British car manufacturers “sitting on their hands” instead of investing due to Brexit uncertainty

UK carmakers have said they do not believe a trade deal with the EU will be reached within two years and are “sitting on their hands” instead of investing in Britain.

Before it makes any investment decisions the booming sector is waiting for clarity on a post-2019 transitional deal that it hopes “retains as much as possible” of current trading conditions for as long as can be arranged.

Speaking at an event in Brussels to highlight the European auto-industry’s position on Brexit, Society of Motor Manufacturers and Traders (SMMT) CEO, Mike Hawes, said: “Our experience of trade deals is that they take many, many years.

“We have the advantage that our regulations are in the same place but all the sounds from Brussels have been to say that it will be the divorce first and the rest later. It is no surprise that this reality is now taking hold in the UK. I think Boris Johnson has accepted as much.”

He added: “The industry has been a tremendous success in the last five or six years. In terms of investment, it has been running at an average of £2.5bn per annum.

“Last year it was down to £1.6bn, it has dropped off. Anecdotally you will find that companies are sitting on their hands to a certain extent until there is more clarity on the situation.

“We need a transition arrangement, or an implementation period as the government would put it, that retains as much as possible. I don’t know how far that is possible.”

Hawes also rubbished derided claims by Tory Brexiteer John Redwood that UK consumers could avoid Brexit price increases by purchasing British made vehicles.

He said: “We don’t always see eye to eye with the hardline Brexiteers. There are around 400 models of cars on the market and it is a very small minority, albeit an important one, (completely) made in the UK.”

If the UK leaves the EU with no deal and no transitional arrangements it would revert to World Trade Organisation (WTO) rules. In this situation passenger cars would be subject to tariffs of 10 percent, while commercial vehicles would be hit with 22 percent tariffs, which would prove devastating for the industry.

Non-tariff barriers such as customs checks, would also damage the sector, which relies on a complex, fast moving cross border supply chain.

Last year more than half of UK manufactured cars, and 90 percent of British built commercial vehicles, were sold in Europe. During the same year 35.7m vehicle parts and components moved between the UK and the EU, as part of one of the most integrated international supply chains on earth.

As well as single market and custom union access, the automotive industry needs access to the EU labour market. Currently around 10 percent of the UK auto-sector’s workforce comes from the EU, however it is estimated that this increases to 50 percent in the case of some companies. At present there are more than 5,000 auto-sector job vacancies because of the skills gap.

Also speaking at the event was Erik Jonnaert, secretary general of the European Automobile Manufacturers Association (EAMA).

He said: “The reason why we are gathering today is that we want to get the message across to the negotiators that our industry is key to Europe, and I mean all 28 member states.

Jonnaert said the EU had made it clear that the auto-industry would not receive a special sectoral deal during the Brexit negotiations.

He said: “Whatever we are going to do following Brexit will cause some pain, so the question is how can we do it in the best possible way.”