'Not an option': The British car industry is sounding the alarm on a no deal Brexit

Daniel Leal-Olivas/ AFP/ Getty Images.
  • A no deal Brexit is “not an option” for UK car manufacturers, the head of Britain’s auto manufacturing group said on Tuesday.
  • “No deal… is just not an option. It would be seriously damaging to the industry not just in the UK but in Europe as well,” Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT) said.
  • The warning was made more stark as new figures show that nine out of ten cars built in the UK in the last month were due for export rather then domestic sales, as demand in the domestic market collapsed by 47%, Reuters reported.
  • “A no-deal scenario is feared by volume UK auto manufacturers which could affect the smooth running of plants and squeeze the already tight cost margins of British car companies selling to Europe,” David Leggett, a director and car industry analyst at Just Auto, told Business Insider.

A no deal Brexit is “not an option” for the UK car industry, considering the disruption and cost carmakers would suffer, the head of the country’s auto manufacturing group said on Tuesday.

Carmakers are “increasingly concerned” about the lack of clarity around the manner of Britain’s departure from the European Union, Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT) said, Reuters reported.

The warning was made more explicit as fears over disruption to cross-border trade were highlighted by new figures showing that nine out of ten cars built in the UK last month were for the foreign export market.

Prime Minister Theresa May, who has eight months until the split with the EU is due to take place, is yet to produce a proposal that can sustain economic links and satisfy both her party and negotiators in Brussels.

This has left open the possibility that Britain could have economic ties with the EU severed, leaving the UK dependent on World Trade Organisation rules meaning British car exports to the EU would face 10% tariffs.

“No deal… is just not an option. It would be seriously damaging to the industry not just in the UK but in Europe as well,” Hawes told Reuters and other reporters as he presented SMMT’s mid-year update on British car production.

The car industry employs over 850, 000 people, both directly and indirectly in Britain and Hawes said car manufacturers were getting as “ready as possible” for any disruption from a no-deal Brexit.

In the first six months of 2018 British car production fell by 3.3% due to a sharp decline in domestic demand outweighing a boost in exports. In June production fell by 5.5% compared with June in 2017, despite a 6% rise in export output. Behind the shift is a domestic market collapse of 47%.

“This reflects a number of developments, including model cycles and pressures on consumer spending in Britain,” David Leggett, a director and car industry analyst at Just Auto, told Business Insider.

On the cost to car manufacturers he added that a no-deal scenario is feared by volume UK auto manufacturers which could affect the smooth running of plants and squeeze the already tight cost margins of British car companies selling to Europe.

“The auto industry in Britain is highly locked in to pan-European supply chains. Besides the impact of new trade tariffs of as much as 10%… the industry in Britain could face expensive hold-ups at borders for additional checks that would disrupt production schedules set-up for just-in-time delivery processes,” Leggett said.

Despite the concerns over Brexit, Hawes reassured reporters, that “looking at the long-term picture, the sector is performing as expected in the context of market conditions at home and abroad.”

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