Brexit: lack of deal would be damaging to UK car industry, say MPs

A committee has warned that Britain leaving the European Union without a trade deal would be “hugely damaging” to the British car industry, according to a report by the country's MPs.

The Business, Energy and Industrial Strategy Committee says that failure to reach a deal would lead to a 10% tariff being introduced on British-made cars exported to the EU that would, in turn, result in the shift of manufacturing to countries remaining in the EU. The report says that would put “hundreds of thousands” of jobs at risk.

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The UK exports just under 80% of the cars it produces – which amounts to 13% of all goods exported from the UK – with 56% of those going to the EU. The report notes that 86% of all vehicles sold in the UK are imported, with 70% of that total coming from the EU.

The ‘impact of Brexit on the Automotive sector’ report, produced after the Committee heard from figures involved in both the UK and EU car industries, says that because UK car industry supply chains are “inextricably intertwined” with those of the EU, any tariffs or non-tariff barriers (such as border delays and added bureaucracy) resulting from Brexit would affect UK competitiveness.

It adds that future trade deals would “need to accommodate the largely European content of cars built in the UK”, and calls for a deal to allow UK content in cars to be classed as EU under the rules of origin.

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When considering the post-Brexit regulatory framework, the report noted: “We have not identified any potential benefits from [regulatory] divergence from the EU, only costs. We recommend that the Government seeks in the negotiations to preserve existing arrangements for the certification of vehicles throughout the EU.”

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The report also looked at potential opportunities that might arise from Brexit, through Britain’s ability to negotiate independent trade deals with non-EU countries. It noted: “We found that it is unrealistic to expect an expansion of trade overseas to outweigh the loss of trade to Europe arising from a hard Brexit. Furthermore, 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.

“Retaining good access to the single market is more important than securing the freedom to secure new trade deals with third countries.”

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When considering freedom of movement within, the EU report also calls for the Government to prioritise ensuring key manufacturing sectors such as the car industry can “retain sufficient access to essential skills to ensure that gaps can be filled adequately with UK workers.”

The report concludes: “There are no advantages to be gained from Brexit for the automotive industry for the foreseeable future. The negotiations are an exercise in damage limitation.”

The 11-member Business, Energy and Industrial Strategy Committee is chaired by Labour’s Rachel Reeves MP. The committee features Labour, Conservative and Scottish National Party members.