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Reach zero-tariff Brexit agreement or risk £40bn production losses in 5 years, automotive body warns

Professional Engineering

A no-deal scenario could see volumes falling below 850,000 by 2025, the SMMT said (Credit: Shutterstock)
A no-deal scenario could see volumes falling below 850,000 by 2025, the SMMT said (Credit: Shutterstock)

Brexit negotiations must deliver a “comprehensive zero-tariff free trade agreement” or the UK automotive sector risks “crippling” £40bn production losses by 2025, the Society of Motor Manufacturers and Traders (SMMT) has warned.

The industry body issued the warning to government as it revealed that one in six jobs in the sector are at risk because of the coronavirus pandemic.

“With a third of automotive workers still furloughed, the end of the government’s job retention lifeline in November highlights the critical need for a dedicated restart support package to safeguard these jobs,” the organisation said.

More than 6,000 automotive job cuts have been announced in June, the SMMT said, a result of global lockdowns, closed markets and shuttered plants. Showrooms in England and Wales are now re-opening and production lines restarting, but reduced demand and social distancing are reportedly slowing productivity.

SMMT called on the government to address this with a support package for the entire sector, to help drive demand and ease cash flow. Suggested measures include “unfettered access to emergency funding, permanent short-time working, business rate holidays, VAT cuts and policies that boost consumer confidence,” aiming to accelerate a sustainable restart.  

“UK Automotive is fundamentally strong,” said SMMT chief executive Mike Hawes at the organisation's annual industry summit today (23 June). “However, the prolonged shutdown has squeezed liquidity and the pressures are becoming more acute as expenditure resumes before invoices are paid. A third of our workforce remains furloughed, and we want those staff coming back to work, not into redundancy.

“Government’s intervention has been unprecedented. But the job isn’t done yet. Just as we have seen in other countries, we need a package of support to restart – to build demand, volumes and growth, and keep the UK at the forefront of the global automotive industry to drive long-term investment, innovation and economic growth. Support delivered now is an investment in the future of one of Britain’s most valuable assets… investment that we will repay many times over.”

The SMMT said the pending jobs crisis is amplified by the prospect of a ‘bare bones’ or ‘no-deal’ Brexit, so it welcomed an injection of fresh momentum into free trade agreement talks. Certainty that a full, zero-tariff deal will be in place by the end of the transition period will give businesses on both sides chance to prepare, it said, helping to drive investment into new skills, facilities and technologies for a zero-carbon future.

“Covid has consumed every inch of capability and capacity and the industry has not the resource, the time nor the clarity to prepare for a further shock of a hard Brexit,” said Hawes. “That’s why we do need to ‘turbo charge’ the negotiations to secure a comprehensive free trade agreement with the EU that maintains tariff and quota free trade… with such a deal, a strong recovery is possible, we can safeguard the industry and our reputation as an attractive destination for foreign investment and a major trade player.”

The impact of the pandemic on manufacturing is expected to cut annual car and light commercial vehicle production by a third, to just 920,000 units this year. The SMMT said an “ambitious, tariff-free FTA” could enable full recovery in five years, with output reaching pre-crisis levels of 1.35m units by 2025.

However, the organisation warned a no-deal scenario would severely damage these prospects and could see volumes falling below 850,000 by 2025 – the lowest level since 1953. This would mean a £40bn cut in revenues, on top of the £33.5bn cost of Covid-19 production losses over the period. 

Automotive exports more goods than any other sector, generating billions for the economy and supporting 168,000 high-skilled and high-paid manufacturing jobs around the UK.

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Content published by Professional Engineering does not necessarily represent the views of the Institution of Mechanical Engineers. 


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