As Toyota says it’ll invest £240m in its UK plant, has the threat of Brexit to carmakers been overplayed?

Toyota Posts Record Sales In November
Toyota has pledged to invest millions in its UK factory (Source: Getty)

Daniel Mahoney, deputy director at the Centre for Policy Studies, says Yes.

The prospect of a 10 per cent tariff on UK car exports to the EU is unnerving for the automotive industry. However, developments since the EU referendum are reason to remain positive.

Both Nissan and now Toyota have announced major investments in the UK, and car production is at a 17 year high. Post-Brexit, investors will continue to be attracted to the UK car industry’s highly productive workforce, which is one of the world’s most competitive.

There is also an understanding that some sort of mutual trade agreement on cars is likely to emerge from the upcoming EU negotiations. The recently signed CETA trade deal between Canada and the EU shows that tariff-free automotive trade is perfectly possible without EU membership. And, of course, there is little appetite for UK-EU car tariffs from Europe’s economic powerhouse Germany, which exported 810,000 cars to the UK last year, amounting to nearly 15 per cent of its total production.

Chiara Benassi, a lecturer in human resource management at King’s College London, says No.

Toyota’s announcement is certainly an encouraging sign, but it does not necessarily mean that the threat of Brexit to the automotive industry has been overplayed. The costs of Brexit will become clearer in the negotiations which will take place over the next two years.

If tariffs and customs were one of the outcomes of the Brexit deal, not only export costs but also production costs for all automotive manufacturers in the UK would dramatically increase because a large part of the suppliers are based in Europe. This could lead to disinvestment and possibly even to plant closure.

Such a negative backlash could be avoided if the British government showed real commitment to invest in skills, infrastructure and technology in order to support and expand the UK supplier base. However, industry leaders and manufacturing employers have so far cast doubt that the industrial strategy presented by Theresa May last January is up to the challenge.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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