Next UK Prime Minister must negotiate favourable Brexit deal warns SMMT

25 June 2019

Britain’s next Prime Minister needs to secure a favourable deal with the EU as a priority when taking office, the Society of Motor Manufacturers and Traders (SMMT) has warned.

The call came as the trade body published a new report highlighting the importance of automotive trade to the UK economy and the risks associated with a ′no-deal’ Brexit. The 2019 UK Automotive Trade Report calculates that delays to production caused by friction at the border could add costs of up to £50,000 (€56,000) a minute.

Speaking exclusively with Autovista Group earlier this month, chief executive Mike Hawes indicated that the SMMT is watching the current leadership challenge, which will see a new Prime Minister named next month, with interest. ′Of course, we are watching the leadership challengers, some are adamant that no deal is the only option, others are more approachable over the prospects of a deal of some sort,’ he commented. ′I wouldn’t say we start afresh when a new regime comes in, but we will be sure to speak with MPs and Cabinet members to champion the needs of the industry.’

Leaving the EU without a deal would trigger the most seismic shift in trading conditions ever experienced by the automotive sector, with billions of pounds of tariffs threatening to impact consumer choice and affordability. The end to borderless trade could bring crippling disruptions to the industry’s just-in-time operating model. Delays to shipments of parts to production plants are measured in minutes, with every 60 seconds costing £50,000 (€56,000) in gross value added, amounting to some £70 million (€78.5 million) a day in a worst-case scenario.

Combined with WTO tariffs, which for trade in passenger cars alone amount to £4.5 billion (€5 billion) a year, this would deliver a knockout blow to the sector’s competitiveness, undermining a decade of extraordinary growth.

Current benefits

The report states that thanks to the current free and frictionless trade with the EU, through the customs union and single market, automotive trade value has risen by 118% since the global financial recession – from £47 billion (€53 billion) in 2009 to £101 billion (€113 billion) in 2018. Over the same period, car production increased by more than half, with more than eight in ten vehicles bound for export – the majority to the EU. Around 3.3 million new cars are traded between the UK and EU each year, while the UK exports some £5.2 billion (€5.8 billion) worth of components and £2.9 billion (€3.2 billion) of engines to help build vehicles across the continent.

Addressing an audience of business leaders and government officials at the industry’s annual International Automotive Summit in London today, Mike Hawes, SMMT chief executive, said, ″Automotive matters to UK trade and the economy, and this report shows that, if the right choices are made, a bright future is possible. However, ′no deal’ remains the clear and present danger. We already see the consequences of uncertainty, the fear of no deal. The next PM’s first job in office must be to secure a deal that maintains frictionless trade because, for our industry, ′no deal’ is not an option and we don’t have the luxury of time.″

Valuable asset

Automotive is the UK’s single biggest exporter of goods, trading with some 160 countries worldwide, and accounting for more than 14% of total exports. The sector is one of the country’s most valuable economic assets, according to the SMMT, directly employing 168,000 people, supporting communities and delivering an annual £18.6 billion (€20.8 billion) to the public purse. Leaving the EU without a deal would jeopardise this, hampering government’s ambitions to boost global exports and GDP. Without automotive, the UK would lose its hard-won status as the world’s 10th biggest exporter of goods, falling to 14th place behind Belgium, Canada, Mexico and Russia.

However, the report also calculates that the right deal – backed up by ongoing collaboration to create a competitive business environment and thriving market – combined with an ambitious automotive-focused trade strategy, could trigger a 20% uplift in the industry’s global trade value – worth £20 billion (€22 billion), if the sector can maximise its full capacity.