domestic demand. In the case of the motor industry, it failed.
    In 1965 Britain built 2,177,261 vehicles. By 1967 that had dropped to 1,907,119, while in the same period exports dropped from 827,000 to 703,000.

    It was the July 1966 measures that directly led to the creation of British Leyland. The restrictions plus the industrial relations disharmony it caused when BMC tried to shed labour, cost the parent British Motor Holdings around £22 million in pre-tax profits and around 150,000 vehicles. The same period cost Ford UK around £6 million in lost profits and around 80,000 vehicles.

    So, while the Government eventually got the balance of payments to its liking, the deflationary measures it enforced inflicted severe fiscal damage on BMC, resulting in it becoming the junior partner in British Leyland, and control being handed over to a management team who had no time for the front wheel drive philosophy prevalent at BMC, while the European opposition was about to embrace it whole heartedly. The £22 million in lost profits could have made a world of difference to BMC in 1968, with the 9X and ADO22 becoming production reality.

    The deflationary measures also ended the era of full employment around the same time.

    UK unemployment reached 1 million in January 1972, and the Conservative Government under Edward Heath reacted by making an economic U-turn and announcing a massive spending spree, a dash for growth, known as the ‘Barber Boom’ after the Chancellor of the day. It succeeded in reducing unemployment by half, but sucked in imports, causing another balance of payments crisis and on top of that the October 1973 Arab-Israeli war resulted in steep oil price rises.

    And that is as far as I have got in my reading.

    I do feel that for the ordinary man in the street the subject of economics is confusing.

    Although Harold Wilson poured scorn on the BMC car workers who lobbied him at the 1966 Labour Party conference, it was never satisfactorily explained to them why they went from working flat out to satisfy demand one moment, to being laid off the next. They were in effect sacrificial pawns in a big game of global finance. Why did the strength of Sterling matter to them?

    • Hi Ian – thanks. Of course the exchange rate had an impact on (almost) everything so if one’s not careful – one ends up writing about almost everything : ) So it ended up a rather long piece …

  2. Thanks Chris. People forget how much external situations effected UK industry, not just BMC/BL. The question you would have to ask is, had the politicians left well alone and not tried to artificially protect the pound value, would have BMC still self destructed?

    • Well, if you’re talking about the 1967 devaluation by the Wilson Government… They tried desperately to avoid it not least because, at a stroke, it devalued a lot of the foreign exchange reserves of countries like Australia because sterling was a “reserve currency”. So, those countries weren’t happy. 🙂 However, in the end, they simply had no choice after a long series of dreadful balance of payments crises and linked sterling crises during the 1960s… So, unfortunately it was not a case of “leaving well alone”. All was not well.

      To answer your question, if they had not devalued the pound at that point, life would have been much harder for BMC and later British Leyland during 1968-1972 …. as discussed in the article, the reduction in the value of sterling in that period was a shot in the arm for them and (though not enough to solve a host of other problems) it under-pinned a rise in output and an improvement in profitability.

      • Hi Chris, I was talking more about the restrictions on credit brought in by the government to try and increase our exports in the 60s, to balance our books. As, has been said by Ian and you above, the income lost during this period badly affected BMC, forcing the move towards Leyland. Had this not happened, excluding the issues with strikes in this period, could BMC stood alone or would they still collapsed?

        • I certainly agree with you there. Using the motor industry as a ‘regulator’ of the economy proved disastrous, depressing overall demand in the long-term and introducing volatility in the short term. Which depressed profitability and encouraged industrial militancy.
          The Germans realised the importance of a strong and stable home market. Which gave German firms the profits to develop good cars which sold well in export markets as well – a virtuous circle.
          Starving BMC of domestic sales (which tend to be more profitable) in the hope that would push more cars into export markets did damage them badly (as it did other British firms one should add).

  3. Another time when the currency marketed were causing problems for the car industry was in the early 1980s when the exchange rates between the Pound & Dollar weren’t good, and led to the Triumph & MG sports cars going out of production as the couldn’t be sold in the USA at a profit.

  4. Would it have made a difference to the country’s industries if the UK received what became the Anglo-American loan as an outright gift (as suggested by Robert A Taft) and had been able to implement Operation ROBOT economic policy?

    Recall reading elsewhere the US had reservations about giving money to the newly formed Attlee government after WW2, because of what Attlee was promising set off the US’s anti-Red radar and had to be persuaded by Churchill and others to grant the country a loan because the UK was bankrupt (not helped by poor decisions prior to WW1 and the interwar periods).

    The same goes with Wilson (or another more enthusiastic PM such as Gaitskell had he lived) accepting then US President Johnson’s offer to pay Billions (more than the cost of any British military force) in the form additional assistance for the £ Pound Sterling, in return for the British helping the Americans with COIN and winning hearts & minds in a certain part of Southeast Asia at the time.

    With the right decisions could the UK have emulated France’s Les Trente Glorieuses after WW2 or been able to join the EEC earlier without having to throw the Commonwealth under the bus, similar to how France in contrast was able to retain a foothold in Françafrique with the CFA Franc despite being part of the EEC amongst other things?

    Would the above in some form have aided the UK in better weathering the exchange rate fluctuations and had positive knock on effects on BMC, Leyland and other UK industries?

