Industry warns no-deal Brexit will cost UK car sector £40bn by 2024

A lorry with car carrier trailer leaves the Honda car plant in Swindon, Britain, February 18, 2019. REUTERS/Eddie Keogh
A lorry with car carrier trailer leaves the Honda car plant in Swindon, Britain. Photo: Eddie Keogh/Reuters

The Society of Motor Manufacturers and Traders warned on Tuesday that leaving the European Union without a Brexit deal would cost the British car industry £40bn in the next five years.

Independent research commissioned by the SMMT calculates that World Trade Organisation tariffs on both imported car components and exported cars would add over £3bn a year to manufacturing costs—an amount equal to the sector’s current annual research-and-development spending.

These huge costs would effectively devastate British manufacturing, the SMMT said, forcing it to raise its prices, which in turn would kill demand.

The research estimates that WTO tariffs would drive down UK production volumes by 1.5 million units by 2024, which would amount to a value of over £42bn.

“Rather than producing two million cars a year by 2020, a no trade deal, WTO tariff worst-case scenario could see us making just a million,” said SMMT chief executive Mike Hawes in a statement. “The next government must deliver the ambition, the competitive business environment, and the commitment needed to keep automotive [industry] in Britain.”

READ MORE: EU car sales grew everywhere in October, except the UK

“UK Automotive’s needs are clear: frictionless trade-free tariffs, with regulatory alignment and continued access to talent,” said Hawes.

Speaking at the association’s annual dinner in London on Tuesday, SMMT president George Gillespie urged the industry to forge ahead despite the challenges of Brexit.

“The automotive sector is going through a period of unprecedented change and we must not let the pressure of Brexit deflect from our focus on a coherent national industrial strategy,” Gillespie said.

The SMMT has drawn up a list of recommendations for the next UK government on how to prioritise the needs of the British car industry, to help it stay competitive, especially in the electric-mobility era.

Brexit uncertainty is affecting the country’s ability to attract certain investments, with Tesla CEO Elon Musk saying recently that Brexit “made it too risky to put a Gigafactory in the UK.” He has chosen to build his first European plant in Germany instead.

READ MORE: Elon Musk to build first European Gigafactory near Berlin

Contributing an annual £18.6bn to the UK economy, the UK’s auto sector is also the country’s biggest exporter. Automotive manufacturing employs some 168,000 British workers and, the SMMT notes, wages in this sector are typically 21% higher than the UK average.