British and European motor manufacturers have warned of “catastrophic” £100bn losses in the industry over the next five years if a Brexit trade deal is not struck.
As trade talks hang by a thread in the face of a political showdown over the EU withdrawal agreement, sector leaders from across Europe predicted a wave of job losses in both factories and their suppliers if the UK crashes out of the single market.
In a joint statement signed by 23 automotive trade associations, they say the calculated €110bn (£100bn) impact comes on top of the estimated €100bn cost of the Covid pandemic.
“These figures paint a bleak picture of the devastation that would follow a no-deal Brexit. The shock of tariffs and other trade barriers would compound the damage already dealt by a global pandemic and recession, putting businesses and livelihoods at risk,” said Mike Hawes, the chief executive of the Society of Motor Manufacturers and Traders in the UK.
Hildegard Müller, the president of the German automotive association, the VDA, said some businesses would be at risk if cross-border trade was hit by tariffs.
“This would jeopardise closely linked value chains and possibly make them unprofitable. Our member companies have more than 100 production sites in the United Kingdom. We hope that the EU and the UK will continue their close partnership – with a comprehensive free trade agreement.”
The head of the European Automobile Manufacturers Association, Eric-Mark Huitema, said it “absolutely must have an ambitious EU-UK trade agreement in place by January”.
Major automotive job cuts on back of Covid-19 crisis
Jaguar Land Rover – 1,100 jobs
15 June: The UK’s largest car producer has cut 1,100 contract workers at manufacturing plants in Merseyside and the West Midlands.
Johnson Matthey – 2,500 jobs
11 June: The chemicals company, a major supplier of catalytic converters for cars, plans to make 2,500 redundancies worldwide over the next three years, 17% of its workforce.
Bentley – 1,000 jobs
5 June: The Crewe-based luxury carmaker intends to shrink its workforce of 4,200 by almost a quarter, slashing 1,000 roles through a voluntary redundancy scheme.
Aston Martin Lagonda – 500 jobs
4 June: The Warwickshire-based luxury car manufacturer, struggling even before the pandemic, has announced 500 redundancies.
Lookers – 1,500 jobs
4 June: The car dealership chain said it plans to cut 1,500 jobs and close 12 dealerships only days after car showrooms were allowed to reopen in England.
McLaren – 1,200 jobs
26 May: McLaren Group, the Formula One team owner and maker of supercars, cut 1,200 jobs as it scrambled to save cash.
JCB – 900 jobs
15 May: Digger maker JCB said in May up to 950 jobs were at risk after demand for its machines halved because of the coronavirus shutdown.
Over the past two years, the auto industry has consistently warned of the deep cost of no deal on the car industry, which employs 14.6 million people directly and indirectly in factories, component supplies, engineering, design and marketing and sales.
They hope this latest warning from the combined forces of leaders in both the EU and the UK will help both sides see past their political differences and strike a trade deal.
Brexit talks are continuing this week, but on Sunday, Ireland’s foreign affairs minister, Simon Coveney, said it would be difficult to conclude a trade deal if the British government passed legislation allowing it to renege on parts of the withdrawal agreement.
The motor industry fears a collapse in talks would mean punitive tariffs – 10% on car sales and 22% on vans and trucks, but also hit jobs and sales revenues that underpins more than €60bn investment in technical innovation and research every year, which Sigrid de Vries, the secretary general of the European Association of Automotive Suppliers (CLEPA) said makes it “the EU’s largest private R&D investor”.
Its latest calculations suggest production levels would fall by 3m units in the UK and the EU over the next five years in a no-deal scenario. This is on top of a 3.6m reduction in the annual 18.6m units produced a year because of coronavirus.
What is the UK internal market bill?
The internal market bill aims to enforce compatible rules and regulations regarding trade in England, Scotland, Wales and Northern Ireland.
Some rules, for example around food safety or air quality, which were formerly set by EU agreements, will now be controlled by the devolved administrations or Westminster. The internal market bill insists that devolved administrations have to accept goods and services from all the nations of the UK – even if their standards differ locally.
This, says the government, is in part to ensure international traders have access to the UK as a whole, confident that standards and rules are consistent.
The Scottish government has criticised it as a Westminster “power grab”, and the Welsh government has expressed fears it will lead to a race to the bottom. If one of the countries that makes up the UK lowers their standards, over the importation of chlorinated chicken, for example, the other three nations will have to accept chlorinated chicken too.
It has become even more controversial because one of its main aims is to empower ministers to pass regulations even if they are contrary to the withdrawal agreement reached with the EU under the Northern Ireland protocol.
The text does not disguise its intention, stating that powers contained in the bill “have effect notwithstanding any relevant international or domestic law with which they may be incompatible or inconsistent”.
Martin Belam and Owen Bowcott
In a separate development, the Unite union has warned of border chaos in Britain unless “decisive action is taken over incomplete IT systems to deal with post-Brexit customs”, along with plans, revealed last week, for 29 lorry parks across the country to deal with possible delays at Dover.
Deal or no deal, drivers on trucks carrying car components and other products face a fine of £300 if they do not have the correct and completed paperwork to cross the Channel.
Unite said it was “completely unacceptable” to penalise drivers “who are not responsible for preparing customs declarations for their loads”.
The union’s national officer, Adrian Jones, said border chaos would also come at a great cost not only to drivers but to local authorities, who with “less than four months to go” still do not know the locations of the majority of lorry parks.