    • Well Nate – I think what’s pertinent to a lot of those points you raise is simply the basic structural imbalance in Britain’s trading relationships that was becoming more and more of a problem as the 50s & 60s progressed. The ‘old model’ of supplying Commonwealth markets with manufactured goods while they remained faithful customers and primarily producers of agricultural produce and raw materials was collapsing.

      The Commonwealth was becoming a diminishing asset for Britain’s exporters and – to get specific about the car industry – that was abundantly obvious when both Australia and South Africa introduced highly protectionist regimes (starting in the 50s) to foster homegrown car industries. While Canada dismantled any Commonwealth preference and treated the UK just like any other supplier, introducing tariffs in 1962 then signing the Auto Pact with the USA in 1965 which essentially squeezed out most British cars. South Africa left the Commonwealth in 1960 – so no preference there either anymore.

      Meanwhile, other Commonwealth countries – many of them moving through independence – were keen to diversify trading ties and reduce dependence on Britain, and markets were lost (nowhere more so than the rather special example of Rhodesia).

      British car exports to Commonwealth markets peaked in the late 50s at around 250,000 units annually. They then started declining (with those Australian and South African restrictions a big reason why).

      Acknowledgement of this trend – and the need to re-orientate trade – took hold in the British ‘body politic’ in the late 1950s.

      As you say – if such thinking had taken root earlier, then the UK could have been in at the start at the creation of the EEC and moulded it more to suit Britain (as the French did). But instead we famously remained aloof (at the 1956 Messina conference where the EEC was born)… But a few years later the Macmillan (Conservative) Government had put EEC entry at the heart of policy – even though that now meant applying to join from the outside.

      They believed (and events in the 1960s rather proved them right) that only a major expansion of UK exports to Europe (which was growing very fast) would allow the UK to balance its growing import needs in terms of food, raw materials, oil etc.

      And BMC (and other car firms) were convinced we would join and see a major expansion in sales to Europe during the sixties. That largely explains why BMC invested a great deal (together with dealer groups like Stewart & Arden) in developing a French distribution network in the early 60s, and it explains why the industry went hell for leather to increase capacity – building Halewood, Ellesmere Port, Linwood and expanding Longbridge (CAB2) in the early 60s… (and ending up with a serious problem of over-capacity).

      The rejection of the UK’s EEC application in early 1963 was thus a big blow – it led directly on to a period of worsening trade deficits which undermined the pound – hence the pressure for devaluation – and the humiliation of having to rely on American support to bolster the pound in 1966, which almost came with the obligation of sending British troops to Vietnam as you mention (something Wilson deftly avoided).

      And it led to restrictions on domestic demand intended to reduce imports and (for car firms especially) push exports which would be highly damaging for the industry – BMC especially.

      The Wilson Government made soundings about joining the EEC in 1967 having come to the same conclusion as the Macmillan Government – but was rebuffed again. It was only after that, in desperation, devaluation was implemented.

      And if all that sounds like a sort of “hymn to the EEC” it need not be. Because what was preventing British firms from selling their wares (in the desired quantities and profitably) in the EEC were tariffs – which actually got steeper for British exporters towards the late sixties as the EEC common external tariff was applied while internal tariffs were dismantled…

      But it should be remembered that due to the global GATT process those tariffs then started falling – to 11% in 1972. By the mid 1970s it was much easier for a firm from outside the EEC to sell into it – that is, after all, what the Japanese did with great success in the 1970s…

      BLMC had plans to keep expanding in Europe, relying heavily on Seneffe assembly, if EEC membership was never achieved (it wasn’t certain until 1972)
      And in fact – as discussed in the article – although the UK did eventually join the EEC on Jan 1st 1973, the best ever year for British Leyland sales in continental Europe was 1971 before we joined… Because although tariffs on UK built cars would be lifted (phased out by 1977) that couldn’t compensate for the British Leyland line-up not being very appealing, with the “star” car being the Mini which was the big seller in the 1971 numbers but then increasingly looked dated as the super-minis arrived… so EEC membership wasn’t a silver bullet…

      • When applying to join the EEC in 1967, Harold Wilson and George Brown went to see De Gaulle, and an inebriated Brown called the French President ‘Charlie’ to his face!
        Needless to say it resulted in rejection.

        • Just a note: Innocenti never assembled a “kit car” with parts from UK, excluding some minor parts in the very early production cars meanwhile Italian parts suppliers making the required manufacturing tools.

          Innocenti was a famous metal stamping manufacturing industry that served also Fiat, so the only parts of Innocenti Mini that was made in UK is just the complete engine with its gearbox.

          Every other parts, starting from the engine linkage to body panels passing through subframes, interiors, lamps and every other bits are Innocenti Mini specific and completely made by Italian suppliers.

          • Hello Stefano – I accept what you say about Innocenti not assembling “kit cars”. But (it would appear) the sets of components despatched from the UK to build the Innocenti Mini had enough “UK content” to be regarded as “a car” for trade purposes. It gets complicated!
            When it is claimed British Leyland “manufactured” around 300,000 Minis in the UK in each of the calendar years 1970, 1971, 1972 and 1973 (which it is) that appears to include the Innocenti Minis – that is what I was referring to.

