Car industry must be the focus of Brexit negotiations say manufacturers

The needs of the UK’s automotive industry must be placed at the heart of the Government’s Brexit negotiations, the industry’s lobby group has said.

As a highly-integrated sector that has maximised the benefits of the European single market, the Society of Motor Manufacturers and Traders said the triggering of Article 50 marked the most significant threat to the competitiveness of the UK automotive sector in a generation.

The UK automotive industry, one of the most significant business sectors in the Midlands, employs more than 800,000 people across the country, including manufacturers, suppliers, retailers and the aftermarket, contributing £18.9bn to the economy.

The industry is on a roll, with 2016 the best year ever for new car registrations, car production stands at a 17-year high with record exports and the EU’s highest productivity levels.

The SMMT said much of this success was due to the UK’s global competitiveness – a competiveness drawn from economic and political stability, investment, a highly skilled workforce and beneficial trading conditions with its biggest market.

Total automotive trade with the EU is worth more than £42bn – nearly seven times the value of the UK’s second biggest trade partner, the United States.

The SMMT said the sector was deeply integrated within the European automotive industry. Nearly 70% of the cars we buy come from European factories, more than half our new car exports are destined for European markets and the tens of thousands of parts that make up a car cross European borders multiple times.

It said both sides needed to reach a deal which not only protected this arrangement, but also avoided tariffs, harmonised regulation and ensured the European and UK automotive industries remained the engine for growth, innovation and jobs.

The group said that while the UK automotive industry traded around the globe and wanted to exploit new markets, this should not be at the cost of its biggest trading partner.

Mike Hawes, SMMT chief executive, said: “Triggering Article 50 has started a race against time to secure a deal that safeguards the future of the UK automotive industry.

“Government has committed to creating and supporting the right conditions for our industry to be successful. That means certainty in our relationship with our biggest market, tariff-free and open borders so products, parts and investment can flow freely, and continued influence over the regulation that governs the vehicles we build and drive.

“We will continue to work with government and our European counterparts but no deal is not an option. Now is the time for government to deliver.”

No deal at the end of the two-year negotiations would mean the adoption of World Trade Organisation (WTO) rules, which would likely be the worst possible outcome for the UK.

Current WTO tariffs are 10% for cars and 2.5%-4.5% for parts. The SMMT has calculated that a 10% tariff would add £1.8bn to the cost of fully assembled cars exported from the UK and £2.7bn to those imported from the EU – which would add around £1,500 to the cost of every one sold in the UK.

“Such tariffs, as well as other non-tariff barriers and customs restrictions would put our industry at an immediate competitive disadvantage, inevitably hitting consumers in the pocket with price increases and reduced choice,” it said.

“Attracting investment whilst carrying these additional costs would be a major challenge, a challenge already visible with the current uncertainty resulting in reduced investment, down from £2.5bn in 2015 to £1.66bn last year.”