David Leggett, Automotive Analyst at GlobalData, warned that the UK automotive sector was facing decimated sales due to the COVID-19 crisis, the very real possibility of no-deal on free trade between the UK and EU when the Brexit transition period ends at the end of the year would be a double whammy that seriously jeopardises recovery, competitiveness and future investment.
“Time is now short to get a free trade deal in place or risk new tariffs and additional border checks on UK-EU trade in vehicles and parts. The UK’s auto industry is highly integrated with that of the EU, in terms of both manufacturing supply chains and a high proportion of UK car exports being bound for the region – over half of the one million cars exported from Britain last year went to EU27 markets. If those EU-bound vehicles face a 10 percent import tariff levied by the EU under WTO trading rules, that would make UK manufacturing much less attractive to car companies that have alternative options to produce at plants inside the EU’s tariff free customs union”, he said
“Additional border checks would also be a concern for an industry heavily reliant on just-in-time logistics and with razor-slim margins. In the UK, a 10 percent import tariff on EU-sourced vehicles would potentially create problems for the retail sector either in absorbing higher prices or passing them on to consumers.”