            To be specific – in the fiscal year 1970/71 Longbridge built 154,000 Minis which left the plant on wheels. But 120,000 Minis were also built as kits for export (or sets of parts if you prefer) which counted as a car (being “countable” in trade terms).
            The Seneffe plant also assembled 39,000 Minis in that period – but those are not included in the 120,000 as Seneffe was treated as part of the home manufacturing network.
            154,000 plus 39,000 plus 120,000 brings us to 313,000 Minis in 1970/71. Which matches the number of Minis British Leyland claimed were manufactured in the UK in that period.
            So where did those 120,000 Minis exported as a “countable” set of parts go? A lot clearly went to Innocenti (who were building approx. 60,000 annually) as all other global assemblers were relatively small. (Australia, Spain and South Africa were manufacturing with extremely high local content – so would not be included as “countable”).

            When a set of parts with not enough UK content to qualify as a car was exported it was termed “non countable” in trade terms – and the UK exported 4000 such sets of parts to Innocenti in 1970/71 for the i5 (ADO16). But none for the Mini (which would seem to confirm it was seen as “countable”).

            This can be a bit of a statistical grey area. It comes down to the trade authorities (HMRC in the UK) making a judgement about the value of the parts being exported – and what % of the value of a complete car they represent. If it’s over 50% – those parts count as a “car” and the British figures for “car production” increase.
            There have been many disputes over this point down the years – when the authorities in the receiving country have not agreed with the UK authorities. For example when the UK was exporting parts for the Paykan (based on the Hillman Hunter) to Iran there was a period when the UK claimed they counted as “cars manufactured in the UK” but the Iranians insisted the Paykan was a car “manufactured in Iran”. So it was double-counted in the global production statistics.
            If you have access to such records, it would be very interesting to see how the Italian authorities classified Innocenti Mini production.
            I might be wrong about this – but I don’t think I am, as I’ve also checked the statistics for “British car exports to Italy” in the 1970s – which seem extremely high if the Innocenti Mini is not part of the numbers.
            But if none of those 120,000 Mini component sets were going to Innocenti – it’s very hard to “place” them around the world.

            Meanwhile, I’ve changed the wording in the article from “exported as kits” to “exported as components” .

      • Apparently, although a British representative was said to be invited to Messina, they deemed it too distant for what was ostensibly a meeting of ECSC ministers as opposed to anything. The UK ambassador in Paris referred to the communique at Messina as lengthy but not very informative.

        Guess it boils down to how the UK could have moulded the EEC more to suit its interests to the extent where its industries could benefit from the lower/no tariffs from the early-1960s, while allowing the likes of Leyland to establish a presence on the continent via a stake in DAF before Volvo in late-1972.

        Was there even room for the UK to benefit without getting swallowed up by the EEC’s vision towards a United States of Europe or would the UK have been better off without joining the EEC in 1973 due to the global GATT process of falling tariffs?

        In the case of the latter scenario would it have been necessery for BMC, Leyland and others to establish a presence on the continent?

        • Good question Nate.

          If the (effectively) third attempt of the UK to join the EEC had been refused, it would have been manageable – seen from 1972 anyway. BLMC controlled a continental assembly and manufacturing infrastructure developed in the context of exclusion from the EEC up to that point, with Seneffe, Innocenti and Authi as the three main pillars – plus Mechelen/Malines (Triumph) and a few smaller operations. Authi was primarily to serve non-EEC Spain – but was developing exports to elsewhere in Europe also… So, with that local presence (which softened but didn’t eliminate the impact of tariffs) and with the fact that the EEC had anyway lowered tariffs due to GATT, British Leyland should have been able to plan for sales expansion on the European continent in the 1970s even if the UK remained outside the EEC – in the same way that Volvo did – despite Sweden not joining the EEC (until 1995).

          On the other hand, Denmark (an important market for BLMC) joined the EEC in 1973 (although Ireland almost certainly would not have done if the UK had not). And in the longer term most of the countries of EFTA which had acted as a sort of smaller, rival EEC with the UK as a member – would switch to EEC membership …. So the UK would increasingly be ‘on a different page’ from all its European trading partners.

          But the EEC common external tariff of 11% on cars from 1973 onwards would have been more an annoyance than a hindrance during the 1970s, and something of less importance really than the exchange rate (as discussed in the article).

          But that’s not to say all would have gone well. Because, irrespective of whether the UK had joined the EEC or not in early 1973, it would still have been hit by the Fuel Crisis and associated recession in late 1973/1974 as was all of Europe. And BLMC would still almost certainly have required rescue by the British state in 1975 – and one must presume that the meltdown that happened at both Innocenti and Authi during 1975 would have happened anyway – so in practice it may have become a lot more difficult for British Leyland to serve the European market than forecasters might have thought in 1972… but one is getting into the realms of speculative ‘alternative history’ here.:)

          The other important point to make in this context is that the UK – as a firm believer in GATT – had mirrored the EEC in also lowering its tariff on car imports by 1972.

