Car industry warns next PM ‘no deal’ could cost UK £72m a day

The Society of Motor Manufacturers and Traders (SMMT) today issued a plea to the UK’s next prime minister to secure a favourable Brexit deal as his number one priority on taking office.

The call came as the trade body published a new report highlighting the importance of automotive trade to the UK economy and the high stakes of a ‘no deal’ Brexit.

SMMT’s 2019 UK Automotive Trade Report calculates that delays to production caused by friction at the border could add up to £50,000 a minute for the sector.

Leaving the EU without a deal would trigger the most seismic shift in trading conditions ever experienced by automotive, with billions of pounds of tariffs threatening to impact consumer choice and affordability, the SMMT warned.

It says the end to borderless trade could bring crippling disruptions to the industry’s just-in-time operating model.

Delays to shipments of parts to production plants are measured in minutes, with every 60 seconds costing £50,000 in gross value added – amounting to £72m a day in a worst case scenario.

Combined with WTO tariffs, which for trade in passenger cars alone amount to £4.5bn a year, this would deliver a knockout blow to the sector’s competitiveness, undermining a decade of extraordinary growth, the SMMT warned.

Thanks to the free and frictionless trade afforded by the customs union and single market, automotive trade value has risen by 118% since the global financial recession, from £47bn in 2009 to £101bn last year.

Over the same period, car production increased by more than half, with more than eight in 10 vehicles bound for export – the majority to the EU.

3.3 million new cars are traded between the UK and EU each year, while the UK exports some £5.2bn worth of components and £2.9bn of engines to help build vehicles across the continent.

Addressing an audience of business leaders and Government officials at the industry’s annual International Automotive Summit in London today, Mike Hawes, SMMT chief executive, said: “Automotive matters to UK trade and to the economy, and this report shows that, if the right choices are made, a bright future is possible.

“However, ‘no deal’ remains the clear and present danger. We are already seeing the consequences of uncertainty, the fear of no deal.

“The next PM’s first job in office must be to secure a deal that maintains frictionless trade because, for our industry, ‘no deal’ is not an option and we don’t have the luxury of time.”

Automotive is the UK’s single biggest exporter of goods, trading with some 160 countries worldwide, and accounting for more than 14% of total exports.

The sector is one of the country’s most valuable economic assets, directly employing 168,000 people, supporting communities and delivering an annual £18.6bn to the public purse.

Leaving the EU without a deal would jeopardise this, says the SMMT, hampering government’s ambitions to boost global exports and GDP.

Without automotive, the UK would lose its hard-won status as the world’s 10th biggest exporter of goods, falling to 14th place behind Belgium, Canada, Mexico and Russia.

However, the report also calculates that the right deal, backed up by ongoing collaboration to create a competitive business environment and thriving market, and combined with an ambitious automotive-focused trade strategy, could trigger a 20% uplift in the industry’s global trade value – worth £20bn, if the sector can maximise its full capacity.

In April this year car maker Jaguar Land Rover shut its plants in Halewood, Merseyside, and Castle Bromwich, Solihull and Wolverhampton in the West Midlands, for a week due to Brexit uncertainty.

JLR employs around 14,000 staff, including 4,000 at Halewood.

There is also just over 1,000 staff at the Vauxhall manufacturing site in Ellesmere Port, while many thousands more jobs are linked to the automotive industry supply chain throughout the North West and Midlands.

The JLR shutdown was in addition to the planned closure the following week for Easter.

The company said it needed more clarity around Brexit and warned that a “no-deal” would cost it more than £1.2bn in profit each year.

In March this year a study by independent law firm Brabners stated that almost three quarters (71%) of automotive businesses expect to move part of their UK operations overseas in the next three years.

The research, conducted with senior leaders from across the UK’s automotive supply chain, found that nine in 10 (92%) viewed the EU as the most attractive destination if they were to relocate part, or even all, of their UK operations.

As the inital March date for Britain to leave the EU approached, the potential impact of Brexit continued to be seen as the biggest threat to the health of the industry, with three quarters (75%) of businesses highlighting it as their most significant cause for concern.

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