What will a ‘no deal’ Brexit really mean for the car industry
The Society of Motor Manufacturers and Traders (SMMT) has separated the myths from the facts. Here’s what it had to say.
1. The most seismic shift in trading conditions UK Automotive has ever experienced
For the British car industry it would mean an end to free and frictionless trade with its biggest market, an end to preferential trade with a further 70 countries worldwide, the imposition of billions of pounds of tariffs, severe disruption to supply chains and production, and lasting damage to the global reputation of the UK as an attractive and stable investment destination.
2. Sales and investment already hurting
Investment, car sales and manufacturing has plummeted in the UK over the last two years. Admittedly there are other major issues affecting global growth in the car industry, such as the slow-down of the Chinese market and the backlash against diesels. However companies surveyed said that Brexit was costing jobs and competitiveness – one in five automotive companies have already lost business and thousands of jobs are being lost.
3. Uncertainty is pulling away investment
Brexit has been consistently cited by business as a cause of job cuts and reduced investment (now down to a fifth of the recent average), which undermines future competitiveness. Uncertainty is causing investors to look elsewhere.
4. Access to other markets isn’t the solution
The Chinese market is in decline, with UK-built cars exported there down by a quarter. We already export to some 160 markets worldwide including the emerging economies, but the EU, which accounts for more than half of this trade, is a 15 million-strong car market on our doorstep.
5. A devalued Sterling will make cars costly to build
A cheaper pound may make exporting cheaper, but it makes manufacturing more expensive and will not offset the cost of tariffs. Car factories here are integrated into the European supply chain network with the majority of parts used to build cars here imported, thereby negating any cost advantage.
6. We will have less choice of cars
Tariffs could make foreign-made cars expensive here and don’t forget there’s already an added cost of reengineering cars for right hand drive just for our market. With lower profit margins it could de-incentivise manufacturers to supply cars to the UK market.
7. No say in EU Automotive rules
EU automotive rules are often the basis for global regulations. If the UK wants to sell cars to the EU and other global markets, it must comply with these rules. We currently have a say in their creation. We won’t once we leave but we will still have to abide by them.
8. Tariffs would not help UK car makers
Only 12% of cars sold here are actually made here. And of the cars that are manufactured here, 80% are exported, two-thirds of which go to Europe, Canada, Japan, South Korea and Turkey with which the EU has preferential trade agreements, and which we wouldn’t after a no-deal Brexit.
9. The UK market is not crucial to European car makers
Since Germany sells 750,000 cars in the UK, some have said that it will demand a special deal, but the EU car industries have clearly stated that the single market matters is more important to them. The UK only accounts for around 10% of EU production volume and yet we ship more than 40% of everything we make to customers in the EU.
10. UK car manufacturing is an essential part of the economy
Automotive manufacturing is one of the UK’s most important economic pillars, delivering an annual £82 billion direct to the Treasury, employing 186,000 people and responsible for 13% of the UK’s export in goods. However, the true scale of its contribution is significantly larger, at around £202 billion once the impact on adjacent sectors, including raw materials; R&D; logistics; retail; finance; insurance; tech and more are taken into account.