Executive Briefings

U.K. Auto Sector's Only Brexit Option Is Damage Control, Report Says

There is nothing good to come from exiting the European Union for the U.K. auto industry, leaving the government only one option: limiting the damage.

That’s the view of a new impact assessment from the Business, Energy and Industrial Strategy Committee, which urged Prime Minister Theresa May and her cabinet to take a "pragmatic" approach to negotiations with Brussels. The report, arriving amid a hardening of positions in the talks with the EU, comes after opposition Labour Party leader Jeremy Corbyn raised the dangers of a hard Brexit for carmakers.

“There are no advantages to be gained from Brexit for the automotive industry for the foreseeable future,” according to the report compiled by 11 cross-party lawmakers. “The negotiations are an exercise in damage limitation. The government should acknowledge this and be pragmatic.”

The auto industry has been a key topic of debate post-Brexit due to its reliance on tariff-free trading to allow components to travel in and out of the country in the manufacturing process. The U.K. employs nearly 1 million people in the sector either directly or through supply chains and the industry makes up 13 percent of all goods exported from Britain, the second highest from any one sector, according to the report.

Among lawmakers’ chief concerns is the introduction of a 10 percent tariff on U.K. exports and imports in the event of a no-deal Brexit, which might shift production away from Britain. Profit margins are small, between 2 and 4 percent, and tariffs could make some U.K. manufacturing unsustainable. The committee also said it could find no upside to breaking with EU regulations and recommended the government tries to preserve the existing framework.

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That’s the view of a new impact assessment from the Business, Energy and Industrial Strategy Committee, which urged Prime Minister Theresa May and her cabinet to take a "pragmatic" approach to negotiations with Brussels. The report, arriving amid a hardening of positions in the talks with the EU, comes after opposition Labour Party leader Jeremy Corbyn raised the dangers of a hard Brexit for carmakers.

“There are no advantages to be gained from Brexit for the automotive industry for the foreseeable future,” according to the report compiled by 11 cross-party lawmakers. “The negotiations are an exercise in damage limitation. The government should acknowledge this and be pragmatic.”

The auto industry has been a key topic of debate post-Brexit due to its reliance on tariff-free trading to allow components to travel in and out of the country in the manufacturing process. The U.K. employs nearly 1 million people in the sector either directly or through supply chains and the industry makes up 13 percent of all goods exported from Britain, the second highest from any one sector, according to the report.

Among lawmakers’ chief concerns is the introduction of a 10 percent tariff on U.K. exports and imports in the event of a no-deal Brexit, which might shift production away from Britain. Profit margins are small, between 2 and 4 percent, and tariffs could make some U.K. manufacturing unsustainable. The committee also said it could find no upside to breaking with EU regulations and recommended the government tries to preserve the existing framework.

Read full article