UK looks at 'levers' to support car industry in no-deal Brexit

The UK is looking at the tools it can use to support carmakers in the event of a no-deal Brexit, Business Minister Nadhim Zahawi said.

The government is in talks with companies including PSA Group, Toyota, Ford, Nissan and Jaguar Land Rover to establish where the "pinch points" and 'pain' would be if the UK leaves the European Union without an agreement, Zahawi said.

"There are a number of levers available to me, to us in government, to be able to help those businesses," Zahawi said in an interview, when asked whether loan guarantees were possible.

He said he is working out how he can help car makers "within the confines of either World Trade Organization state aid rules, or, if we have a deal, EU state aid rules."

Automakers have been vocal in opposing the sort of no-deal Brexit Prime Minister Boris Johnson has said he's pursuing if he can't reach an accord by Oct. 31.

They have warned it would be 'devastating' for the industry, disrupting just-in-time supply lines and ushering in tariffs that would drive up costs and make exports uncompetitive.

The UK auto industry association, SMMT, said a no-deal Brexit "would have an immediate impact on the industry, putting jobs at risk and causing severe and potentially irreversible damage."

"The UK and EU automotive industries are deeply integrated so we need a deal that guarantees free and frictionless trade. Anything less risks destroying this vital industry," said SMMT CEO Mike Hawes in a statement.

PSA CEO Carlos Tavares said in July that all production will be pulled from its plant in Ellesmere Port if Brexit makes it impossible to turn a profit at the 1,000-worker Vauxhall-brand facility.

Nissan has suggested it may move some production out of the UK if the country leaves the EU without a deal.

"Any decision is not straightforward. We have to carefully analyze all the situations," Nissan Europe Chairman Gianluca de Ficchy said when asked on Thursday about the possibility of closing a plant in Sunderland, northeast England. "The only clear conclusion we have reached is that if WTO tariffs will be applied, it will not be sustainable."

Nissan, which sends 70 percent of its UK output to the EU, is urging Johnson's government to support the industry by agreeing with the bloc not to apply tariffs, de Ficchy said.

The imposition of WTO rules with a 10 percent duty on UK-built cars shipped to the EU would be impossible to offset through cost cuts, he said.

Zahawi said one of the tools he is considering is the so-called exceptional regional growth fund -- an award of grants outside normal competitive bidding processes designed to assist "where the economic situation in a local area deteriorates suddenly."

He said the UK will seek to avoid disruption to supply chains in a no-deal Brexit by not imposing additional border checks.

"Essentially, we will wave the deliveries through," he said, adding that there have been "encouraging noises" from authorities in Calais, the main French port for the UK, that will not cause any problems "either because they don't want to harm French businesses."

Still, that's far from a cast-iron guarantee that there won't be disruption, because the French will be obliged to follow EU laws and enforce a customs border.

Zahawi also said that the government is pushing an ambition for Britain to lead the world in developing electric vehicles and hydrogen technology, including a drive to develop a so-called gigafactory to make electric car batteries in the UK.

The government announced as much as 1 billion pounds ($1.22 billion) of investment to accelerate the development of new battery technology and hydrogen fuel cells last month.