PROSPER MAGAZINE: ISSUE 01 | SECTOR FOCUS
BREXIT AND OUR AUTOMOTIVE INDUSTRY
The automotive industry in the UK is one of the biggest industries facing the most uncertainty when it comes to Brexit.
With PM Boris Johnson stating that he wants to negotiate a new deal with the EU, whilst also preparing for a No Deal scenario, the uncertainty surrounding the sector isn’t becoming any clearer.
However, there are many aspects that we can be much more certain of right at this moment in time. Ian Henry, visiting Professor in Automotive Business Strategy at the Centre for Brexit Studies shared his latest research and statistics, stating that if the UK and EU reach a deal of some form, there will be a transition period through to the end of 2020, if not longer, ahead of a new free trade agreement coming into effect. He said: “In such circumstances, the operating environment for the industry should continue much as now, albeit with some, as yet unknown, changes to customs procedures and administration.
“However, if no agreement is reached, or looks like not being reached, one of two things is likely; either the UK Parliament will find a means to block no deal, leading to a general election, a new referendum or indeed revocation of article 50; or the UK will leave without a formal withdrawal agreement (the no-deal scenario would come to pass).”
In this case, we can be sure that the EU will impose tariffs on UK exports of cars and components, respectively at 10% and around 4% (components will face tariffs of 2.5-5%).
Ian said: “Based on an average of 2017-18 production volumes and sales destinations for the UK made vehicles, I have calculated likely tariffs on UK exports to the EU of around £2.5-2.8bn per year on cars and as much as a further £800m on engines and parts exported by UK vehicle companies, although this could be reduced if the car companies re-allocated engine production away from the UK.
“UK car manufacturers may also be subject to import duty on parts brought in from the EU; based on 2017-18 sourcing patterns, I have calculated import duty on imported parts would be around £700m per year. If the UK government exempts EU component imports from tariffs, they would have to do the same for imports from other markets too, saving around £220m of current annual tariffs.”
These figures will, of course, vary with car production volumes; and if they fall as prices rise, then the amount paid in duty would, in turn, fall. A vicious circle, or downward spiral, will soon come into play. There are many uncertainties facing the UK’s automotive industry right now; but of one thing we may be sure, a no deal Brexit will result in significant additional costs for the industry.
INTERNATIONAL EVENT DIARY
'LIGHT-WEIGHTING' SPECIALISM DELIVERS £3M CONTRACT BOOST
Alucast, one of the UK’s largest independent aluminium foundries, has secured more than £3m of new contracts from carmakers keen to explore ways of reducing weight on future models.
Backed by support from Sandwell Metropolitan Borough Council, Black Country LEP and the Black Country Growth Deal, it has opened additional facilities adjacent to its Wednesbury headquarters to cope with the expansion, giving the company an additional 7000 sq ft of dedicated machining space to work with.
“The automotive industry continues to move to lighter vehicles as the carmakers look at ways where they can meet emission targets and improve fuel performance,” said Tony Sartorius, Chairman of Alucast. “We have been working on this approach for some time, supporting some of the world’s most prestigious OEMs to design and cast lighter components to what they’ve been using previously.”