CEO Update

Why ‘no deal’ threatens to stall UK’s green recovery

23 October 2020 #CEO Update

This week SMMT has once again urged the UK government and the EU to re-engage with vigour in the Brexit negotiation process, so we welcome the news that both sides are now back around the table. New SMMT calculations illustrate the high stakes of a ‘no deal’, not just for the automotive industry but for hopes of a green recovery from the coronavirus crisis.

If a deal is not agreed by the end of the transition period, the implementation of 10% WTO tariffs would add £4.5 billion to the annual cost of fully assembled cars traded between the UK and the EU, increasing the average price of a EU built vehicle sold in the UK by around £1,900. The cost is even higher for fully electric cars fitted with expensive battery technology, at £2,800, which effectively makes the current £3,000 plug-in car grant for these vehicles null and void.

Analysis shows that the shock of these higher prices risks reducing increased Battery Electric Vehicle (BEV) demand next year by at least 20%, even before the impact of currency fluctuations, border delays and supply chain disruption, holding back efforts to accelerate uptake and decarbonisation.

This tariff would also add £2,000 on to the average price of every UK-built BEV exported to the EU, making British products less competitive and the UK far less attractive as a manufacturing investment destination.

The importance of Free Trade Agreements beyond the EU is also crucial for the long-term future of the UK’s automotive industry, and SMMT welcomes today’s historic signing of an FTA between the UK and Japan. While we await the text of the agreement, we are confident it will deliver the conditions to help foster a mutually beneficial automotive trade and investment relationship between our two sectors – and that, indeed, this milestone will set a positive precedent to help spur on negotiations for the UK-EU deal that remains key to unlocking the full benefits of our future relationship with Japan.

With a second wave of coronavirus now sweeping the UK, ‘no deal’ with the EU is not the only threat to the sector and a green recovery. As new restrictions are imposed across the UK, including the closure of showrooms in Wales (although SMMT has obtained confirmation that “click and collect will still be permissible), SMMT’s dedicated Covid-19 Support Hub remains a crucial tool for supporting automotive businesses. Please click here to access the latest coronavirus support, information and webinars.

In other news this week, the sector’s latest sustainability report shows just how hard the industry has been working to reduce its own environmental impact. In addition to adding more environmentally efficient models to help fleet renewal, the sector has reduced its annual carbon footprint by more than 1.3 million tonnes and, over the past two decades, saved 1.2 billion litres of water a year, alongside cutting waste to landfill by -97.4%.

The success of automotive in the UK has been built upon decades of craftmanship, engineering excellence and innovation delivered by a highly skilled workforce. Apprentices – who will ultimately become tomorrow’s leaders – are crucial to this, which is why the SMMT Charitable Trust Fund’s (SCTF) automotive apprenticeship Covid salary support scheme is still open for applications to SMMT members.

This support package has been designed to offer financial assistance to businesses who are considering apprenticeship redundancies after the government’s furlough scheme ends – if this applies to you, I urge you to apply now. For more information, click here.

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