LONDON, Jan 31 (Reuters) - British car production fell by 9 percent last year, the biggest drop since the 2008-9 recession, and investment slumped by nearly half due to fears about Brexit, an industry body said on Thursday.
The once runaway autos sector, which employs some 850,000 people in Britain and has been lauded by politicians as a rare manufacturing success story, has seen sales, company spending and output slump since 2016, the year of the Brexit referendum.
Volumes have also been hit by a crackdown on diesel, stricter emissions rules disrupting supply and a slowdown in China, the world's no. 1 autos market, the Society of Motor Manufacturers and Traders (SMMT) said.
Britain, the world's fifth-largest economy, is due to leave the EU, the globe's biggest trading bloc, without an agreement on March 29 after lawmakers rejected Prime Minister Theresa May's deal, prompting fears of major disruption.
Last year saw the biggest drop in production since a slump of nearly a third in 2009 following the financial crisis and the fall in investment to 589 million pounds ($770 million) leaves it at the lowest level since the SMMT started compiling figures in 2012.
"Brexit uncertainty has already done enormous damage to output, investment and jobs," said SMMT Chief Executive Mike Hawes, calling on the government to avoid a no-deal exit.
"Yet this is nothing compared with the permanent devastation caused by severing our frictionless trade links overnight, not just with the EU but with the many other global markets with which we currently trade freely."
Output is expected to fall another 3 percent this year based on Britain leaving the EU with a deal followed by a transitional period.
Britain's biggest carmaker Jaguar Land Rover, which has been hit by a slump in demand from China and for diesel models, recorded a 15.6 percent drop in domestic output, while Nissan, which runs Britain's largest car factory, fell by 10.7 percent.
A series of investment decisions are coming up, including whether Peugeot's parent company PSA will keep its Ellesmere Port plant open, where staffing will fall to just 850 people by the end of 2019 after a series of job cuts.
Output there fell by 15.9 percent last year, the biggest decline of any of Britain's six big carmakers.
PSA will also decide later this year on whether to build electric vans at its southern English Luton facility and petrochemicals firm Ineos is choosing the location for its off-roader.
The Chinese Geely-owned London Electric Vehicle Company, which builds the famous London black taxi, is cutting 70 agency staff at its central English plant, around 20 percent of its line-side workforce.
"Given the global headwinds, the challenges to the sector are immense," said Hawes. (Editing by Stephen Addison)