No-deal Brexit will deliver 'catastrophic' blow to British auto industry, warn businesses in new survey

'Plants will close; jobs will be lost,' says trade body as Theresa May's withdrawal agreement is pronounced 'doomed'

The “catastrophic” impact of a no-deal Brexit on the UK’s car industry has been laid out in a new survey which found that three quarters of companies in the sector fear a no-deal Brexit will hurt them.

Less than 7 per cent said leaving the EU with no agreement in March would be beneficial.

The figures emerged on Tuesday as deepening political divisions looked to have scuppered the prime minister’s “doomed” Brexit deal.

More than half of companies polled by the Society of Motoring Manufacturers and Traders (SMMT) have begun executing their Brexit contingency plans with 12.4 per cent saying they are relocating operations overseas.

Fully 55 per cent of firms say they have already been negatively affected with close to a third having postponed or cancelled UK investment decisions while one in five have lost business.

Almost seven in 10 respondents predicted that their profitability would be negatively affected by a no-deal scenario and 53.9 per cent saying they will be less likely to win new overseas business. Half said no deal would make it harder for them to maintain their existing staff.

“Leaving without a deal would be catastrophic – plants will close; jobs will be lost,” said SMMT chief executive Mike Hawes.

He added that the transitional period included in Ms May’s proposed deal was "crucial" because it allows the industry to step back from the “cliff edge”.

“We need a deal now, and we need an ambitious deal for the future that guarantees frictionless trade with our most important market – nothing else will do, and we urge all parties to remember what’s at stake.”

The latest warning from car manufacturers comes as Ms May’s Brexit deal was denounced as the “worst of all worlds” by Sir Michael Fallon, once considered one of the prime ministers closest allies.

The former defence minister said he would not vote for the “doomed” deal in a Commons showdown next month.

Crashing out of the EU without an agreement puts the future of one of Britain’s most successful sectors in doubt.

Annual car production has risen by a third to 1.67 million since 2010 with 80 per cent of those vehicles destined for export, the majority of them going to the Continent. The industry now employs 856,000 people but it depends heavily on parts crossing the border without checks or delays.

“No deal is not an option,” said Tony Walker, Toyota Managing Director and SMMT president.

“In the short term, crashing out of the EU would have immediate and devastating impacts, with border chaos disrupting the Just in Time basis on which our business depends. Disruption could last for weeks – even months.”

Some MPs have attempted to play down the impact that leaving without a deal would have, pointing to the option of trading under World Trade Organisation (WTO) rules.

But Mr Walker said it was "unimaginable" that car manufacturers could implement WTO import and export procedures overnight.

He added: “For the longer term, a ‘no-deal’ Brexit would harm our competitiveness, undermine sales and cost jobs… We need the certainty of a deal, not more uncertainty, and we need the smooth transition period based on current trading conditions… It is vital we have free and frictionless trade with common technical standards. Without these, we risk losing all we have achieved in building a world-class automotive sector.”