UK car industry chiefs have joined forces with the European industry to issue dire warnings about the effects of a ‘no-deal’ Brexit on British car manufacturing. As much as £50,000 could be lost through a single minute’s stoppage – a serious side effect of components failing to be delivered to production lines.
With just over one month to go before the UK is due to leave the EU, senior representatives of the European automotive industry made a united call for the UK and the EU to avoid a ‘no-deal’ Brexit. UK car manufacturing chiefs as well as organisations representing vehicle and parts manufacturers across the EU have joined forces to condemn a ‘no-deal’ Brexit and underline the consequences it would have on one of Europe’s most valuable economic assets.
The automotive industry contributes hugely to the UK and the EU as a whole, producing 19.1 million vehicles a year and employing 13.8 million people. Fundamental to this success is the deeply integrated nature of the industry, which uses the single market and frictionless border crossings to speed up production and increase efficiency.
According to European industry chiefs, the UK’s departure from the EU without a deal would seriously hamper trading conditions, with tariffs threatening to raise prices on both sides of the Channel. The imposition of border checks would harm the industry’s just-in-time operating model, which according to the SMMT, could add €5.7 billion (£5 billion) to the collective EU-UK auto trade bill. Carmakers believe that such disruption and cost must be avoided, and that all effort should be made to deliver an orderly withdrawal of the UK from the EU that affects trading as little as possible.
Frictionless trade needed between the EU and UK
Ralph Speth, CEO of Jaguar Land Rover, said: ‘In order to produce vehicles we need in the UK between 25-30 million parts a day, delivered on time, in order to assemble a vehicle, and if it’s guaranteed we have a frictionless trade… then we can continue production. But if we don’t have the parts we need we will not produce the vehicle. And that will be an issue not only for us but also for the smaller suppliers.’
Stephen Norman, Managing Director of Vauxhall, told CAR magazine: ‘September 2019 is the last normal month for the UK market. If we get a hard Brexit, we will be entering uncertain territory. I do not know what the fourth quarter will look like – I’m trying to get my full year by the end of September. In the event of a hard Brexit the new car market could fall by between 20-25%. It could be higher – nobody knows.’
This view is echoed on the other side of the Channel, where a number of big hitters stated their countries’ position. Bernhard Mattes, President of the German Association of the Automobile Industry (VDA), said: ‘We regret Brexit. The UK has more than 100 production sites as well as research and development facilities. In the view of the German automotive industry, everything has to be done to maintain the free movement of goods, of services, the freedom of capital and the freedom of movement for workers between the UK and the EU.’
Erik Jonnaert, Secretary General of the European Automobile Manufacturers Association (ACEA), said: ‘Barrier-free trade is crucial for the continued success of the deeply integrated European auto industry, which operates some 230 assembly and production plants right across the EU. Brexit will have a significant negative impact on the automotive sector and a ‘no-deal’ Brexit would greatly exacerbate those consequences, causing massive disruptions to an industry which is so vital to Europe’s economy. The European automobile industry calls for all sides to rule out a no-deal scenario as soon as possible.’
Mike Hawes, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT) in the UK, concluded: ‘European Automotive is deeply integrated and the benefits of free and frictionless trade have helped our sector become one of Europe’s most valuable assets, delivering billions to economies and supporting millions of livelihoods across the EU. A ‘no deal’ Brexit would have an immediate and devastating impact on the car industry, undermining competitiveness and causing irreversible and severe damage. UK and EU negotiators have a responsibility to work together to agree a deal or risk destroying this vital pillar of our economies.’
A ‘no-deal’ Brexit will cost car buyers dearly
With sales and production down in the UK consistently throughout 2019, the chilling effects of Brexit are already hitting the UK motor industry. Parliament has passed the European Union (Withdrawal) (No.2) Act 2019 which puts the Government under a legal obligation to secure a further extension pursuant to Article 50(3) of the Treaty on European Union beyond the 31 October if a deal cannot be concluded at the European Council meeting on 17 and 18 October.
However, if the Government does not conclude a deal and, as has been suggested, finds a way around the Act, the UK will leave the European Union on a ‘no-deal’ basis on 31 October – in those circumstances, the UK car industry is set to lose £70 million a day (based on a five-day working week) because of delays to the arrival of components. Moreover, if World Trade Organisation tariffs are imposed because of no deal, the annual cost to the car industry could be as much as £5bn per year – if manufacturers cannot absorb the additional cost, much of that is likely to be passed on to consumers.
What long-term impact all of this will have on an already embattled UK Automotive sector remains to be seen…