It has been a good week in the fight against the coronavirus pandemic, with the first vaccinations administered across the UK offering up some certainty that life will be able to resume to some sense of normality during 2021. On the other hand, the increasingly bleak signals emanating from the UK-EU trade negotiations, with talks now extending into the weekend, are of grave concern.
Time has nearly run out but, even at this eleventh hour, we remain hopeful that a trade deal will be struck between the two parties. Ultimately, the only deadline that matters is 31 December 2020. A ‘no deal’ scenario reached despite all the assurances, the warnings, the rhetoric and negotiations running for more than four years, would be damning. The resulting tariffs would put our manufacturers at a disadvantage when exporting to our biggest and closest markets, raising prices for consumers and making the UK less competitive, both as a market and producer.
We know the UK government recognises this, and we hope it will do whatever it takes to secure a deal that safeguards the sector and hundreds of thousands of livelihoods that depend on its success.
Policy makers clearly understand the importance of overseas trade, not only to this sector but to the entire country, and we welcome efforts to roll over existing agreements with other global nations, as well as forge news ones. Only last week a post-Brexit free trade agreement with Switzerland was announced, followed by agreements with Singapore and Vietnam this week.
However, vital gaps remain, not least with the absence of free trade agreements with crucial automotive markets and manufacturing bases, including Turkey – with whom we are unable to sign a deal without first agreeing one with the EU – and Mexico. With both of these nations we currently enjoy reciprocal tariff-free trade in finished vehicles, engines and parts, worth hundreds of millions of pounds every year. From 1 January 2021, that tariff exemption will be lost with the cost of trade increasing to uncompetitive levels.
All of this, and so much more, hinges on a deal with the EU. Without that, the competitiveness of our export-led sector hangs in the balance and costs to consumers will rise.
Make no mistake, these are extremely worrying times. As the end of 2020 draws ever nearer, and with it a new trading reality for all of us irrespective of a deal or not, business preparedness is more important than ever. Throughout the festive period SMMT will remain on hand to support you in preparing for January as best we can, whatever the outcome.