          When people claim there would not have been a surge in imports from the EEC if we had not joined – they tend to ignore that point. An 11% tariff is not the showstopper the highly protectionist tariffs of earlier times (33% in the 1950s, still 25% in 1968) were. And car imports to the UK had already reached 23.5% of the market in 1972 – before the UK joined the EEC.

          It seems likely European firms would have continued to make gains on the UK market even if the UK had remained outside the EEC.
          If you think British Leyland could have successfully expanded sales within the EEC from the outside, then you have to think Fiat, Renault etc. could have continued to expand sales on the UK market ‘from the outside’ as well.

          And, of course, EEC membership status made no difference to the Japanese conquest of the UK market (which was capped by restraints at 11%).

          So, British Leyland faced an erosion of its domestic market share in the more free-trading 1970s, inside or outside the EEC. It’s rather a fallacy to claim that joining the EEC was solely responsible for a swamp of imports which undermined British Leyland – as people often do.

          There’s another debate about what difference continued exclusion from the EEC would have made to the policies of Ford, GM and Chrysler in terms of UK manufacturing, UK exports and the switch to tied imports – but that’s another debate and this comment is getting a bit lengthy.:)

          • Have given quite a bit to think about concerning the UK via vis the EEC and GATT, Chris.

            Given the presence of the US Big Three in the UK and the Anglo-American loan, was a free-trade agreement with the US ever considered in the UK prior to the latter joining the EEC? Especially based on the importance of British carmakers placed on the North American market and it could have effected the short-lived Canadian-US Auto Pact?

  5. While this is mostly about British Leyland and its successors, don’t forget the Japanese owned factories have been successful exporters of cars since the eighties. Nissan UK currently exports 250,000 cars every year and while it’s closed now, the Honda factory exported hundreds of thousands of Accords, Jazzes and Civics during its 30 year life. I’m not sure how successful Toyota have been, but I did see numerous Corollas and Avensises when I was in Amsterdam in 2002.

    • Yes – That’s a big reason why UK car exports hit an all time record in 2016 of course (1.35 million) and even in 2023 (715,000) were much stronger than most of the 60s or 70s.

  6. One should add what is exported now is mostly high value cars rather than the Minis and ADO16s of the past. JLR and Nissan SUVs have proven very popular in export markets and the BINI is a best seller in Benelux countries and popular in France and Germany. I’m sure this is so much better than exporting low value cars whose popularity started to shrink overseas as the seventies progressed and relying on a parochial company car market for domestic sales, which is what Ford of Britain relied on at the time. British cars, while there are a few grumbles about the quality of Range Rovers, are as competitive and desierable as their rivals and very popular in export markets.

    • The 2nd hand prices for RR models at auction have been dropping recently. Reportedly it is because people are fed up with their reliability and their supposed ease to steal.

  7. One of the latest test drives of BMC cars in Finland’s biggest car magazine The year was 1974.

    There were compliments
    – quite a good package compared to the price
    – instrument devices placement
    – driving characteristics

    and minus
    – suspension behaviour for bad roads
    – noise level
    – headlights
    – quality of work

    Although British cars were cheap at the time, they were not sales successes. It was mainly the poor quality of work that drove away the buyers. Although the work quality of later cars from Belgium was significantly better. But the reputation was gone.

  8. Very interesting. Not keeping the TR7/8 in production was a massive shame, as the product by then was good enough to stay in production without much investment for many years if it could have survived the temporary horrendous exchange rate.

    Not mentioned much here is the Land Rover side, where bizarrely the Range Rover wasn’t officially sold in the US until 1987, an example of how this side of the business was crazily ignored. An example of a premium “desirable” product, less impacted by exchange rate movements.

    • Yes – of course during the 70s anyway they never built enough Range Rovers (due to the tragic slowness in expanding production capacity) so in export markets being expensive wasn’t a problem when the pound was strong … importers never had trouble shifting the limited supplies they received.

      But for the mainstream Land Rover things were different – and broadly speaking at least some of the blame for Land Rover’s loss of much of the global 4×4 market to Toyota (who priced aggressively) and others in the late 70s/early 80s must be attributed to the strength of sterling in that period – as 80% of production was exported … Land Rover certainly went through a difficult patch then, with production declining from 63,000 in 1975 to 43,000 in 1983 (including CKD). It was estimated their share of the global 4×4 market had fallen from a dominating position to 25% by 1983.

      • The better reliability of the Japanese rivals was a major factor too. If you’re genuinely going off road into the wilderness, the superior reliability of the Land Cruiser over a Land Rover matters.

        Plus the Series 3 was very crude by the late 70s. The 90/110 improvements were well overdue when they finally arrived.

    • The sad thing with the TR7 is by 1981, when the car was cancelled, the quality was quite good, the car was still competitive, and a convertible version had won many fans. I’m sure, like the XJS, whose production had slumped at the start og the eighties, the TR7/8 could have lived on. Also by 1982, the energy crisis had passed in America, making the TR8 easier to sell, and the pound had weakened againt the dollar. I’d think the TR8 could have done very well over here as a cheaper alternative to the XJS.

