SMMT, Ford and BMW warn UK government to safeguard trade competitiveness post-Brexit

30 March 2017

The SMMT has warned Brexit is ′perhaps the most significant threat to the competitiveness of the UK automotive sector in a generation,’ as calls come from all sectors of the UK’s auto industry to protect competitiveness. This comes as negotiations finally begin following the prime minister’s formal triggering of the Article 50 Brexit process on Wednesday. However, despite concerns, the actions of many of the UK’s most entrenched players suggest that the core industry will push on through the Brexit uncertainty.

SMMT Chief Executive Mike Hawes said: ′Triggering Article 50 has started a race against time to secure a deal that safeguards the future of the UK automotive industry,’ adding the UK needs ′certainty in our relationship with our biggest market, tariff-free and open borders so products, parts and investment can flow freely, and continued influence over the regulation that governs the vehicles we build and drive.’

Finally he warned: ′No deal is not an option. Now is the time for government to deliver.’

A spokeswoman for BMW – which builds Mini and Rolls-Royce cars in Britain – warned of the need for the UK government to listen to international businesses, adding this means: ′Not only free trade but also cross-border employment opportunities and unified, internationally applied regulations are of proven benefit to business, the economy and individuals.’

Ford’s top concern – as by far the UK’s biggest engine manufacturer – lay in the detail of the expected trade deal. It said: ′Any deal must include securing tariff-free trade with the wider Customs Union and not just the EU27, whilst retaining access to the best talent and resources.’ Ford is especially concerned about this distinction as it builds vans in Turkey, which is in the EU customs union despite not being part of the EU.

Ford of Europe President Jim Farley added: ′It also is critical that a transitional period is put in place to ensure that customers are not penalized and to maintain free trade.’

However, there are indications of growing confidence among the largest players in the UK auto industry about their prospects after Brexit. Toyota has announced a long-term investment for its UK plant to upgrade it for its next-generation vehicle platform, and tier 1 supplier Gestamp has announced it will continue to invest heavily in the UK as it wants to continue its close relationship with the UK’s two biggest car manufacturers Jaguar Land Rover and Nissan, both of whom have major UK investments planned.

The SMMT highlights that, with nearly 70% of cars bought in Britain coming from European factories and with components from many criss-crossing the UK-continent border, ′both sides [should] reach a deal which protects this frictionless, ′just in time’ movement but one which also avoids tariffs, harmonises regulation and ensures the European and UK automotive industries remain the engine for growth, innovation and jobs.’

No deal with the EU following the UK’s two-year negotiations before leaving the bloc in March 2019 would be the ′worst foreseeable outcome for UK Automotive,’ according to the SMMT. It has calculated that a 10% tariff – the result of no deal – would add £1.8 billion to the cost of fully assembled cars exported from the UK and £2.7 billion to those imported from the EU. It would therefore add some £1,500 to the cost of every one sold in the UK – wiping out much of most OEM profit margins.

SMMT says: ′Such tariffs, as well as other non-tariff barriers and customs restrictions would put our industry at an immediate competitive disadvantage, inevitably hitting consumers in the pocket with price increases and reduced choice.’

It warns that continued uncertainty risks future investment – with investment already down a third from £2.5 billion (€2.9 billion) in 2015 to £1.66 billion (€1.9 billion) last year. Whether this is lost investment or investment delayed until levels of uncertainty fall remains unclear.

In response to Brexiteers’ calls for the UK to forge new international trading relationships, the SMMT said: ′We want the UK to exploit new markets, but this should not be at the cost of our biggest trading partner. Substituting one market for another is not straightforward given differing consumer tastes, regulation and market access.’ It calls for: ′a trade policy aligned to a strong industrial strategy.’