Automotive sector ‘spends £330m on no-deal prep instead of tech and environmental challenges’

Hundreds of millions of pounds that would be better spent on new technology and environmental issues are instead being spent mitigating against the potential effects of a ‘no-deal’ Brexit, the automotive sector’s trade body has said.

The industry has already spent at least £330m on “contingency plans” including stockpiling materials, said the Society of Motor Manufacturers and Traders (SMMT). Other measures include securing warehouse capacity and investing in new logistics, extra insurance and training in new customs procedures. Many manufacturers also moved annual plant shutdowns from the summer to April – ahead of an expected Brexit deadline in March – which cannot be repeated ahead of the proposed departure date on 31 October.

A no-deal Brexit would bring the immediate imposition of tariffs costing £4.5bn per year, an end to “seamless” movement of goods and pose a serious challenge to ‘just-in-time’ manufacturing, the SMMT said.

“Today’s figures are the result of global instability compounded by ongoing fear of no-deal,” said SMMT chief executive Mike Hawes. “This fear is causing investment to stall, as hundreds of millions of pounds are diverted to Brexit cliff-edge mitigation – money that would be better spent tackling technological and environmental challenges.”

Alongside the SMMT no-deal research, UK manufacturing data showed 15.2% fewer cars were built this June than last, with a 20.1% drop in the year to date, partially due to falling demand at home and in key foreign markets such as the European Union, US and China. Inward investment “effectively stopped” in the first half of the year, the SMMT added, with newly-pledged investment down more than 70% to £90m.

“The industry’s foundations are fundamentally strong, however,” said Hawes. “We’re ready to work with the new government to build on these through the industrial strategy. We need an internationally-competitive business environment to encourage more investment, more innovation and more growth. That starts with an ambitious Brexit deal that maintains frictionless trade and we look to the new administration to get a deal done quickly so manufacturers can get back to the business of building cars and helping deliver a brighter future for Britain.”