CEO Update

Why the risks of a ‘no deal’ Brexit can’t be fully mitigated

27 September 2019 #CEO Update

While it’s always noteworthy to see the UK’s manufacturing and registrations figures each month, there’s always a wider narrative at play, and it’s no different with the August production figures that were released this week. While a 3.3% growth year-on-year is of course welcome, the figures mask the underlying downward trend and strengthening global headwinds facing the sector, thanks to international trade tensions, massive technological upheaval and, in the UK, political and economic uncertainty.

Many UK manufacturers opted to move their planned annual shutdowns from the traditional summer dates, which allow for maintenance and balancing of production and holidays, to April this year, to mitigate the effects of the initial Brexit date of 29 March. That is a measure that cannot necessarily be repeated, meaning that many manufacturers will have even less time and flexibility in trying to prepare for the latest Brexit deadline of 31 October.

It’s impossible to fully prepare for a ‘no deal’ Brexit scenario because the full impact of the move is so difficult to anticipate. We know it will mean a massive culture shift for an industry built on just-in-time parts delivery and frictionless trade with our biggest trading partner, the European Union. It will also mean the imposition of tariffs that would threaten the very existence of many of the UK automotive businesses in the UK and also impact European operations.

Indeed, we saw the unprecedented move of 23 industry associations from 17 countries across Europe united this week in calling for a ‘no deal’ Brexit to be avoided. The mere threat has already undermined investment in the UK sector – the potential imposition of tariffs, border delays and additional administrative burdens would damage competitiveness at a time when UK Automotive can least afford it. We want to be investing in new technologies not ‘no deal’ preparations.

We need the UK and EU negotiators to redouble efforts to get a deal that maintains free and frictionless trade. Given the ongoing challenges and costs being incurred across the industry, there is not a moment to lose.

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