  9. Chris, thanks for a fascinating article.
    The graph raises an interesting point. Why is it always assumed on the site that MGR is the successor to British Leyland? This is incorrect. The successor to BL is MINI. We all agree that Rover under BMW ownership between 1994 and 2000 was the successor company, so logically it continues after 2000. MGR was a part that was sold off. If MGR is regarded as the successor company, then why not Land Rover, as that was another part that was sold off in 2000?
    I wonder if enthusiasts on this site see MGR as the successor to BL because it continued the tradition of inept management and outdated products.

    • Well you raise an interesting point. When I drew that graph some time ago I experimented with another version which included Land Rover Ltd. throughout – and another which also included the separated out BMW-MINI after 2000 – and then another with both …. but as you can no doubt appreciate it then becomes very incomprehensible after 2000 as all those measured indicators split three ways…

      So (up to 2000), it’s a graph of the company’s passenger car production (as opposed to car plus offroad) over time – the only exception being that Range Rover is included prior to 1982 (which makes little difference as volumes were relatively tiny). Other than that, there’s no Land Rover product represented on that graph at all.

      It’s worth adding that most of the classic Series/Defender Land Rovers (all except SW) were not classified as ‘cars’ but as ‘commercial vehicles’ by the SMMT so including or excluding the Land Rover business makes very little difference to the figures in the 20th century, if we’re looking at a graph of ‘car production’ as we are. (For the same reason most statistics about the British ‘car industry’ exclude most classic Land Rovers – which makes Britain’s export performance in the 1970s (for example) look a bit worse than it was).

      I take MGR as the successor company after 2000 largely because that’s conventionally done, and because it inherited Longbridge which tends to be treated as the ‘core’ plant of BMC / British Leyland etc, etc…

      British Leyland was a company created through mergers that then de-merged in essence. So after Jaguar’s departure from BL in 1984, Jaguar is removed from the figures (as annotated) and essentially I treated MINI as though it had also de-merged and departed – and MGR wa the “rump” that was left… But I agree with you that if you look at the British car industry today, one can say that the ‘successors to British Leyland’ are still going strong in the form of Jaguar Land Rover and MINI…

      If you treat BMW-MINI as the successor company from 2000 onwards and exclude MGR – then that export ratio line shoots sky-high – and it looks very much like a different business has suddenly taken hold…

      • Chris, many thanks for your prompt and comprehensive reply.
        “I take MGR as the successor company after 2000 largely because that’s conventionally done, and because it inherited Longbridge.” This is my point – I think what is conventionally done is incorrect. Also Cowley could equally be regarded as the ‘core’ plant of BMC / British Leyland.

        “I treated MINI as though it had also de-merged and departed – and MGR was the “rump” that was left.” MINI was not demerged and did not depart – BMW kept it. MGR was the part that was sold off.

        • Well it’s a debate. Irrespective of the technicalities of ownership I see MG Rover as essentially “legacy British Leyland” and thus include them on the chart rather than BMW MINI. (And I think if I’d done the opposite there’d be a lot of grumbling : )) ….
          It’s essentially the same business (production of Rover & MG badged cars) being charted on that graph after 2000 as it is before 2000 – so it’s consistent.

          Though they re-used the long-established brand, BMW Mini at Cowley was in a sense a brand new “greenfield” operation (in fact within the old “brownfield” Pressed Steel plant rather than the old car assembly plant) with a new car…. But I do see where you’re coming from – in fact I’ve written (below) articles arguing the case for BMW MINI to be seen as a sort of “continuity Rover” …

          • Weren’t the Rover 600, later 800s and early 75s made in the Pressed Steel plant as well?

            Longbridge is to me just one part of the dismembering of British Leyland. BMW kept Cowley and the Swindon pressing plant. JLR kept Solihull, which after all is the real home of “Rover” and the very BL SD1, but perhaps more significantly kept Gaydon, the development centre for BL/ARG/Rover. That to me makes JLR the most important inheritor of the BL/ARG DNA.

            I imagine there will be people at Gaydon even now who worked on models like R8 or the Rover 75, whereas the BMW Mini is basically a German car.

  10. As well as the effects of Sterling there were also a load of stop-go policy issues in the UK. Purchase tax rates varied wildly, cars being seen as luxury items would be hit when the Chancellor wanted to put the brake on a seemingly overheating economy, and there were also similar swings in the minimum up-front deposit required and the length of credit period permitted for hire-purchase agreements as applicable to cars.

    As a manufacturer, trying to handle such various changes and fit the production of cars into the real unpredictable future, along with the tendency for plants and suppliers to go on strike just when you needed factories to be working flat out because there was a boom on, and the results we all know.

    The same issues affected the UK electronic industry (my specialism) – though at first the TV trade was protected from global competition because they used a UK-only standard (405 lines) the stop go issues were just as problematic for them as for the car industry. Once we adopted the same TV standards as most of the rest of the world, the protection afforded by the odd VHF standard vanished, and the likes of Sony came into the market with their technically superior, more reliable Trinitron colour tellies so displacing the UK manufacturers like Ultra, GEC and Bush.

    • British electronics companies seemed to be caught off guard by the early 1970s colour boom, which meant retailers had to start importing sets from abroad because the UK based makers couldn’t keep up with the demand.

      Thorn had invested in many of the rental companies to allow for a steady demand for their products, but by the 1980s customers were starting to buy sets on credit rather than renting, so the market went into decline.

