Brexit: UK car prices 'could surge by £1,500 after EU withdrawal' as auto industry warns of permanent damage

Society of Motor Manufacturers and Traders warns of ‘permanent damage’ and ‘death by a thousand cuts’ as investment slumps

Sean O'Grady
Tuesday 20 June 2017 13:18
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The UK car industry has issued its sternest Brexit warning to ministers yet, cautioning of “permanent damage“ and ”death by a thousand cuts“ in investment that could lead to a surge in the price of new cars from Europe by as much as £1,500.

Speaking at an industry event in London on Tuesday, Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, said: “We waited patiently to hear how the Government would square the circle of leaving the single market and the customs union while maintaining our competitiveness. We have asked for clarity and certainty.”

“However, the general election result has not brought that clarity. It has added to the confusion.”

In an outspoken attack he called on the Government to negotiate continuing membership of the single market and customs union until a new “bespoke” EU-UK treaty is signed, however long that may take.

He said the SMMT feared that a tariff on imports of cars made in Europe – which represent the majority of imports into the UK - would add £1,500 to the price of a typical family car.

Representing around 750,000 manufacturing jobs in Britain, the car industry's leadership is moving towards a far more assertive stance. Previously it had been reluctant to get involved in such politically charged issues.

Privately, senior executives have also spoken of their frustration at the lack of consultation and the shifting sands of policy. As recently as the Conservative conference last autumn, Prime Minister Theresa May was still discussing the prospect of the UK industry being able to trade within the single market.

Since then she seems to have ruled that out, even though Chancellor Philip Hammond in his Mansion House speech on Tuesday appeared to strike a softer tone.

Mr Hammond called for a feasible transition to provide stability for business before new arrangements kick in, and underscored the benefits of foreign workers. That contrasts sharply with Ms May’s immigration-centred Brexit rhetoric voiced ahead of the election.

“This uncertainty cannot be allowed to drag on – and drag British industry down with it. Nor will we be satisfied with vague talk of a 'transition' or 'implementation' period. Instead we need a clear interim arrangement - an arrangement enabling 'business as usual from day one,” Mr Hawes said.

“We need an assurance that we will avoid any risk of the UK leaving the EU without having established new trading terms with the EU,” he said.

“No deal is simply not an option. No deal is the worst possible deal.”

At the industry “summit meeting”, Jeremy Hicks, managing director of Jaguar Land Rover UK, endorsed Mr Hawes, while Ian Howells, a senior vice president for Honda Motor Europe, added that without membership of the EU customs union, bureaucratic delays and congestion at ports would mean Honda's “supply chain will start to seize up”.

Honda's plant in Swindon employs 4,000 directly and exports the new Civic globally, including to Japan. The firm is especially concerned about smaller suppliers being able to cope with new rules and how the technicalities of new tariffs could end up with them being levied on both sides of the Channel, making British manufacturing less competitive.

Fears of crashing out of the EU in March 2019 are growing intense, with many doubting that a new deal will be able to be signed off by then.

“There must be no cliff-edge,” Mr Hawes said. “To leave in 2019 without a deal would put the industry in peril [and] would damage our industry permanently“.

He predicted that the 2019 deadline for a deal would not be met.

Asked about the opportunities opened up by Brexit, Mr Hawes said he thought the UK’s smaller volume sports car makers could benefit from changes in regulations

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