UK carmakers warn hard Brexit would cost them £50,000 a minute in border delays

Trade body says delayed shipments of parts and WTO tariffs ‘would deliver a knockout blow to the sector’s competitiveness’

Olesya Dmitracova
Economics and Business Editor
@dmitracova
Tuesday 25 June 2019 15:08
comments
EU Commissioner says no-deal tariff plans will breach WTO rules

British carmakers have called on the next prime minister to strike a Brexit deal, saying failure to do so would cost the industry £50,000 a minute just from border delays.

The Society of Motor Manufacturers and Traders (SMMT) issued its warning against hard Brexit as it published a comprehensive report into the car industry, the country’s single biggest exporter of goods.

The trade body said delays to shipments of parts to production plants are measured in minutes and could amount to as much as £70m a day in costs. Combined with World Trade Organisation tariffs, which would kick in if Britain crashed out of the European Union, the delays would deliver “a knockout blow to the sector’s competitiveness”, the SMMT said.

Boris Johnson, the frontrunner to succeed Theresa May, has repeatedly said he is willing to accept a no-deal Brexit, and his rival Jeremy Hunt has refused to rule it out.

“No deal remains the clear and present danger,” SMMT chief executive Mike Hawes told the audience at an industry summit on Tuesday. “The next PM’s first job in office must be to secure a deal that maintains frictionless trade because, for our industry, no deal is not an option.”

The SMMT report provides several examples of how hard Brexit would affect the car industry, which employs 168,000 people. It says tariffs on exports of light vehicles to the EU would amount to £1.9bn, forcing UK carmakers to choose between passing this cost to consumers – denting demand, profitability and jobs – or taking the hit themselves “in a market with wafer-thin margins”.

British buyers of cars and vans from the continent would also have to stump up £1,700 more per vehicle on average if EU manufacturers and their dealer networks couldn’t absorb new tariff costs.

But it won’t be just trading with the EU that will suffer after Brexit.

The report says: “The UK might cease to be a party to all EU preferential trade agreements, unless the UK government successfully replicates the effects of these treaties on exit day.

“The replication of complex trade agreements requires time, and the UK is unlikely to preserve preferential treatment with several key trading partners unless a transitional period maintaining the status quo is secured in negotiations with the EU.

“More than 16 per cent of UK cars are destined to preferential trading partners. Some of them are among the world’s fastest-growing markets for UK car exports.”

In one of a number of recommendations, the trade body urged the government to ensure no new trade barriers are introduced between the UK and the EU and that existing access to major markets beyond Europe is maintained.

UK carmakers also face headwinds at home as consumers remain reluctant to splurge. In the latest survey by the CBI, motor traders reported a fall in sales volumes in June compared with a year ago, the steepest decline in over seven years.

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