    • Yes, of course “stop go” was related to the exchange rate as well – because the ‘overheating’ you refer to manifested itself in balance of payments deficits, as more imports were sucked in and manufacturers neglected exports (which weren’t very profitable when sterling was over-valued) in favour of the home market.

      Devaluation of the pound in 1967 was intended to bring an escape from what they called ‘the balance of payments constraint’ (to growth).

  11. “The technicalities of ownership” are important – that’s why we remove Jaguar from 1984.

    I see MINI as essentially “legacy British Leyland”, so we will agree to disagree!

    Nothing in the BMC>BL>MINI story is straightforward.

    And yes, Longbridge produced Rover-badged cars, but they weren’t Rovers – they were (and continue to be) produced at Solihull, prefixed by ‘Land’ or ‘Range’. Remember that the bodgers at Longbridge trashed the Austin brand (see 3-Litre, Allegro and many others) so took the Rover brand, then spent 20 years trashing that (see Metro, CityRover).

    • Well, I know you’re being “purist” – and I respect that. But to say the Rover 75 (for example) wasn’t a Rover is a view – and it’s a valid view. But it’s not a universally accepted view and many will disagree.

      The Rover 75 has a place in all (or almost) of the histories of the Rover marque written this century for example.

      (PS: Just for the record, the Austin 3 Litre was built at Cowley.:))

  12. Ah, another bogie man we can blame for all Britain’s ills. It’s not like other exporting nations need to deal with fluctuating exchange rates is it?

    • Well, I think I touched on how West Germany and Japan coped with a fluctuating (or strengthening) currency – and how the UK wasn’t well placed to respond in quite the same way.

      But yes – the rapid appreciation of the Deutschmark caused big problems for West Germany in the early 1970s – for example, it brought an end to the export of Opel cars to be distributed through Buick dealers in the USA (and we’re talking big volumes there). And it helped persuade Volkswagen to start manufacturing in the USA.

      The exchange rate was a problem for them, as well as being a problem for us. That doesn’t mean it wasn’t a problem for us.

  13. The one thing I don’t really get is, why, when we did not get into the EEC, did BMC not look earlier at getting production setup in Europe, and then later invest heavily in new plant (in obscure locations because of the Government’s reorganisation remit) in the UK when again it was dubious we would get membership?

    I know there were protectionist efforts in most countries, but the Americans did it, with mixed success. Seneffe was a token, Authi forced upon them due to Spain’s position, and Innocenti just a contract operation for many years. Had Austin looked at Volkswagen, and said we will have a bit of that, it would given them a base to build upon.

    I am not sure what Austin as a company said, but I know William Rootes called the car unsellable. But they missed the point, it wasn’t the car, but the factory they would have gained.

    • Morris after WW1 could have chosen a better factory to acquire in France than Léon Bollée Automobiles, which would have aided in setting production set-up on the continent post-BMC.

      Do wonder however if it would be a regular European presence or something more autonomous akin to Fiat-founded Simca, with similar trajectory of either becoming part of BMC or going its own way?

    • Big question! 🙂

      One should remember that the EEC didn’t exist until 1960 so if you were looking at investing in Europe in the 1950s – it was on an individual country basis – and the ability of an assembly plant located in one EEC country to export to another was still constrained by internal tariffs until the late 1960s (earlier within Benelux) – so it wasn’t a case of just establishing one plant ‘on the inside’ and problem solved.

      BMC preferred to deal with local assembly partners in various countries to serve those specific markets – and in the 1950s was doing that in Netherlands and Denmark, and on a small scale in Belgium. (not forgetting the Republic of Ireland). Italy (Innocenti) started in 1960, Portugal in 1962. This was a low cost route to supplying European markets which weren’t really the prime focus of BMC’s (or Britain’s) overseas efforts in the 1950s.

      Because after WW2 Commonwealth markets (which had imported very few cars from Britain pre-War, in general preferring North American cars (often built in Canada)) became major customers and there was a desire to build on that – which often implied major investment. Austin came close to building a plant in Canada around 1950 (the Korean war got in the way) and was forced by Australia’s growing protectionism to make major investments in manufacturing there – with the Zetland plant opened in 1956 being almost a ‘mini Longbridge’ with transfer machines, rotodip etc. Direct investments were made in South Africa and Rhodesia also.

      And there was only so much investment to go round.

      By 1960, BMC (as the AGM reports clearly show) was taking it for granted that the UK would join the EEC imminently and putting their European efforts more into improving distribution (notably in France) than in extending local assembly.

      Standard-Triumph in contrast opened the Malines/Mechelen plant in Belgium in 1961 which proved a good strategic move – supplying most Triumphs sold in the EEC by the late 1960s.

      BMC considered buying Borgward in 1961 which could have helped them build strength in West Germany where their weakness would later prove fatal – but, in the 1960s, the focus of mergers and acquisitions was more on consolidating the UK industry. So BMC bought Jaguar (although portrayed as a merger it was an acquisition) for £18 million in 1966 and Pressed Steel in 1965.

