Rule Out ‘no-deal’ Brexit Now, Negotiators Urged, as Smmt Warns £5bn Tariffs Threat Just Tip of Iceberg for Auto Sector

  • ‘No-deal’ not an option for Auto, warns SMMT as limited progress pushes sector closer to cliff-edge.
  • New figures show application of tariffs could mean at least £5bn bill for EU-UK industry & consumers.
  • SMMT calls for all Brexit negotiators to be pragmatic, secure a withdrawal agreement and transition, and safeguard one of Europe’s most valuable economic assets.

A ‘no-deal’ Brexit must be ruled out now to avoid damaging one of the EU’s most valuable economic assets, the Society of Motor Manufacturers and Traders (SMMT) is warning today. Time is running out, and negotiators on both sides of the Channel must prioritise the agreement of terms for a managed withdrawal and ‘status quo’ transition as soon as possible. ‘No-deal’ would undermine the industry’s ability to operate and cannot be an option.

The UK trade body will today meet 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 if a deal cannot be struck. New SMMT analysis suggests that no-deal and the resulting tariffs on light vehicles alone would add £5 billion to the collective EU-UK auto trade bill.1

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 – affecting demand, profitability and jobs. Similarly, 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.2

The automotive sector is one of Europe’s most valuable economic assets, employing 13.3 million people and representing 6.8% of EU GDP. The sector invests some £47 billion in innovation each year, making it the EU’s largest R&D investor, and it produces roughly 17 million cars annually – nearly a quarter of global passenger car production.3

UK Automotive is a key component of this success. It is the EU’s second largest new car market – worth some £29 billion to EU manufacturers every year – and the fourth largest car manufacturing nation.4 Alone, it turns over some £82 billion, supports 856,000 jobs (186,000 in manufacturing) and is responsible for 11% of EU auto manufacturing R&D spend.5 In 2017, British buyers registered some 1.9 million cars and vans from the Continent.6

Fundamental to this has been the deeply integrated nature of the EU-wide industry, which has sought to maximise single market and customs union benefits to reduce costs, improve quality and embrace innovation. Some seven out of every 10 cars registered by UK motorists come from factories in Europe, meanwhile UK car plants send more than 40% of their output to the Continent.7 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, supporting supply chain jobs across the region.

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 some £3.4 billion worth of components to help build these vehicles in Europe, and sources almost three times that sum from EU-based suppliers. More than 1,100 trucks cross into the UK from the Continent every day – the vast majority without a customs check – to deliver some £34 million worth of parts to UK plants for vehicles and engines, which are then exported back to the EU.8

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.

Notes to editors

1: Based on the application of a 10% standard tariff on cars exported to and imported from the EU
2: SMMT calculations
3: ACEA data
4: ACEA and SMMT data and calculations
5: SMMT calculations based on 2015 Euro Stat Business expenditure on R&D
6: SMMT data
7: SMMT data
8: SMMT analysis and data

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