Failure to secure tariff-free access to European Union markets following Brexit could cost the British automotive industry as much as £4.5 billion (€5.3 billion) pounds annually, according to estimates from the Society of Motor Manufacturers and Traders (SMMT). This could translate to an increase in new car prices of £1,500 (€1,768).
The SMMT based its calculations on a standard tariff of 10% being applied on all imports/exports of vehicles, dictated by World Trade Organization rules.
EU officials have said the UK has to keep open borders if it wants tariff-free access to the single-market after Brexit. This clashes with the UK government’s aim of limiting immigration at the same time as securing tariff-free access.
Negotiations on the UK’s exit will not begin until it officially starts the two-year process of leaving the EU by invoking Article 50. The government has set a deadline for that of the end of Q1 2017, but there are concerns that ongoing legal action could cause extensive delays.
There are already warnings that EU officials are in no mood to make concessions, with politicians across Europe calling for negotiators to take a hard-line approach.
SMMT president Gareth Jones believes recent growth in the UK car manufacturing industry is linked to the benefits of EU membership.
He said: ‘The challenge now is to make a success of the new future. We want a strong UK economy and we want to see the UK’s influence in the world enhanced.
‘Our members […] want membership of the single market, consistency in regulations, access to global talent and the ability to trade abroad free from barriers and red tape.’
Last week, the government announced that the UK could expect lower growth and higher levels of borrowing from 2017 onwards as a result of the Brexit vote.
Experts have also warned that car sales could fall by 8% in 2017 with further falls in subsequent years.
Despite this, manufacturers are willing to keep investing in the UK. Nissan agreed to build some of its most important new cars at its Sunderland plant following controversial government reassurances about keeping the UK competitive. Jaguar Land Rover is planning thousands of new jobs over the next few years.
Ford of Europe has indicated that it expects Brexit to damage revenues at its European operations for years to come, although it recently announced that profits had soared to nearly €1 billion for the first three quarters of 2016.
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