A no deal Brexit must be ruled out now to avoid serious damage to the entire European motor industry, the Society of Motor Manufacturers and Traders (SMMT) has warned.
The UK trade body met with EU representatives in Brussels to highlight the economic importance of the integrated European automotive industry and set out the repercussions for businesses, economies and jobs in the event of a no deal Brexit. SMMT analysis suggests that no-deal and the resulting tariffs on light vehicles alone would add £5bn to the collective EU-UK auto trade costs.
If passed directly on to consumers, import tariffs would push up the cost of UK-built cars sold in the EU by an average £2,700, and that of light commercial vehicles by £2,000. UK buyers of a car or van from the EU would be faced with £1,500 and £1,700 increases if manufacturers and their dealer networks were unable to absorb these additional costs.
Around seven out of every 10 cars registered by UK motorists come from factories in Europe, while UK car plants send more than 40% of their output to the continent. In addition, the tens of thousands of parts making up a vehicle cross EU borders multiple times before final assembly, with the majority of components going into UK-built cars coming from EU suppliers.
Mike Hawes, SMMT chief executive, said: “Tariffs alone should be enough to focus minds on sealing a withdrawal agreement between the EU and UK but the potential impact of ‘no-deal’ means the stakes for the automotive sector are far higher. Without a deal, there can be no transition period and the complex issues surrounding tariffs and trade, customs, regulation and access to talent will remain unresolved. Our industry is deeply integrated across both sides of the Channel so we look to negotiators to recognise the needs of the whole European automotive industry and act swiftly to avoid disruption and damage to one of our most valuable shared economic assets.”
In addition to the 2.7 million cars and vans that cross the Channel both ways each year, the UK exports around £3.4bn worth of components to help build these vehicles in Europe, and sources almost three times that sum from EU-based suppliers.
The SMMT said: “Without a withdrawal agreement, on 30 March 2019 this trade will, as a minimum, be severely disrupted – potentially halting production, undermining competitiveness and negatively impacting the industry in the UK and Europe.”
Recent SMMT figures showing falls in new car registration have been blamed on stringent WLTP regulations, though concerns over Brexit have been cited as an additional factor.