‘No-deal’ Brexit fears threaten the UK’s automotive sector, says GlobalData

Following the results of a recent survey carried out by the Society of Motor Manufacturers and Traders (SMMT), the UK’s automotive trade body, showing fears of the consequences of a no-deal Brexit;

David Leggett, Automotive Editor at GlobalData, offers his view:

“Profitability, new business opportunities and investment in the UK automotive sector are all under threat as the industry faces a £5bn World Trade Organisation (WTO) tariff bill on cars and vans alone. This cost cannot be mitigated and will be passed on to customers, reducing market size further.

“The auto industry in Britain has been consistent in its view that an orderly UK withdrawal from the EU is in everybody’s interests, with sufficient transition time to negotiate a free and frictionless economic relationship.

“Pan-European supply chains in the industry operate on just-in-time principles that minimise the need for stocks and depend on the free flow of parts and components,  as well as finished vehicles, across international borders. A no-deal Brexit threatens that frictionless flow.

“In addition, profit margins in the automotive industry – especially on volume segment car products – are thin and extremely vulnerable to any cost shocks. The adverse impact on UK plant competitiveness could lead to more automotive manufacturing activity moving elsewhere, especially for plants that are heavily dependent on exports to the EU.

“The industry in Britain has taken considerable steps to prepare for the possibility of no deal, with the vast majority actively preparing for post-Brexit disruption. Investment in stockpiling and warehousing to mitigate against the risk of border delays and production stoppage is a distraction from essential investments in emerging advanced technologies such as electrification and autonomous drive that will shape the industry over the next ten years.

“The negative effects of a no-deal Brexit would be felt particularly acutely in the automotive sector – not just in the UK (though it will be more severely felt in Britain than elsewhere) – but also in the automotive supply chain across Europe.”

More Media