SMMT survey highlights no-deal fears
The Society of Motor Manufacturers and Traders (SMMT) has published the results of a new survey highlighting the concerns of a no-deal Brexit within an industry dependent on free and frictionless trade with the EU.
It found that one in three UK automotive businesses is already cutting jobs, up from one in eight when the survey was last carried out in November 2018. Four-fifths (80.3%) fear leaving the EU without a deal will have negative consequences for their future prospects (up from 74.1% 10 months ago). Virtually the same number (79.6%) are worried about the impact on their profitability while two-thirds (62.2%) are saying ‘no deal’ will impact their ability to win overseas business and a similar number state that they will be unable to invest in their UK operations.
In a sign that the mere threat of ‘no deal’ has already hurt the UK, 11.8% of firms said that they had already divested from their UK-based operations and 13.4% are relocating operations overseas. Overall, three quarters (77.2%) of firms say that there has already been a negative impact on business even before the UK has left the EU.
The industry has also taken considerable steps to prepare for the possibility of ‘no deal’, with the vast majority (73.2%) actively preparing for post-Brexit disruption. Almost half have spent money on stockpiling and warehousing to mitigate against the risk of border delays and production stoppage and SMMT’s 2019 UK Automotive Trade Report calculates that a ‘no deal’ Brexit would knock £50,000 a minute off the sector’s economic contribution.
Meanwhile, a third have made adjustments to logistics and shipping routes, and 26.8% have been forced to invest hard-won profits in new customs infrastructure, despite a recognition that such systems cannot guarantee against border delays in the event of ‘no deal’.
Separate SMMT research has already shown that some of the UK’s biggest automotive manufacturers have spent more than £500 million in an attempt to mitigate at least some of the risks of a ‘no deal’ scenario. The industry cannot, however, fully prepare for all the uncertainties and many will not survive the application of a 10% tariff on finished vehicles as they already operate on wafer-thin margins. At a time when the global automotive industry is striving to develop ever safer, cleaner and more advanced technology, manufacturers in the UK are being forced to waste money on ‘no deal’ survival measures.
Mike Hawes, SMMT chief executive, said, ‘As the Brexit clock ticks ever closer to midnight, this survey reveals the bleak future that awaits this vital sector in the event of ‘no deal’. Damage has already been done: investment is haemorrhaging competitiveness being undermined, UK jobs cut and vast sums wasted on the impossibility of preparing for ‘no deal’. Make no mistake, every day ‘no deal’ remains a possibility is another day of lost investment, another day that makes it harder to recover investor confidence in the UK.
‘As yet, the damage is not irreversible. But we need a deal. A deal that, in the short term, enables a ‘business as usual’ transition for as long as it takes to negotiate and implement the future trading relationship. In the longer term, that deal must replicate all of the benefits we currently enjoy which means an ambitious deal that delivers free and frictionless trade. UK jobs, innovation, trading strength and economic growth all depend on the automotive sector so we urge all parties to get a good deal done before it is too late.’
