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June 25, 2019 04:23 AM

UK car industry warns next prime minister against no-deal Brexit

Parts delays could cost industry $89 million a day, SMMT says

Costas Pitas
Reuters
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    LONDON -- Britain's car industry called for the country's next prime minister to secure a Brexit deal that keeps frictionless trade with the European Union, warning that a no-deal exit risks billions of pounds of tariffs and border disruption that could cripple the sector.

    "We are already seeing the consequences of uncertainty, the fear of no deal," Mike Hawes, the CEO of the Society of Motor Manufacturers and Traders, said in a statement.

    Boris Johnson, the frontrunner to succeed Theresa May, and his leadership rival Jeremy Hunt have both said they are prepared to take Britain out of the EU without a deal, although both says it is not their preferred option.

    The British automotive industry fears that a disorderly exit from the EU, its biggest export market, could see the imposition of tariffs of up to 10 percent on finished models and border delays which could snarl up ports and motorways, ruining just-in-time production.

    Britain's car sector, rebuilt by foreign automakers since the 1980s, had been a runaway success story but since 2017 sales, investment and production have all slumped, blamed on a collapse in demand for diesel vehicles and Brexit uncertainty.

    "The next PM's first job in office must be to secure a deal that maintains frictionless trade because, for our industry, 'no deal' is not an option, we don't have the luxury of time," Hawes said.

    Delays in shipments of parts to car production plants, which are measured in minutes, could cost 50,000 pounds ($64,000) per minute in gross value added -- amounting to about 70 million pounds ($89 million) a day in a worst-case scenario, the SMMT said in a report.

    World Trade Organization tariffs for trade in cars alone would amount to 4.5 billion pounds a year, the SMMT said. Combined with parts delays, this would deliver a knockout blow to the sector's competitiveness, undermining a decade of extraordinary growth, the group said.

    So far this year, Britain's biggest automaker Jaguar Land Rover has announced about 4,500 jobs cuts, Honda has said it will close its UK car factory and Ford will shut one of its two engine plants.

    Automotive News Europe contributed to this report

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