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UK car industry warns of 'New Year nightmare' amid no-deal Brexit fears

Kumutha Ramanathan
·3-min read
Jaguar cars are seen parked in rows at the Castle Bromwich plant in Birmingham, central England, January 19, 2009. Jaguar Land Rover has announced it has halted work at its car plant in Castle Bromwich for two weeks, local reported.  REUTERS/Darren Staples   (BRITAIN)
Cars are seen parked in rows at a factory in Birmingham. (Credit: Darren Staples/Reuters)

The Society of Motor Manufacturers and Traders (SMMT) warned of the “New Year nightmare” that faces the UK car industry, if Britain doesn’t seal a Brexit deal with the European Union (EU), as it posted more depressing figures around output.

UK car manufacturing slumped in November by 1.4% with only 106,243 vehicles leaving production lines, said SMMT.

Output for the domestic market, specifically, fell by 0.4% and exports were flat, up just 0.3% to 90,597 units.

In the 11 months to November, total UK car production was now down 31% compared with the same period in 2019, representing a loss of 380,809 models at a cost of roughly £10.5bn ($14.34bn) to the sector.

Chart: SMMT
Chart: SMMT

“Yet another decline for UK car production is of course concerning, but not nearly as concerning as the New Year nightmare facing the automotive industry if we do not get a Brexit deal that works for the sector,” said Mike Hawes, SMMT chief executive.

“With just nine days to go, the threat of ‘no deal’ is palpable and the sector, now also reeling from the latest coronavirus resurgence, Tier 4 showroom lockdowns and disruption at critical UK ports, needs more than ever the tariff-free trading arrangements on which our competitiveness is founded.”

He added that this was “make or break time” as being forced to operate under World Trade Organisation terms would “be a hammer blow for many automotive businesses, workers and their families.”

Should a deal be reached before the 31 December Brexit deadline, it would need to be ratified by UK and EU Parliaments.

WATCH: UK car production 'could halt early next year' if EU trade talks fail, union warns

Key sub-sectors would be impacted by a deal, including hybrid vehicles, where flexible rules of origin thresholds, batteries and a suitable phase-in period would be required to allow supply chains to adapt.

“Urgent clarity, in the event of a deal, would also be needed on proof of origin requirements to ensure qualification for tariff-free trade from 1 January, as well as a 12-month grace period on supplier declarations, with reciprocal facilitation measures by our European counterparts,” said SMMT.

The British automotive sector forms a key component of the national economy, turning over an annual £78.9bn and representing the country’s biggest exporter of goods at 13% of total exports.

READ MORE: Just 6% of business feel 'fully prepared' for Brexit

The industry also invests more than £3bn each year in automotive research & development as well as employing 180,000 people directly in manufacturing, said SMMT. These roles are “often in high skilled, high value jobs, with the average wage 21% higher than the UK average.”

Negotiations are still continues, with EU lead Michel Barnier telling 27 ambassadors on Tuesday that “We are really in a crucial moment," and giving talks “a final push." Key sticking points appears to remain on fisheries and what percentage of tonnage EU boats catch in UK waters.