CEO Update

UK-EU FTA a necessity as Brexit preparedness costs spiral

13 November 2020 #CEO Update

As UK-EU negotiations on a trade deal enter the endgame, new figures from an SMMT member survey released this week illustrate the scale of preparations made by the automotive sector for the UK leaving the EU. At least £735 million has been spent by firms in getting ready, as best they can, for Brexit with more than £235 million of that spent in 2020 alone.

Most companies (67%) across the industry say they are doing everything in their control to prepare for new processes that will come into play on 1 January, with 70% securing GB Economic Operators Registration and Identification (EORI) numbers, 60% spending significantly on stockpiling and 52% employing customs agents, as companies also try to prepare for any disruption or delay to supply chains. Critical questions remain unanswered, however. With the industry’s competitiveness built on Just-in-Time deliveries, clarity on the operation of key new customs systems such as the Goods Vehicle Movement Service (GVMS), is vital.

No amount of preparation could, however, mitigate the devastating impact of ‘no deal’. This would have an immediate and devastating impact on the sector at the worst possible time. But while securing a deal is vital for the automotive industry, it cannot be any deal – it must be workable for our specific needs. This means an agreement with zero tariff, zero quota trade, including highly ambitious rules of origin provisions and a phase-in period that allow businesses time to adjust.

No deal, or one that does not prioritise the needs of automotive, will put jobs at risk and slam the brakes on the UK’s ambitions to be a world leading manufacturer and market for electrified mobility and battery technologies.

As the cost of Brexit preparations spirals, so too does the cost of the pandemic. To date, coronavirus has cost the UK auto sector some £27.5 billion in lost car production and sales. It is therefore critical that car showrooms are allowed to open again as quickly as possible in order to support cashflow and to give manufacturers, who are still operating, a reason to keep producing.

In a rare bright spot of news this week, used car sales increased by 4.4% in the third quarter, as cars continue to play an ever more important role in keeping society moving. However, although this is encouraging to see, the market is still down -17.5% year to date and the longer outlets remain closed, the longer it will take for fleet renewal needed to deliver environmental improvements.

Finally, with the news this week that a coronavirus vaccine could be rolled out in December, rising stability in the US with Joe Biden announced as the 46th President-elect and the UK economy growing 15.5% in the third quarter of 2020, there is – perhaps – a glimmer of light at the end of a very dark tunnel. What happens next will be the focus of SMMT 2020 Update – Live, the digital replacement for SMMT’s Annual Dinner, which sadly we will be unable to host in the traditional way this year.

Instead, I invite you to join me and SMMT’s President, Dr George Gillespie OBE, on Tuesday 24 November at 13:00 when we’ll be discussing the challenges and opportunities ahead. We’ll also be announcing the winners of Autocar’s first Drivers of Change Awards, which seek to promote talent across all age-groups looking to action change in the industry through innovative thinking. To book your place, please click here.

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