UK carmakers fear trade barriers

The number of cars sold in the UK dropped by 5.7 per cent in 2017, according to industry body the Society of Motor Manufacturers & Traders. 2018 isn’t any different – ratings agency, Moody’s, predicts a further 5.5 per cent drop this year. 

“Brexit has derailed the industry,” says Sarwant Singh t0 BBC News, senior partner and global head of automotive and transportation at consultants Frost & Sullivan.

“The uncertainty causes people not to buy cars.”

Each year, about 80 per cent of the vehicles built in the UK are exported, so continued international trade relations are vital for the automotive sector’s continued prosperity.

Industry executives’ main fear is that Brexit will result in heightened barriers to trade, not only with the European Union, but with the rest of the world too, once the transition period ends on 31 December 2020.

Trading relations with China are also complicated, and may well be subject to even greater complexity in future.

“A UK-China free trade agreement will be neither easy nor clearly advantageous for the UK,” says Bruegel, a European firm that specialises in economics.

Once the UK leaves the Union, the UK will be smaller and therefore in a weaker position during trade talks, so there are no guarantees China will be prepared to offer better terms.

Furthermore, UK’s automotive trade with China, and other growing markets, could suffer, depending on the terms of a post-Brexit trade deal with the EU.

At present, EU customers buy about NZ$25 billion worth of British-made cars per year, accounting for around 53 per cent of the UK’s vehicle exports, according to the European Automobile Manufacturers Association (ACEA).

On the other hand, EU manufacturers deliver 81 per cent of the cars imported by the UK, to the tune of about NZ$75 billion, a trade imbalance that will give the UK leverage during trade talks.

At the same time, about 80 per cent of the parts and components used to build cars in the UK are also imported from the EU, while 70 per cent of the parts and components made in the UK are exported to EU countries.

“Any changes to the deep economic and regulatory integration between the EU and the UK will have an adverse impact on automobile manufacturers with operations in the EU and/or the UK, as well as on the European economy in general,” the ACEA said to the BBC.

It is therefore unsurprising that both the UK and the European car industries want to see a final UK-EU deal that retains smooth trade in the long-term.

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