UK Auto counts £735m cost of Brexit preparation with ‘final’ plea for zero-tariff trade deal

Tuesday 10 November, 2020

The UK automotive industry today issued a last-chance plea for a zero-tariff, zero-quota trade deal that delivers for automotive as negotiations enter the endgame this week. The call comes as a new survey from the Society of Motor Manufacturers and Traders (SMMT) reveals the cost to the sector of preparing for Brexit has surpassed £735 million, with more than £235 million spent in 2020 alone.¹

Most companies (67%) across the industry say they are doing everything in their control to prepare for new processes that will come into play on 1 January, with 70% securing GB Economic Operators Registration and Identification (EORI) numbers, 60% spending significantly on stockpiling and 52% employing customs agents, as companies also try to prepare for any disruption or delay to supply chains.² However, significant gaps in the industry’s ability to plan still exist, with a lack of clarity on the nature of the UK-EU’s future relationship hampering the efforts of almost nine in 10 (86%) firms to prepare.³

Critical questions remain unanswered. With the industry’s competitiveness built on Just-in-Time deliveries, companies cannot afford any supply chain delays so clarity on the operation of key new customs systems such as the Goods Vehicle Movement Service (GVMS) and the Permission to Progress (P2P) process, is vital. Moreover, even if the UK and EU do conclude a Free Trade Agreement (FTA) from the end of 2020, there is uncertainty as to how companies will prove origin or products; if firms cannot do this then they will not be able to benefit from preferential trading terms.

No amount of preparation can mitigate the devastating impact of ‘no deal’, with this outcome – or even an unworkable deal – costing the UK automotive sector up to £47 billion in lost trade in cars and vans alone over the next five years.⁴ The industry must have a deal, and one that delivers zero tariff, zero quota trade with highly ambitious rules of origin provisions and a phase-in period that allow businesses time to adjust. Failure to achieve these requirements would, for the auto sector, be the equivalent of no deal at all, and compound the impact of the coronavirus crisis – itself already costing the UK sector some £27.5 billion in lost car production and sales.⁵

Mike Hawes, SMMT Chief Executive, said, 

“As the UK-EU FTA negotiations enter the endgame, now is the time for both sides to deliver on promises to safeguard the automotive industry. Securing a deal is absolutely critical but it cannot be any deal. To work for UK Automotive it must deliver for UK products and that means securing the right terms and conditions that allow our exports – now and in the future – to be zero tariff and zero quota trade. A deal that failed to achieve this would be the equivalent to no deal at all, devastating jobs and slamming the brakes on the UK’s ambitions to be a world leading manufacturer and market for electrified mobility and battery technologies.”