Europe SMMT News UK Manufacturing

Automotive industry warns of catastrophe of exiting EU without an agreement; ‘No Deal’ must be off the table

20 December 2018 #Europe #SMMT News #UK Manufacturing

‘No Deal’ must be taken off the table or risk destroying the automotive industry and the hundreds of thousands of jobs it supports, the Society of Motor Manufacturers and Traders (SMMT) warned today. ‘No Deal’ with the EU would have an immediate and devastating impact on the industry, halting production, undermining competitiveness and causing irreversible and severe damage. Automotive businesses are exasperated by the current situation with only weeks until Brexit. Industry has been unequivocal about the impact of ‘No Deal’.

Delays at the border would fundamentally undermine just-in-time manufacturing stopping production, tariffs would add at least £4.5 billion to industry costs and the demolition of the sector’s competitiveness is already resulting in business and jobs lost overseas.

It is the responsibility of all politicians to rule out No-deal and all effort should be focused instead on delivering a deal that provides for a status quo transition and a future relationship with the EU that has frictionless trade at its heart.

While many companies have begun implementing contingency arrangements for a ‘No Deal’ Brexit, it is impossible for any individual company to fully mitigate the risks of this scenario. UK Automotive’s complex and integrated supply chain works on a Just-in-Time basis, with the arrival of parts at plants timed to the minute, not the day or the week.

The border chaos caused by a ‘No Deal’ scenario would render this process impossible with warehousing not a viable option given the scale of production, the complexity of the product, the space needed and the lack of immediate availability.

Furthermore, the hundreds of SMEs across the domestic supply chain – the backbone of our lean and successful automotive industry – are unlikely to have the time or resources to prepare for the huge and immediate changes to their trading conditions. Such a shock to the system cannot be “managed”, leaving them to bear the brunt of a ‘No Deal’.

Automotive is one of the UK’s most valuable assets, employing 856,000 people and delivering £20.2 billion to the economy. Since 2010, car production alone has risen by a third, with 80% bound for export, the majority to the EU. 2.7 million new cars are traded between the UK and EU each year, while the UK exports some £3.4 billion worth of components to help build vehicles across Europe.

UK plants source almost three times that sum from EU-based suppliers with over 1,100 trucks crossing into the UK every day delivering some £34 million worth of parts. This success has been dependent on free and frictionless trade afforded by the single market and customs union. A no-deal Brexit threatens the viability and, therefore, the future of this critical UK sector.

Mike Hawes, SMMT Chief Executive, said,

As UK motor companies are being told to prepare for a ‘No Deal’ Brexit, the long-standing fears of the industry are becoming a reality. Brexit is already having an impact – in output, costs and jobs. But this does not compare with the catastrophic consequences of leaving the EU without a deal. The Just-in-Time nature of automotive means the impact of ‘No Deal’ will be felt, not in months or days, but hours.

There is no such thing as a ‘managed’ ‘No Deal’. We would face immediate delivery shortages, additional costs and uncertainty, which will seriously damage our sector. Both government and parliament have a responsibility to take this option off the table or risk destroying this vital UK industry.

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