WTO tariffs would cost the UK automotive sector £3.2bn a year – SMMT

The UK automotive industry is urging political parties to put the sector at the heart of their economic and trade policies.

Setting out the industry’s priorities for a new government, the trade body SMMT has called for an ambitious Brexit trade deal to maintain the sector’s competitiveness and ability to deliver innovation, productivity and prosperity for the UK.

Independent research commissioned by the trade body shows WTO tariffs on imported components and exported vehicles would add more than £3.2 billion a year to UK automotive manufacturing costs.

Such a colossal increase – equivalent to almost 90% of the sector’s annual spend on R&D – could not be absorbed by the sector, forcing prices to rise and global demand to shrink.

At a time when additional investment in zero/low emissions technology is essential for carmakers, the trade body says this would be a tragic waste.

The analysis estimates the impact of such tariffs could result in the cumulative loss of more than 1.5 million units from UK production volumes over the next five years, worth some £42.7 billion at factory gate prices. Under this scenario, by 2024, falling demand and model reallocation to more competitive and welcoming production locations would see annual output falling to just 1 million vehicles per year.

Speaking at the 103rd SMMT Annual Dinner in London, SMMT president George Gillespie outlined the industry’s vision for a better, safer and cleaner future.

He said: “The automotive sector is going through a period of unprecedented change and we must not let the pressure of Brexit deflect from our focus on a coherent national industrial strategy. Collaboration between industry and government must be stronger than ever... We want to work closely with the next government, as we have in the past; united in a common purpose to keep UK Automotive a global player that drives employment, creates wealth and gives all of us pride in what we can do here.”

Automotive is one of the UK’s most valuable economic assets, exporting more goods than any other sector to over 160 countries worldwide and employs 168,000 British workers. The sector provides high value, highly skilled jobs across the country, with wages typically 21% higher than the UK average.

Its annual economic contribution is £18.6 billion. Leaving the EU without an ambitious deal that eliminates tariffs, delivers frictionless trade, maintains regulatory alignment and secures access to talent from across the globe would jeopardise this contribution, causing serious economic damage and putting thousands of jobs and progress at risk.

Mike Hawes, SMMT chief executive, said: “UK Automotive’s needs are clear: frictionless trade free of tariffs, with regulatory alignment and continued access to talent. Detailed trade negotiations have yet to begin. They will be complex and they will take time. But a close trading relationship is essential to unlock investment so we can deliver our goals: cleaner air, zero carbon emissions, and the ability to go on building our products and marketing them globally.

“Rather than producing two million cars a year by 2020, a no trade deal, WTO tariff worst case scenario could see us making just a million. The next government must deliver the ambition, the competitive business environment and the commitment needed to keep automotive in Britain.”

SMMT www.smmt.co.uk