New PM urged to make Brexit deal top priority to avoid ‘knockout blow’ of tariffs

Leaving the European Union on October 31 without a deal would trigger the most seismic shift in trading conditions ever experienced by the UK’s automotive industry, with billions of pounds of tariffs threatening to impact fleet and consumer choice and affordability.

Furthermore, it is claimed in a new report from the Society of Motor Manufacturers and Traders (SMMT), that the end to borderless trade could bring crippling disruptions to the industry’s just-in-time operating model resulting in delays in the import of new vehicles and components.

That bleak outlook has led the SMMT to issue a plea to the UK’s next Prime Minister – either Boris Johnson or Jeremy Hunt, the two remaining Conservative Party leadership candidates in the battle to succeed Theresa May – to secure a favourable Brexit deal as his number one priority on taking office.

Disruption of the motor industry’s just-in-time operating model would result in delays to shipments of parts to production plants – as well as spare and replacement parts delivered to garages, workshops and fast-fits – due to customs changes and a raft of other red tape. Such delays are measured in minutes, with every 60 seconds costing £50,000 in gross value added, amounting to some £70 million a day in a worst case scenario, it is calculated. Such delays could also trigger longer lead times for new vehicles due to hold ups at the import location.

Combined with World Trade Organisation (WTO) tariffs, which for the import and export trade in passenger cars alone amount to £4.5 billion a year, a no-deal Brexit would deliver a “knockout blow” to the sector’s competitiveness, undermining a decade of extraordinary growth, says the SMMT’s ‘2019 UK Automotive Trade Report’.

Imposition of WTO tariffs would see the list price of cars rising by 10%; commercial vehicle prices rising by up to 22% (an average 13.5% for light vans); and the cost of vehicle components by up to 4.5%.

The SMMT says that if the imposition of tariffs was passed directly on to vehicle buyers – and not swallowed up by manufacturers and their dealer networks – there would be an average £1,700 increase in the cost of cars and vans in the UK.

What’s more, some motor manufacturers have warned that the burden of price rises could mean that available model choice was reduced.

Meanwhile, fleets can expect the in-life cost of vehicle operations to also rise as a result of a ‘no-deal’ Brexit. Experts have suggested that service, maintenance and repair (SMR) costs could rise by 10%, while such an increase – along with the rise in the price of components – would also trigger a surge in insurance premiums. It is calculated, for example, that the cost of a vehicle service could increase by around £70.

But, said the SMMT, the “right deal, the right business environment and auto-friendly trade strategy” could deliver a £20 billion boost in global trade value from £101 billion as industry maximised its potential.

Mike Hawes, the SMMT’s chief executive, said: “Automotive matters to UK trade and to the economy, and this report shows that, if the right choices are made, a bright future is possible.

“However, ‘no deal’ remains the clear and present danger. We are already seeing the consequences of uncertainty, the fear of no deal. The next PM’s first job in office must be to secure a deal that maintains frictionless trade because, for our industry, ‘no deal’ is not an option and we don’t have the luxury of time.

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