Brexit Trigger Renews Auto Industry Call for EU Trade Deal

LONDON – With the U.K. government’s triggering of Article 50 beginning the countdown to the nation’s exit from the European Union, the Society of Motor Manufacturers and Traders is renewing its call for the automotive industry to be at the head of new trade negotiations.

It points out that, as a highly integrated sector that has maximized the benefits of the European single market, Brexit poses a significant threat to the competitiveness of the U.K. automotive sector.

The industry employs more than 800,000 people in the U.K., including manufacturers, suppliers, retailers and the aftermarket, contributing £18.9 billion ($23.6 billion) to the economy.

The industry has been on a roll, reaching a 17-year high for car production, setting records for new-car registrations and exports and posting the EU’s highest productivity levels in 2016. The SMMT maintains much of this success is owing to the U.K.’s global competitiveness, which it says is drawn from economic and political stability, investment, a highly skilled workforce and beneficial trading conditions with Europe, its biggest market.

“The U.K. automotive industry trades around the globe,” the SMMT says in a statement. “We want the U.K. 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.

“We need a trade policy aligned to a strong industrial strategy that supports the specific needs of the sector for all the investment, reshoring and export opportunities,” the group adds. “We need an outcome that maintains growth, innovation, consumer choice and the long-term future of the industry.”

No deal at the end of the 2-year negotiations would mean the adoption of World Trade Organization rules that would result in tariffs of 10% for cars and 2.5%-4.5% for parts.

The SMMT calculates a 10% tariff would add £1.8 billion ($2.3 billion) to the cost of fully assembled cars exported from the U.K. and £2.7 billion ($2.8 billion) to those imported from the EU. That would add some £1,500 ($1,800) to the cost of every vehicle sold in the U.K.

“Triggering Article 50 has started a race against time to secure a deal that safeguards the future of the U.K. automotive industry,” SMMT CEO Mike Hawes says. “Government has committed to creating and supporting the right conditions for our industry to be successful. That means 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.

“We will continue to work with government and our European counterparts, but no deal is not an option,” he says. “Now is the time for government to deliver.”