How could Brexit affect Britain’s automotive industry?

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So, #BrexitDay is upon us. From today, there is no going back. But how could Brexit affect Britain’s automotive industry and what impact will it have?

Post Brexit Tariffs

The automotive industry has already told Theresa May that tariffs introduced after Britain leaves the EU are a limit past which safety can no longer be guaranteed: they were deemed as a “red line” issue that could result in a sales dip and potential job losses.

The chief executive of the Society of Motor Manufacturers and Traders, Mike Hawes, said tariffs would make UK car plants ‘uncompetitive’ and it was crucial trade deals with the EU contain some of the advantages of the single market and customs union.

World Trade Organisation WTO export and import tariffs

The tariffs warning came a little over a week after the Theresa May said that Britain will leave the single market as part of Brexit and if a good deal can’t be brokered with the EU whereupon the UK will return to World Trade Organisation rules.

The WTO rules would mean 10 percent tariffs on exports and imports which could potentially add £1,500 to the cost of every car sold in the UK.

Car manufacturing 17 year high

His comments came as the SMMT announced on Thursday that car manufacturing in Britain reached a 17-year-high in last year, with a total of 1.72m cars produced in 2016; this is an 8.5% increase from 2015 and the highest figure since 1999. Hawes said that this was a result of “investment over many years”, not a “post-Brexit bounce”.

Post Brexit UK car exports

Turning our attention to exporting, the number of UK car exports was 1.25m, which is an all-time record. To prove just how important Europe is to the UK car industry, 57% of exported cars went to the European Union.

UK Car manufacturing Brexit fears

Although Nissan announced in October 2016 that it is to expand its Sunderland plant, Hawes said there was evidence that manufacturers were delaying investment in the UK due to Brexit uncertainty.

The SMMT uncovered that the investment committed to Britain by carmakers dropped by over a third in 2016 compared to the year before (from £2.5 billion to £1.66 billion).

Free trade concerns

Another industry worry about the rules around the source of products. With the existing free trade deals involving Europe and other markets, there are stipulations that a proportion of parts of a car must be made on the continent to qualify for free trade.

As it stands, on average, 41% of car components exported from Britain are made in the UK, the rest being imported. Vehicle manufacturers are pressing for European-made components to qualify as ‘home-sourced’ as part of any trade agreement.

How could Brexit affect Britain’s automotive industry? Have your say!

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