      In the absence of EEC membership BMC’s European sales became heavily skewed towards the (smaller) EFTA marketplace (The UK and Sweden were the only countries in that 7 country grouping with a car industry). But that would prove a vulnerability in the long term because, lacking a car industry, those countries were relaxed about Japanese imports which made huge conquests there in the 1970s.

      Anyway, going back to 1963 when EEC membership was refused, BMC then moved quickly to establish Seneffe which started assembling cars in 1965. And in fact by the early 70s – when EEC entry was still uncertain – the new British Leyland was investing heavily in a continental production infrastructure.

      Capacity at Seneffe was expanded to 150,000 cars. Innocenti’s car operations were purchased outright becoming Leyland Innocenti with capacity programmed to rise to 110,000 cars. Authi was purchased outright becoming Leyland Authi with capacity programmed to expand to 140,000 cars (Imports to Spain were restricted but Spain faced little restriction in exporting to the rest of Europe).

      So they had, with considerable investment, put in place what was required to fulfil the plan which (as announced in 1971) was to lift continental volume from 200,000 cars to 500,000 by 1976 (a target later picked up by Ryder) – and to build 270,000 of those cars in that network of continental plants.

      There was also Malines/Mechelen (where the addition of Rover and Jaguar assembly to Triumph assembly was investigated and could well have happened if EEC entry had not proceeded)… plus some smaller scale local operations including Portugal.

      So, in fact – on paper – British Leyland looked well placed to expand sales on the continent even if the UK did not join the EEC – especially when one remembers that the common external tariff had come down a lot since the 1960s so even direct imports from the UK were not as disadvantaged as they had been.

      Things appeared set fair for the future in mid-1973 without the need to acquire any rival European manufacturer – but then, of course, “events” intervened…

      Not sure if that’s really answered your question – buying Volkswagen (which would in any case have been difficult given its ownership structure) was really out of the question for anybody (except perhaps General Motors) by the late 1950s.

      In 1955 they built 330,000 vehicles in Wolfsburg (and associated German plants) when the whole of BMC built 370,000 (in the year ending July 1955). But Volkswagen soon got a lot bigger – building 1.5 million vehicles in 1966 in a network of six German factories when BMC only built 703,000 vehicles in the year ending July 1966.

  14. Seneffe was a moderate success, assembling lhd Minis and Allegros, and being far less strike prone and more productive than Longbridge. There was a plan to make it the main production centre for Allegros in the late seventies, moving most Allegro production out of Longbridge, but union resistance only saw a handful of rhd Allegros exported to Britain. Seneffe was probably hampered by only being an assembly plant, more or less assembling Minis and Allegros from kits, and it was considered cheaper at the start of the eighties to export fully built cars from the UK. Interestingly the closure of Seneffe in 1981 led to 2000 job losses at the factory, but also 270 workers in the UK who packed and inspected the car kits lost their jobs at the same time.

    • That was one of the points I was trying to make. Senneffe was hit by tariffs because they just assembled from parts imported, while Innocenti imported the engines and transmissions which again affected the sale price with tariffs. They should have invested in a full manufacturing plant.

    • I’m of the view that (perhaps) the best thing for Seneffe in the 1980s (and beyond) would have been to become the sole plant within BL assembling the Mini. There was no tariff rationale for assembling anything at Seneffe after 1977 – but building Mini there would have made use of the capacity, and reduced complexity at Longbridge (similar to the earlier plan to concentrate Allegro on Seneffe) which could have been valuable if Metro production had expanded to the levels once forecast of 325,000 annually (rather than peaking at 180,000).

      Putting newer models like Metro and Maestro into Seneffe made little sense given there was adequate capacity in the UK and their design assumed robotization in various stages of the build process which swelled the investment that would have been required to assemble them in Seneffe.

      However, Seneffe was already building Mini and so could just have carried on while Longbridge stopped – doing that would have avoided layoffs (BL tried to sell the plant to GM but that fell through) and consequent bad blood / loss of sales in Belgium. And it could have allowed Longbridge to run rather more smoothly while potentially allowing Mini to be built in bigger numbers during the 1980s and ’90s with less space constraints.

      There are perhaps parallels in other “legacy” cars being farmed out to overseas assembly plants in their dotage – all the final Chrysler Hunters were built in Ireland for example, and Citroen 2 CV in Portugal.

      But, of course, for a long time it was assumed the Mini was going to have to be chopped imminently so management was not planning for its future (the assumption the UK would stop building Minis is why the South Africans stopped in 1983 – for fear of the supply of components drying up).

      • @ Chris Cowin, the Mini really should have been given the axe in the early eighties as for all it had a cult following, it wasn’t generating much in profits and, according to one Austin Rover insider, was “a pig” to manufacture as it was a dated design. The money could have been better invested in the M cars and particularly the Metro, whose shortcomings became apparent when new alternatives were launched in 1983.

        Regarding the Chrysler Hunter, this was moved to Ireland to make way for the Sunbeam at Linwood and to keep the Irish assembly plant busy. Similarly the slow selling Chrysler 180 was moved from France to Spain at the same time to reduce costs, and also because the car had a following among Spanish taxi drivers, rather like the Chrysler Hunter remained popular with British taxi drivers in its last years.

