U.K. Carmakers Warn Against Flimsy EU Trade Deal After Brexit

LONDON (Capital Markets in Africa) – British automakers warned that the next U.K. government needs to deliver a “world-beating Brexit trade deal” to bolster their competitiveness and safeguard jobs following a split from the European Union.

Carmakers need a frictionless border free of tariffs and customs, regulatory alignment and access to talent, the Society of Motor Manufacturers and Traders lobby group said ahead of the country’s general election on Dec. 12.

A victory for Prime Minister Boris Johnson may lead Britain to quit the EU on Jan. 31, triggering detailed trade talks. It’s vital those negotiations result in the close trading relationship needed to unlock investment in zero-carbon technology, according to the SMMT, which held its annual dinner late Tuesday.

“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,” SMMT President George Gillespie said. “Collaboration between industry and government must be stronger than ever.”

Tariffs on imported parts and exported vehicles under World Trade Organization rules would inflate manufacturing costs by 3.2 billion pounds ($4.1 billion), the SMMT said, forcing prices to rise and global demand for U.K. cars to shrink. Auto output could halve to 1 million units by 2024, it warned.

Carmakers have spent more than 500 million pounds preparing for Brexit, with Nissan Motor Co. last month issuing the starkest warning yet against a no-deal scenario, saying tariffs on exports to the EU would most likely to render its U.K. operations unviable.

While Johnson is fighting the election on the basis of a negotiated Brexit, if re-elected he’d have just 11 months to secure a subsequent trade arrangement.

That means there’s still a chance Britain could revert to WTO rules if he lacks a big enough majority to stop anti-EU lawmakers in his own Conservative Party from running down the clock or forcing through a harder split, or the talks simply run out of time.

Away from Brexit, the SMMT said the new government must pour resources into developing low- and zero-carbon vehicles and securing a so-called gigafactory for battery production, as well as regulating to ensure that the U.K. is an early-adopter of autonomous vehicles.

Source: Bloomberg Business News