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The Chief Executive of the Society of Motor Manufacturers and Traders (SMMT) says a ‘No Deal’ Brexit is not an option for the UK automotive industry, and the next Prime Minister must make securing a favourable deal his first priority.
Speaking at the SMMT’s annual summit in London, Mike Hawes used statistics from the trade body’s new sector report to highlight the importance of automotive trade to the UK economy and outlined the high stakes of leaving the European Union without a deal.
“Automotive matters to UK trade and to the economy, and this report shows that, if the right choices are made, a bright future is possible,” Hawes told delegates.
“However, ‘no deal’ remains the clear and present danger. We are already seeing 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.”
Time is money
According to the SMMT’s 2019 UK Automotive Trade Report delays to production caused by friction at the border could add up to £50,000 every minute for the sector.
It says leaving the EU without a deal would trigger the “most seismic shift in trading conditions ever experienced by automotive”, 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, the report warns. Delays to shipments of parts to production plants are measured in minutes, with every 60 seconds costing £50,000 in gross value added – amounting to some £70 million a day in a worst-case scenario.
Combined with WTO tariffs, which for trade in passenger cars alone amount to £4.5 billion a year, the report estimates this would deliver a knockout blow to the sector’s competitiveness, undermining a decade of extraordinary growth.
Free and frictionless trade
Thanks to the free and frictionless trade afforded by the customs union and single market, automotive trade value has risen by 118 per cent since the global financial recession, from £47 billion in 2009 to £101 billion in 2018.
Over the same period, car production increased by more than half, with more than eight in 10 vehicles bound for export – the majority to the EU. Some 3.3 million new cars are traded between the UK and EU each year, while the UK exports some £5.2 billion worth of components and £2.9 billion of engines to help build vehicles across the continent.
Automotive is the UK’s single biggest exporter of goods, trading with some 160 countries worldwide, and accounting for more than 14 per cent of total exports.
However, the SMMT report warns 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 status as the world’s 10th biggest exporter of goods, falling to 14th place behind Belgium, Canada, Mexico and Russia.
Project fear?
Asked whether the assessments in the report were peddling ‘project fear’, Hawes said that they had been based on a “reasoned, fact-based approach.”
He added: “Not least of all we’ve already seen businesses closed needlessly April after preparations were made for the initial leave date. Money was wasted and jobs lost. The wider world is losing patience and investors are wary. If you under-invest then competitiveness diminishes, it makes it hard to be efficient and hard to compete. This industry is agile, but we can only do so much.”
Times they are a-changin’
Quoting the line made famous by Bob Dylan, Hawes said a favourable trading deal with the EU was all the more important to the automotive industry in light of the changes brought about by technological, social and geo-political transformation.
“Change has been our sector’s constant for over 100 years, from horse drawn to horse power; coach built to mass produced; mobility for the few to freedom for the many. Today, however, change threaten to submerge this industry,” he explained.
“The industrial combustion engine becomes the battery electric motor; the driver becomes driverless; analogue becomes digital. The industry could of course cling to old ways and technologies, and the consumer too can often be resistant to change, but if we chose this approach that would guarantee us being drowned out by new entrants. So, we will continue to adapt and to innovate and continue to make the case for a successful and competitive UK automotive industry.”
A bright future
Hawes said he believes that despite the challenges, the UK’s automotive industry can have a bright future thanks to its skilled workforce, engineering excellence and global reputation for producing quality products.
“The sooner the country is seen as a politically stable one that people are happy to invest in then the sooner we can concentrate on the technical transitions that the industry is looking at,” he added.