Auto industry issues stark warning over hard Brexit

 
Catherine Neilan
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The New State Of The Art Ford Production Line
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Some of the world's biggest car-makers have warned that a hard Brexit would put significant pressure on their UK operations, urging the government to agree a standstill transitional period amid fears that time is running out.

Ahead of an industry hearing before the Business, Innovation, Enterprise and Skills (Beis) committee this afternoon, MPs have published the sector's submissions into the impact Brexit will have on trade, and the evidence suggests auto firms are bracing themselves for a very bumpy ride.

Transition

A time-limited transition is key, and business needs to know a timeframe as soon as possible, the car giants argue. Ford, Vauxhall and Honda, as well as the Society of Motor Manufacturers and Traders (SMMT), called for a standstill agreement, in which all current trading and customs arrangements apply.

"We do not believe that the new customs, border and documentation arrangements necessitated by the UK leaving the EU and customs union could be put in place by April 2019," Ford explained.

"It is necessary that businesses, like ours, are allowed sufficient time to prepare and review the impact of any future relationship and that the arrangements are fully resilience tested," Vauxhall said. "Without certainty on the arrangements post March 2019, businesses like ours will have to take steps to ensure that we can continue to run our facilities effectively."

Honda called for a transitional period of "at least" two years, and also called for it to be a standstill based on "current arrangements".

Tariffs

"We consider trading with the EU under WTO terms as a worst case scenario," said Vauxhall. "Access to the European market and the benefits associated with single market access and operating within a customs union is essential for our operations... access to this market post Brexit, in both tariff free and no non-tariff barrier terms [is] vital."

Ford also warned that reverting to WTO tariffs would "place a very significant cost on Ford in Britain and across Europe" in three critical areas: import of components, export of engines and import of cars and vans.

"The impact of tariffs on our business would be considerable," the firm said.

Using SMMT figures, which estimated that tariffs would push up the duty cost by £1,500 per car, Ford said "this cost would either increase the cost of a vehicle, or reduce the choice available to the consumer- or possibly both".

Honda added that "an optimal future EU –UK would maintain the benefits of the customs union, by delivering tariff-free trade between the UK and the EU and specifically, as frictionless as possible trade and customs procedures and continued mutual recognition".

Leaving the Single Market would also affect Ford's captive finance arm, Ford Credit Europe, which finances 40 per cent of Ford vehicles sold in the UK. "Ford cannot afford any kind of disruption to FCE’s continuity of financing," the group said.

Firms also weighed in on the new UK customs system, which a group of MPs warned over this morning. Ford said it "may not be able to handle​​ the expected surge in demand... if a status quo transition period is not achieved".On labour, the car firm said ensuring free movement was "critical" to maintaining operations across Europe and the UK. It recommends replacing the EU principle with "a workable light-touch visa system, in order to ensure that Ford can continue to fill vital roles in the UK".

Vauxhall said: "It is essential that a common customs code and procedures are maintained with the EU to prevent any disruption to the frictionless trade we have today. Government should prioritise delivering the ‘freest’ possible trading zone with minimal procedural and compliance costs"

Skills

Car firms are nervous about the impact of ending free movement of labour after leaving the European Union.

"There is a well-documented shortage of local engineering talent, specifically in relation to software engineers to support emerging areas of activity around electrification and mobility," Ford said. "Any reduction in our ability to attract and retain these skills would impact the competitiveness of our UK operations against other markets."

They call on the government to avoid using Tier 2 as a template for future EU workers, with the SMMT dubbing it "complex, burdensome and costly". Ford recommended a "workable light-touch visa system, in order to ensure that Ford can continue to fill vital roles in the UK".

Silver linings

But it wasn't all bad. Ford said it saw "potential opportunities in future UK trade deals" and called on government to work closely with the sector to assess specific trade deals, "taking into account the growing importance of electro-mobility and data services".

Ford stressed the need for an "ambitious free trade arrangement with the EU as a necessary platform on which to build other opportunities" noting that priority areas for FTAs included Canada and South Africa, as well asTurkey.

The SMMT added: "There are substantial global trade opportunities for the UK automotive sector and government’s role in enabling the industry to access markets is critical. Clarity from government is needed on how current trade benefits gained through the EU will be secured and how government intends to pursue other trade opportunities."

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