Britain’s automotive industry trade body chief has indicated that car makers would rather suffer yet another period of Brexit uncertainty than crash out of the European Union without a deal – a scenario that would be damaging to UK business, but particularly harmful to car makers.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT) said that the industry would “put up” with more months of delays if it meant avoiding a no-deal.
Prime Minister Boris Johnson has said that he will take Britain out of the EU on 31 October “no ifs, no buts,” and that he is prepared to accept a no-deal scenario if he must.
But the motor industry has been one of the most vocal critics of this, warning that trade tariffs at the border would disrupt manufacturers’ just-in-time supply chains, which would ruin the viability of many factories.
Several car plants have already been earmarked for closure this year, with thousands of jobs hanging in the balance as a result. Nissan, Honda and Ford all said they will cancel or end factories’ production in the last six months. Although they have largely played down the importance of Brexit in making these decisions, it is expected a no-deal would result in many more announcements of this kind.
Another plant which could hang in the balance is Peugeot’s factory which builds the Vauxhall Astra, after the firm committed to keeping the site open “conditional on the final terms of the UK’s exit from the European Union”.
Why are car makers so worried about a no-deal Brexit?
Car manufacturers in Britain bring most parts in from abroad before assembling engines and cars in the UK.
A no-deal scenario would mean Britain must trade on World Trade Organisation rules. That means imports would be subject to higher tariffs than they are now, significantly increasing the cost for car makers.
To compound the issue, a no-deal would lead to increased border checks on these imports, which would significantly slow down the parts coming into the UK. This would have a knock-on effect on car makers’ just-in-time supply chains, costing them hundreds-of-millions of pounds extra per year.
“Leaving without a deal would be the worst outcome,” said Hawes. “If it takes an extra couple of months to get that deal, I think the industry would put up with that,” he said.
All the main car companies in Britain are foreign-owned but the case for investing in the country as a gateway into Europe is at risk, Ian Henry, Professor in Automotive Business Strategy at Birmingham City University’s Centre for Brexit Studies said.
“When you’re talking about adding billions of pounds to the cost structure of an industry which either makes very low margins or no money at all, that can only undermine the viability of producing vehicles in this country,” he said.