The devastating impact of a hard Brexit on the UK car industry has been laid bare to MPs, who were told that every 15 minutes of new customs delays would cost some manufacturers up to £850,000 a year.
Presenting the industry’s most detailed evidence yet to the House of Commons business select committee, Honda UK said it relied on 350 trucks a day arriving from Europe to keep its giant Swindon factory operating, with just an hour’s worth of parts being held on the production line.
Honda said it would take 18 months to set up new procedures and warehouses if Britain left the customs union and that with 2m daily component movements, even minor delays at Dover and the Channel tunnel would force hundreds of its trucks to wait for the equivalent of 90 hours a day.
“Outside of the customs union, there is no such thing as a frictionless border,” said Honda’s government affairs manager, Patrick Keating. “I wouldn’t say that the just-in-time manufacturing model wouldn’t work but it would certainly be very challenging.”
Until now, many large multinationals have chosen to present such commercially-sensitive data to the Government in private but with MPs still struggling to force disclosure of 58 sectoral analysis reports produced by Whitehall officials there is a growing demand for the impact of Brexit to be spelled out.
Evidence given to the MPs said new tariffs would add an estimated £1,500 to the price of an imported car, and Rachel Reeves, the Labour MP and former Bank of England economist who led this week’s hearing, encouraged the executives to outline how exporters might also face a possible £300 cost due to tariffs on their imported components.
If Britain leaves without a special EU trade deal ministers plan to apply World Trade Organization tariffs that stand at 10% for finished vehicles and about 4.5% for automotive components. More than a third of the 690 cars produced each day by Honda in Swindon are sold in Europe, which is also the source of 40% of the company’s parts.
“Semi-catatrophic”
Honda and other witnesses from Aston Martin and the Society of Motor Manufacturers and Traders (SMMT) argued that customs and trade threats were only the start of their concerns. Aston Martin also feared a “semi-catastrophic” end to EU recognition of UK regulatory approval, which Keating said Brussels was now threatening in the event of a “no-deal” Brexit.
Honda pointed to a recent study suggesting the cost of converting an EU car to match US standards was equivalent to another 26% tariff increase.
The industry also fears the impact of new immigration rules for EU nationals. Some 14% of Honda’s 3,500 to 4,000-strong Swindon workforce are from other EU countries but that proportion is growing fast: 40% of the 600 workers hired to build a new Civic model last year are from the EU, as are 30% of staff at the firm’s European HQ in Bracknell.
“People are sitting on their hands waiting for more clarity about the likely trading relationship with our biggest partner,” said Mike Hawes, the chief executive of the SMMT. He said there could be fewer types of cars on sale in the UK if there is divergence in regulatory standards as some niche importers would not bother to do additional testing just for the UK market.
“If there is any sort of divergence, manufacturers will have to decide whether they want type approval on that UK vehicle, so there might be a contraction in terms of choice,” he said.
The industry leaders dismissed claims that shared interests with European manufacturers would lead EU negotiators to find a solution. While 56% of British car exports go to Europe, just 7% of EU exports go the UK. “The UK is an important market but what matters more is protecting the EU single market,” said Hawes.
by Bob Graham
The post Brexit: Car Industry Facing A Major Crash appeared first on Felix Magazine.
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