LONDON — British carmakers are warning that the UK will likely not get an agreement on trade when it leaves the European Union, and calling on the government to negotiate a special interim deal to avert disaster.
With just 20 months left before the UK formally leaves the EU trading bloc, the probability of a disorderly Brexit is growing, the Society for Motor Manufacturers and Traders said on Tuesday.
“Our biggest fear is that, in two years’ time, we fall off a cliff edge — no deal, outside the single market and customs union and trading on inferior WTO terms,” Mike Hawes, chief executive of the SMMT, said.
“This would undermine our competitiveness and our ability to attract the investment that is critical to future growth,” he said.
Europe is a major market for UK-made cars. A 10% tariff would cost the industry £1.8 billion a year and £2.7 billion if Britain reciprocated, adding £1,500 to the average cost of a car.
“That’s why we have to be honest with ourselves,” said Hawes, calling for a deal to keep single market access for years after 2019 until a new trading arrangement can be worked out.
“If the UK cannot secure — and implement — a bespoke and comprehensive new relationship with the EU in two years’ time, we need a backup plan. Having looked at all the alternatives, we need government to seek an interim arrangement whereby we stay within the single market and customs union until that new relationship is implemented,” he said.
The finance industry has called for a similar deal. Bank of England Governor Mark Carney has floated the idea of a 10-year stay on leaving the single market to allow time to finalise the complexities of a new trading arrangement.
On Monday, a report by Automotive Council UK found that 44% of all components used in UK vehicle assembly come from British suppliers, compared with 41% in 2015, highlighting a move by manufacturers to protect themselves from Brexit-related disruptions to their supply chain.
The UK’s exit from the European Union, along with its single market and customs union, has the potential to disrupt the international supply chains relied on by manufacturers of complex equipment such as vehicles. Companies both in Europe and in the UK are starting to protect themselves from fallout if the talks do not yield a special trade deal by the time Britain leaves the bloc in 2019.
Around 45% of European companies are seeking to replace UK suppliers with local businesses in preparation for higher international tariffs if Brexit negotiations fail.
Meanwhile, a third of UK businesses are actively looking to replace European suppliers, according to a survey of 2,111 supply chain managers carried out by the Chartered Institute of Procurement and Supply earlier this year.
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