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Car industry Brexit negotiations an 'exercise in damage limitation'

1 March 2018

The Business, Energy and Industrial Strategy (BEIS) Committee calls for the Government to keep the closest possible relationship with the existing EU regulatory and trading framework to give UK volume car manufacturing a realistic chance of survival post-Brexit.

No-deal puts hundreds of thousands of UK jobs at risk

In a report published today on The impact of Brexit on the automotive sector, the BEIS Committee says a no-deal puts hundreds of thousands of UK jobs at risk and threatens hundreds of millions of pounds of inward investment. The Society of Motor Manufacturers and Traders (SMMT) estimated the introduction of trade barriers to result in a £4.5bn drop in exports while other studies pointed to a greater decline.

The report finds that non-tariff barriers, in the form of border delays and increased bureaucracy, will also impact on UK competitiveness. The report recommends the Government places a high premium in its Brexit negotiations on securing frictionless trade for the automotive sector.

Government should seek continued regulatory and trading alignment with EU

Rachel Reeves MP, Chair of the Business, Energy and Industrial Strategy (BEIS) Committee, said:

"The car industry is one of the UK's great manufacturing successes. Innovative and efficient car plants across the country provide thousands of jobs and the automotive sector is a major contributor to our economic growth. There is no credible argument to suggest there are advantages to be gained from Brexit for the UK car industry.

Regulatory consistency and friction-free trade benefits car companies, consumers and car-workers. The Prime Minister now needs to ensure common-sense pragmatism prevails and spell out the Government's intention to seek continued regulatory and trading alignment with the EU in the automotive sector."

UK automotive industry largely export-led

The UK automotive industry is largely export-led with Europe as the primary market . The industry is also one of the most closely integrated sectors with the EU. The UK automotive sector's success is built on the complex supply chains that stretch throughout Europe: typically, parts are transferred through different countries before being assembled into the final product.

The report takes a hard look at potential opportunities arising from Brexit but finds it unrealistic to expect an expansion of trade overseas to outweigh the loss of trade to Europe arising from a hard Brexit. The report also states that any new bilateral trade deals secured by the Government are unlikely to lead directly to a significant increase in investment and jobs in the UK automotive sector. The Committee finds that retaining good access to the single market is more important than securing the freedom to secure new trade deals with third countries.

No potential benefits

On the key issue of the future regulatory regime, the report does not identify any potential benefits from divergence from the EU, only costs. The report recommends the Government seeks in the negotiations to preserve existing arrangements for the certification of vehicles throughout the EU, either as part of a Mutual Recognition Agreement or some alternative arrangement. To maximise trade opportunities with the EU – the UK's biggest trading partner - and to provide certainty to global manufacturers, the Government should also aim to retain regulatory alignment with the EU regulatory framework for the short to medium term.

The report also calls on the Government to seek a deal on immigration that enables the sector to access the full range of skills it requires and further incentivise locating relevant research and development in the UK once we leave the EU.

Further information

Image: Creative Commons