Britain’s carmakers have warned that they do not believe a trade deal with the EU will be struck within the next two years and are “sitting on their hands” rather than investing in the UK.
The flourishing industry is now seeking the earliest possible notice that there will be a transitional deal post-2019 that “keeps as much as possible” of the status quo for as long as possible.
The imposition of either World Trade Organisation tariffs of 10% on passenger cars and up to 22% on commercial vehicles, or non-tariff barriers such as customs controls, would be devastating for a sector that relies heavily on the swift, free movement of parts and finished cars. Any change could lead to prices rising for consumers, Michael Hawes, chief executive of the Society of Motor Manufacturers and Traders, claimed.
More than half of all the cars and 90% of commercial vehicles built in the UK last year were bought by customers in Europe. The EU accounts for more than 80% of the UK’s motor vehicle imports. In 2016, 35.7m autoparts and components moved between the UK and the rest of the EU, in what is one of the most highly integrated sectors.
The UK car industry believes it needs an agreement between the EU and the UK that ensures its unrestricted access to the talents of nationals from the continent. About 10% of the workforce in the UK are from the rest of the EU, but this is thought to rise to over 50% in some companies, at a time when there are 5,000 vacancies in the growing industry.
At an event in Brussels to launch the EU car industry’s position on Brexit, Hawes said an early indication of a cushion for the car industry in 2019 was vital to allow companies to make investment decisions.
He said: “Our experience of trade deals is that they take many, many years. We have the advantage that our regulations are in the same place but all the sounds from Brussels have been to say that it will be the divorce first and the rest later. It is no surprise that this reality is now taking hold in the UK. I think Boris Johnson has accepted as much.”
Hawes added: “The industry has been a tremendous success in the last five or six years. In terms of investment, it has been running at an average of £2.5bn per annum.
“Last year it was down to £1.6bn, it has dropped off. Anecdotally you will find that companies are sitting on their hands to a certain extent until there is more clarity on the situation.
“We need a transition arrangement, or an implementation period as the government would put it, that retains as much as possible. I don’t know how far that is possible.”
Erik Jonnaert, the secretary general of the European Automobile Manufacturers Association, told reporters that the sector employed more than 12 million people across the EU, produced a quarter of the world’s vehicles every year, and represented more than 6% of the bloc’s GDP. “The reason why we are gathering today is that we want to get the message across to the negotiators that our industry is key to Europe, and I mean all 28 member states,” he said.
Jonnaert added that it had become clear in recent weeks that there would not be a sectoral deal that would protect the car industry. “Whatever we are going to do following Brexit will cause some pain, so the question is how can we do it in the best possible way,” he said.
Responding to the claims of the former Tory cabinet minister John Redwood, that consumers could avoid the costs of Brexit by buying British-made cars, Hawes said: “We don’t always see eye to eye with the hardline Brexiteers. There are around 400 models of cars on the market and it is a very small minority, albeit an important one, made [solely] in the UK.”
