LONDON -- There is nothing good to come from exiting the European Union for the UK auto industry, leaving the government only one option: limiting the damage, according to a report from lawmakers.
The impact assessment from the British government's Business, Energy and Industrial Strategy Committee, published Thursday, urges Prime Minister Theresa May and her cabinet to take a "pragmatic" approach to negotiations with Brussels.
The report, arriving amid a hardening of positions in the talks with the EU, comes after opposition Labour Party leader Jeremy Corbyn raised the dangers of a hard Brexit for automakers.
"There are no advantages to be gained from Brexit for the automotive industry for the foreseeable future," according to the report compiled by 11 cross-party lawmakers. "The negotiations are an exercise in damage limitation. The government should acknowledge this and be pragmatic."
The auto industry has been a key topic of debate post-Brexit due to its reliance on tariff-free trading to allow components to travel in and out of the country in the manufacturing process. The UK employs nearly 1 million people in the sector either directly or through supply chains and the industry makes up 13 percent of all goods exported from Britain, the second highest from any one sector, according to the report.
Among lawmakers' chief concerns is the introduction of a 10 percent tariff on UK exports and imports in the event of a no-deal Brexit, which might shift production away from Britain. Profit margins are small, between 2 percent and 4 percent, and tariffs could make some UK manufacturing unsustainable. The committee also said it could find no upside to breaking with EU regulations and recommended the government tries to preserve the existing framework.
Investment from Japan, which has been key for the British car manufacturing industry over the last 40 years, may also be under threat. The Asian country's UK ambassador warned last month that "no private company can continue" if profitability falls away.
In a more optimistic move this week, Toyota said it will retain a plant in Britain as the sole European producer of its Auris hatchback.
"There are signs now that the continuing uncertainty is affecting investment decisions" and will cost auto-industry jobs, according to the BEIS report. The lack of clarity "is harmful to UK businesses and will drive away investment for as long as it persists."