No-deal Brexit ‘would cost UK car industry £40bn by 2024’

british motor manufacturing at risk

The British car industry has delivered a bleak warning over the danger of a no-deal Brexit, saying it would devastate UK motor manufacturing at a cost of more than £40bn in lost production by 2024.

About 1.5m fewer cars would be produced by British factories in the next five years, manufacturers warned, should the industry fall back on World Trade Organisation (WTO) rules – whether in a direct no-deal Brexit or at the end of the transition period in Boris Johnson’s withdrawal deal.

The Society of Motor Manufacturers and Traders said that new independent research showed tariffs could add £3.2bn a year to costs in Britain, equivalent to 90% of the industry’s research and development budget.

It said a combination of falling demand and global firms shifting production elsewhere would involve UK factories’ annual output falling to 1m vehicles per year, from 1.3m now. Before the EU referendum, output was rising, peaking in 2016 at 1.7m, and the industry was predicting that more than 2m cars would be rolling off UK production lines by 2020.

The SMMT warned that the cumulative cost by 2024 would be £42.7bn and that thousands of jobs would be at a risk without a Brexit deal. The sector employs 168,000 people in Britain, paying typically 21% more than the UK average wage.

The trade body called for “an ambitious deal that eliminates tariffs, delivers frictionless trade, maintains regulatory alignment and secures access to talent from across the globe”.

Mike Hawes, SMMT chief executive, said: “UK automotive’s needs are clear: frictionless trade free of tariffs, with regulatory alignment and continued access to talent. Detailed trade negotiations have yet to begin. They will be complex and they will take time. But a close trading relationship is essential to unlock investment.

“The next government must deliver the ambition, the competitive business environment and the commitment needed to keep automotive in Britain.”

The industry has consistently campaigned against Brexit, arguing that any delays at borders – let alone tariffs – would heap on production costs. Hawes said that the uncertainty, prolonged by the election in December, had jeopardised investment.

Under the Conservatives current withdrawal agreement, which Boris Johnson would expect to pass if he wins a majority next month, Britain would leave on 31 January with current trading terms due to expire at the end of a transition period in December 2020.

Speaking at the SMMT’s annual dinner in London, Hawes added: “Rather than producing 2m cars a year by 2020, a no-deal worst case scenario could see us making just a million. That’s a loss to the economy of over £40bn.

“Cherished production lines mothballed, workforces cut, a haemorrhaging of skills, of investment. What a travesty.”

The SMMT president, George Gillespie, urged political leaders to work with the sector, saying: “Uncertainty over Brexit and future trade has cost us dearly. We have all spent millions on no-deal preparation – not once, not twice, but three times. Wasted millions that could, should, have been spent on research, on development, on design.”

Manufacturers including Jaguar Land Rover, Toyota and BMW shut down production lines last month to avoid disruption during the anticipated departure of Britain from the EU. Another shutdown may come in January, depending on the outcome of the election.