UK Automotive Priorities for International Trade
Mike Hawes, SMMT Chief Executive:
We welcome today’s agreement of a new EU-UK trading agreement, which provides a platform for our future relationship. We await the details to ensure this deal works for all automotive goods and technologies, including specifics on rules of origin and future regulatory co-operation. A phase-in period is critical to help businesses on both sides adapt and efforts should now be sustained to ensure seamless implementation, with tariff-free trade fully accessible and effective for all from day one. We will continue to work closely with government to ensure all companies are as prepared as possible in the limited time left.
How the deal measures up
Tariffs & rules of origin, including phase-in
The tariff-free, quota-free trade industry has called for has been secured in principle. However, the six-year phase-in period and special provisions for electrified vehicles and batteries now make it imperative that the UK secures at pace investment in battery gigafactories and electrified supply chains to create the world-leading battery production infrastructure to maintain our international competitiveness.
The lack of solid commitments from either party on recognition of standards beyond UNECE and close regulatory cooperation in our sector is disappointing and we urge the UK and EU to commit to addressing these challenges once the TCA is ratified. Businesses in the UK and EU alike will incur additional costs arising from a lack of mutual recognition of type approval or technical services, and we may face capacity issues and delays in testing and bringing new products to market.
Customs & trade facilitations
Automotive just-in-time supply chains depend on frictionless trade. The commitment to simplify customs procedures is welcome as it will reduce time and costs for all – but with no detail or timeframe for implementing reform, immediate costs and friction are inevitable. Suppliers and manufacturers on both sides will face a significant administrative challenge that will undermine productivity and increase operating costs. Customs facilitation must be accelerated to support growth for all.
People & movement
We believe the industry is better placed to succeed when it is free to move the best people at speed to wherever they can deliver the most significant impact. New restrictions on freedom of movement will make this more challenging. While the TCA does include provisions that may ease some of the administration and costs that will be involved as the UK adopts a new points-based immigration policy, we await further guidance from Home Office as to its implementation.
Third country trade
Implementing the UK-EU TCA is now the sector’s priority not just for continuity of free trade between these two markets but also as a precursor to further agreements with key markets such as Turkey that are outside of the EU but part of its customs union. Now ‘the main deal’ is done, government must prioritise building on these trade relations and securing critical preferential arrangements with Mexico, and other global growth markets vital to the success of UK Automotive and the wider economy.
Next steps and automotive priorities
The automotive industry is a vital part of the UK economy, making up 10% of the country’s GDP, with every £1 generated by the sector contributing £3 to the UK economy. The UK new car market remains the second largest in Europe, delivering in excess of £20 billion each year direct to the Exchequer – on top of the £15.3 billion generated by its manufacturing operations.
It is also the UK’s largest exporter of goods, generating global trade worth £100 billion a year – with 78% of all exported finished vehicles heading to the EU. The sector, which provides well-paid, highly skilled jobs for 864,300 people in the UK, is playing a pivotal role in helping the country reach its emissions targets, with manufacturers already having invested billions in developing the technology that will allow Britain to make the transition to zero emission road transport over the next decade.
UK Automotive needs to see the following urgent measures and priorities taken forward to ensure the continued competitiveness of the sector following the agreement of the UK-EU TCA:
- Immediate ratification and implementation of the deal
Implementing the TCA and its Rules of Origin provisions for automotive, and ensuring its smooth functionality, is essential from day one. However, this is only one part of a complex equation to deliver future success for UK Automotive and the achievement of Net Zero ambitions.
- Support for business transition to new trading regime
With only days to adjust to new trading rules, it is imperative Government provides additional phase-ins for all administrative requirements and any new burdens placed upon businesses, in addition to grant funding and loans, and a supportive approach from UK agencies (e.g. HMRC, DVSA) for businesses adapting to meet new rules, standards and reporting targets.
- Industrial Strategy to support electrification
The TCA must be complemented by coherent industrial and climate change policy with significant support to accelerate investment in battery manufacturing and supply chain adaptation to meet Rules of Origin requirements. In addition, consumer incentives for EV uptake and major infrastructure rollout (such as charging networks and electricity grid upgrades), workforce upskilling and a strategy that positions the UK as a leading competitive environment for investment in advanced manufacturing will be essential for future growth.
- Developing future engagement with EU and shared FTA partners
This will be an essential next step for future UK international trade, with a focus on international regulatory co-operation, minimising border disruption, and increasing customs collaboration – including both the EU-UK relationship and shared FTA partners.