UK Edition
Car makers cry out for interim Brexit deal to stop industry falling off a cliff
Britain’s car industry has called on the Government to accept that transitional deal to leave the EU is necessary to stop the automotive sector falling off a “cliff edge”.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, used his keynote address at the trade body’s annual summit to warn of the dangers that Brexit poses to the automotive industry - one of the country's largest - as well as voicing businesses' frustration.
“We have asked for clarity and certainty,” he said. “The general election has not brought that clarity. It has added confusion.
“It is time to stop playing with words. ‘Soft’ or ‘hard’ Brexit and now ‘open’ mean nothing. It’s time to be brutally honest - our sector needs a comprehensive and bespoke trade agreement.”
Mr Hawes' comments came as the SMMT’s annual sustainability report revealed that the industry had grown for the seventh year running, with its annual turnover now standing at £77.5bn, a rise of 9pc.
Employment numbers remained stable, with almost 170,000 people employed in manufacturing vehicles and a total of 814,000 jobs supported by the sector.
Car production rose 8.9pc, with each worker generating an average of £130,000. Productivity rose to a record high, with 11.8 vehicles produced for each person employed in the industry.
The SMMT has previously warned that if Britain crashes out of the EU without a trade deal, tariffs could mean prices of imported cars jumping £1,500 each.
With 80pc of the 1.7m cars built in Britain annually being exported, customs and foreign sales costs could land the industry with a further £2.7bn a year bill.
In total, without a trade deal for the sector, Britain’s automotive industry could take a £4.5bn hit.
The SMMT said the two-year deadline set by Article 50 “cannot be delivered”, adding it is more likely to take five years.
“This uncertainty cannot be allowed to drag on – and drag British industry down with it,” Mr Hawes said. “Nor will we be satisfied with vague talk of a ‘transition’ or ‘implementation’ period.
“Instead, we need a clear interim arrangement – an arrangement enabling ‘business as usual’ from day one.”
He called for the Government to seek an interim deal that sees the UK remaining in the customs union and single market for the duration of the negotiations, and for as long as it takes to settle a new deal with the EU.
Without this, the £77.5bn-a-year UK car industry, which directly employs 170,000 people and supports a further 800,000 positions, faces a “cliff edge” that would put it “in peril, damaging it permanently, disrupting supply chains and jeopardising competitiveness”.
Mr Hawes spoke as an Automotive Industry Council report revealed that the level of UK-produced components in cars coming off British production lines had risen to 44pc from from 36pc a year ago, with manufacturers pushing for this level to increase as Britain heads for the EU exit door. A ratio of around 50pc UK-made parts is thought to be the minimum necessary for British goods to avoid tariffs under a free trade system.
'Death by a thousand cuts'
Asked to define what the industry meant by fearing “permanent damage”, Mr Hawes said: "The danger is death by a thousand cuts. If there is long-term uncertainty about Brexit, it could delay investment decisions, making Britain less competitive and unlikely to attract further investment.”
The industry chief said failure to hammer out a deal would not mean plants shutting down overnight, but rather a slow spiral downwards for the UK car sector.
The industry has had informal input with the Government over its negotiations with the EU, but Mr Hawes said he would like to see this interaction increase as talks about Brexit take shape and specific issues affect the industry.
Jeremy Hicks, managing director of Jaguar Land Rover UK, said the company - Britain’s biggest car maker - could have its future range put at risk by failing to agree a Brexit deal.
“We see the future as autonomous, electric and connected - 50pc of our range will have an electric option in the next few years but it requires a massive investment and that’s why we can’t have uncertainty, which might mean the industry falls off a cliff edge.”
JLR has invested £12bn in facilities and R&D over the past five years and a few days ago said it planned to recruit a further 5,000 engineering and technical staff in the UK, boosting its domestic workforce by 15pc, but there are concerns that such willingness to back Britain as a place to build cars could be hit by the failure to secure a good deal as the country leaves the EU.
Customs union
Ian Howells, senior vice-president of Honda, warned of the impact leaving the customs union would have on the company’s Swindon plant, which relies on a steady flow of parts to production lines to operate its 'just in time' manufacturing.
“We have deliveries of 2m components every day, arriving on 350 lorries,” he said. “We have just one hour of supply of parts at the side of the line, and half a day in local warehouses.
“From that description of the flow of goods you can see how new customs rules would harm our ability to produce cars.”
He added the company also had concerns about the Government’s ability to manage an upgrade to computer systems that track imports and exports of goods, saying it is currently set up to handle 60m transactions; in a post-Brexit Britain, it would be six times this.