      • That would have made sense, and avoided the ill feeling.
        Belgium’s largely boycotted BL products after Seneffe closed.
        The M cars for instance were rarely seen, as they sold only in tiny numbers.

  15. Possibly Leyland wanted to retain most of their manufacturing capability in the UK, probably due to union pressures as well, and their four European plants were assembly plants with limited local content. However, this would have been less of a problem after 1973, when EEC tariffs were phased out.

    Another parallel was when Peugeot took over the Chrysler UK factories in 1979. The Avenger and Sunbeam were rwd cars with mostly British content, while the Alpine/ Solara was fwd with mostly French content. Peugeot found it cheaper to axe the unrelated rwd cars and close the factory in Linwood, while concentrating on the fwd cars made at Ryton which were identical to cars made at a sister factory in France and could be mostly made from French components.

  16. Good article! The problem you describe with the Deutschmark changing from fixed to variable exchange rate in the early ’70s, plus already falling sales of the Beetle, particularly in the US, nearly killed VW in 1974. They had to lose 20% of their workforce in Germany, which they managed without industrial action because of workers’ representation on the boards of German companies. The launch of the Golf was timely and successful – by 1977/8 they were back in profit. And you’re right – the Germans went premium. VW moved up, Porsche, Audi, BMW and M-B continued moving up and although 50 years later we now see Opel dumped by GM and Ford has been in decline since 2010 or so.

    • From what I’ve heard almost all currencies in the Western World were tied to the US Dollar by the Bretton Woods system, which was brought in towards the end of the Second World War & wound up in the 1970s as more currencies became free floating.

      • Yes, the Bretton Woods system (named after the hotel in New Hampshire where the system was agreed in 1944) was the system of fixed exchange rates referred to in the early part of the article – which broke down in 1971. I didn’t want to go into great detail, Keynes etc. as this is AROnline, not The Economist. 🙂

        Sterling’s value against the US dollar (and thus other major currencies) was fixed within that system – except for the two occasions when the UK elected to devalue the pound, changing its dollar value – in 1949 and in 1967 (with the implications for the car industry discussed in the early part of the article).

  17. There was an attempt to fix the value of the pound when we joined the ERM in 1990. This did have the desired effect of more than halving inflation and reducing interest rates, but the pound became overvalued and the recession that started in 1990 was made deeper and longer by the restrictions of the ERM.

    Leaving the ERM in September 1992 might have led to some short lived economic chaos( remember Black Wednesday) and saw the Tories fatally damaged in the polls, but it meant the pound could float freely again, exports became cheaper and the economy started to recover in 1993 and enjoyed 14 years of steady economic growth.

    • Indeed – and the pound did fall to a helpfully (for the car industry) low level against European currencies during 1992-1996. This made the UK look a good place to build cars for the European market – and that’s when BMW bought Rover.

      But then – as discussed in the post – it started appreciating strongly against the DM and thus all European currencies tied to the DM through the ERM. From 2.2DM in 1995 to 3.2DM in 2000.

      The election of a new government was one factor – and the economy was booming as you say – and to prevent inflation getting out of hand the newly independent Bank of England set interest rates at a relatively high level after 1997 – which along with a healthily growing economy explains the strength of the pound in that period – strength relative to the DM that persisted until 2007.

      As discussed in the latter part of the article, this was fatal for Rover (and later MG Rover), but not other car makers where cheaper component imports neutralized the impact of sterling’s strength.

      • Hypothetically what would have been the knock-on effects had Margaret Thatcher defied the European Community to keep interest rates low enough by drastically cutting it by 5%, keeping the economy more or less stable prior to possibly later leaving the European Exchange Rate Mechanism (ERM)?

        • We’re getting into some quite complicated economics here, Nate. 🙂 But the context was one where (after a package of tax cuts which in retrospect were too generous in 1988) inflation started climbing in Britain in 1989 and 1990 – and high interest rates were required to tackle that. The main issue with interest rates was the control of inflation and – at various times – a desire to “defend the pound”.

          UK inflation for the calendar year 1986 was 3.43%. For the calendar year 1990 it was 8.06%. That was very worrying for Thatcher who, of course, had devoted most of her first term (1979-83) to taming inflation.

          During that period interest rates rose sharply, there was a housing bubble which was contributing to inflation – which was all part of the mix.

          • Have read of the above speculative scenario being floated as a way of placing the UK in a more advantageous position, potentially delaying if not fatally undermining the formation of the EEC into the EU during Maastricht (possibly being enough to cause the French to vote No in 1992) as well as possibly even preventing Black Wednesday and the breaking of the Bank of England.

            Yet did ponder what impact it would have had on Rover and the British Motor Industry in general, would BMW have still been tempted to acquire Rover or would the situation have dissuaded the Germans leaving Rover to potentially become further intertwined with Honda (or become involved with another interested company)?

  18. The British car industry did have a good nineties after the big shakeout in the eighties and the chaos of the seventies. Rover were making cars people wanted to buy and with decent quality. Ford’s ownership of Jaguar had turned the company around, and Honda and Toyota had opened factories in the UK. Ford had some wobbles and downsized their British operations, but the Mark 4 Fiesta produced at Dagenham was as good ad German bult Fiestas, and Peugeot UK and Vauxhall continued to do well.

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