A no deal Brexit could harm three quarters of automotive businesses in the UK, according to a new survey by the Society of Motor Manufacturers and Traders (SMMT).
Speaking at the organisation’s 102nd annual dinner in London, last night, SMMT chief executive Mike Hawes said the survey results highlight the critical need for a Brexit withdrawal deal and transition to prevent the industry falling off the cliff-edge.
The survey found that 74.1% of companies with UK operations believed a ‘no-deal’ scenario would damage their business, with fewer than 9% foreseeing any positive impact.
More than half said their operations have already suffered as a result of uncertainty about future trading arrangements.
Almost a third said they had postponed or cancelled UK investment decisions because of Brexit, with one in five having already lost business as a direct consequence.
Contingency plans are now being executed by more than half of firms, with at least one in 10 (12.4%) relocating UK operations overseas and the same proportion already reducing employee headcount. Many have also made alterations to logistics and shipping routes, investment in warehousing and stock and adjustments to production schedules.
“Frictionless trade as part of the EU single market and customs union has driven the success of the UK automotive industry so the fact we are leaving is already painful, and already causing damage. Leaving without a deal would be catastrophic – plants will close; jobs will be lost. Leaving is not what we wanted, but we recognise that the withdrawal agreement has been hard-fought and, crucially, delivers a transition period which steps us back from the cliff-edge.
“We need a deal now, and we need an ambitious deal for the future that guarantees frictionless trade with our most important market – nothing else will do, and we urge all parties to remember what’s at stake,” said Hawes.
SMMT members also outlined the further and long-term damage that a ‘no-deal’ Brexit would do to their businesses. Almost seven in 10 (68.5%) said their profitability would be negatively affected, with 53.9% concerned about their ability to secure new overseas business and a similar number worried about maintaining investment in their UK operations. A further half said a ‘no-deal’ scenario would undermine their ability to maintain their existing workforce.
The automotive sector employs 856,000 people and delivers £20.2 billion to the economy. Since 2010, car production alone has risen by a third, with 1.67 million cars leaving production lines in 2017 – 80% bound for export, most to the EU. Over the same period, the number of jobs supported has risen by 120,000.
This growth has been dependent on free and frictionless trade afforded by the single market and customs union, says the SMMT. It believes a no-deal Brexit would bring an immediate end to the seamless movement of goods, resulting in disruption at the border and delays, throwing Just-in-Time manufacturing into chaos and undermining the competitiveness of the sector – ultimately putting profitability and jobs at risk.
Tony Walker CBE DL, SMMT president and managing director of Toyota Motor Europe – London Office, added: “No deal is not an option. In the short term, crashing out of the EU would have immediate and devastating impacts, with border chaos disrupting the Just in Time basis on which our business depends.
"Disruption could last for weeks – even months. It is unimaginable that we could implement full WTO import and export procedures overnight. For the longer term, a ‘no-deal’ Brexit would harm our competitiveness, undermine sales and cost jobs. We need the certainty of a deal, not more uncertainty, and we need the smooth transition period based on current trading conditions… It is vital we have free and frictionless trade with common technical standards. Without these, we risk losing all we have achieved in building a world-class automotive sector.”