‘We must avoid tariffs’: UK car industry on tenterhooks as Brexit trade talks hang in the balance

The fate of the post-Brexit trade talks hang in the balance, with both the EU and UK admitting that serious differences remain on key issues.

Boris Johnson has said the UK can “more than live with” a no-deal scenario after the transition period expires at the end of the year, even calling it a “good outcome”.

But failure to strike a trade deal would bring disruption on both sides of the English Channel. The British car industry says the consequences of new tariffs and other barriers would be devastating.

January 2021 will bring radical changes to trading arrangements, deal or no deal. Customs formalities and regulatory controls will kick in when the UK leaves the EU’s Single Market and Customs Union.

Without a trade deal, the UK and EU would trade under World Trade Organization (WTO) rules, aggravating friction.

The Mini is a British icon: a design which has endured since 1959. The UK is in its DNA — but for the past 20 years, it’s been part of Germany’s BMW Group.

Most Minis are built in Oxford with components from an international supply chain. Parts of the engine criss-cross the English Channel three times before a new car rolls off the production line.

If a Brexit deal is not done, there could be a 10% tax every time it crosses the border — and then once again as the finished car is exported for sale.

“We need a deal. How big, how broad, how deep that deal is is going to affect the viability of the industry. We need to avoid tariffs. Tariffs will threaten the competitiveness of the UK industry,” Mike Hawes, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT), told Euronews.

Most of Britain’s carmakers are foreign-owned. Jaguar Land Rover belongs to the Indian giant Tata. Cars sold in the UK as Vauxhall are known as Opel in the rest of Europe, owned by the French company behind Peugeot and Citroen.

And some of the UK industry’s biggest producers are Japanese: Nissan and Toyota. Honda has already announced it will close its British plant next year.

“Given that barriers are now going up with Europe in some sense, the Japanese are left scratching their heads thinking: well, you’ve ripped up the contract. We don’t necessarily have to stay here,” said David Bailey, professor of industrial strategy at the University of Birmingham.

“This is an industry that runs on very tight margins so a 10% tariff will hit sales, it will hit profits and there will be question marks about the future of plants in the UK,” he told Euronews.

The development of the latest model of the Mini has already been put on hold. A senior BMW executive warned last year that without a deal, they would need to consider moving production of this British icon out of the UK.

BMW told Euronews: “The absence of a workable and frictionless trade deal would be damaging for our industry. We would urge both sides to continue to work towards a zero-tariff agreement that benefits the UK, the EU and our customers.”

Even without Brexit, the car industry is in flux. Factories need an overhaul to build the next generation of cleaner fuelled cars. Manufacturers expect to sell fewer cars as car sharing becomes more popular.

Big decisions are looming about where to build the cars of the future — and cost will be the deciding factor.

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