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‘No deal’ Brexit catastrophic blow to British auto industry, warn businesses

‘No deal’ Brexit catastrophic blow to British auto industry, warn businesses

Three quarters of UK automotive businesses fear a ‘no-deal’ Brexit will threaten their future viability with claims of plant closures and job losses, according to a new member survey by the Society of Motor Manufacturers and Traders (SMMT).

The results highlighted the “critical need” for a Brexit withdrawal deal and transition to prevent the industry falling off the “cliff-edge” on 29 March next year when the UK leaves its largest and closest trading partner, the European Union, said the SMMT.

The survey was published as Prime Minister Theresa May attempts to secure Parliament’s backing for the Brexit deal that she has negotiated with the European Union.

A total of 74.1% of companies with UK operations responding to the survey said that a ‘no-deal’ scenario would damage their business, with fewer than 9% foreseeing any positive impact.

More than half said their operations had already suffered as a result of uncertainty about future trading arrangements, while almost a third said they had postponed or cancelled UK investment decisions because of Brexit, with one in five having already lost business as a direct consequence.

More than half of firms said contingency plans are now being executed, with more than one in 10 (12.4%) relocating UK operations overseas and the same proportion already reducing employee headcount. Many had also made alterations to logistics and shipping routes, investment in warehousing and stock and adjustments to production schedules.

SMMT members also outlined the further and long-term damage that a ‘no-deal’ Brexit would do to their businesses.

Almost seven in 10 (68.5%) said their profitability would be negatively affected, with 53.9% concerned about their ability to secure new overseas business and a similar number worried about maintaining investment in their UK operations. A further half said a ‘no-deal’ scenario would undermine their ability to maintain their existing workforce.

Automotive is one of the UK’s most valuable assets, employing 856,000 people and delivering £20.2 billion to the economy, according to the SMMT. Since 2010, car production has risen by a third, with 1.67 million cars leaving production lines in 2017 - 80% bound for export, most to the European Union. Over the same period, the number of jobs supported increased by 120,000.

That growth, said the SMMT, had been dependent on free and frictionless trade afforded by the single market and customs union. A no-deal Brexit would, said the organisation, bring an immediate end to the seamless movement of goods, resulting in disruption at the border and delays, throwing just-in-time manufacturing into chaos and undermining the competitiveness of the sector - ultimately putting profitability and jobs at risk.

Mike Hawes, SMMT chief executive, said: “Frictionless trade as part of the European Union single market and customs union has driven the success of the UK automotive industry so the fact we are leaving is already painful, and already causing damage.

“Leaving without a deal would be catastrophic - plants will close; jobs will be lost. Leaving is not what we wanted, but we recognise that the withdrawal agreement has been hard-fought and, crucially, delivers a transition period which steps us back from the cliff-edge.

“We need a deal now, and we need an ambitious deal for the future that guarantees frictionless trade with our most important market - nothing else will do, and we urge all parties to remember what’s at stake.”

Tony Walker SMMT president and managing director, Toyota Motor Europe - London Office, said: “No deal is not an option. In the short term, crashing out of the European Union would have immediate and devastating impacts, with border chaos disrupting the just in time basis on which our business depends.

“Disruption could last for weeks - even months. It is unimaginable that we could implement full World Trade Organisation import and export procedures overnight. For the longer term, a ‘no-deal’ Brexit would harm our competitiveness, undermine sales and cost jobs… We need the certainty of a deal, not more uncertainty, and we need the smooth transition period based on current trading conditions.

“It is vital we have free and frictionless trade with common technical standards. Without these, we risk losing all we have achieved in building a world-class automotive sector.”
  • Dr George Gillespie, executive vice president, HORIBA Automotive Test Systems, will become president of the SMMT on 1 January, 2019, replacing Tony Walker managing director, Toyota Motor Europe - London Office, who steps down at the end of this year after completing the post’s two-year tenure. Dr Gillespie has some 25 years’ international experience in the automotive and marine sectors, having previously held senior roles with Ricardo and Schenck AG. He joined MIRA in 2009 as CEO, growing the business internationally and leading its sale in 2015 to HORIBA Japan. Today, HORIBA MIRA is one of the leading global providers of engineering, research, development and testing services to the automotive industry. Dr Gillespie is also chairman of the Intelligent Connected Vehicles Group within the Automotive Council, where he leads activities relating to intelligent and connected vehicles. Following his appointment, he said: “It is a pivotal time in our industry to be taking on this role - not only is the global automotive industry undergoing huge amounts of technological change but we have the unique challenges of Brexit and improving air quality to address at the same time.”