We live in a global economy. A clear example of this is the fact that 80% of cars manufactured in the UK are for the export market and contain components sourced from across Europe. If access to the single market is lost (and there is no single market “for goods” only although the UK government hopes the EU might agree one), the viability of UK car production is seriously in doubt. The industry uses the “just in time” concept for parts delivery such that factories only keep enough parts for current production needs. If components must be verified for source of origin and inspection at ports, this concept fails.
The car industry in the UK had a torrid time in June. Whilst exports were up by 6%, the domestic market saw a 47% decline in output for the domestic market (the June export figure was closer to 90% of output). The Society of Motor Manufacturers and Traders (SMMT), described June as a “perfect storm” of factors dropping demand at home. 53% of UK car production is destined for the EU market. SMMT stated that lack of clarity over Brexit meant that it was very difficult to prepare for the UK’s departure at the end of next March.
Ironically, the UK car market is largely served via imports with 86% coming from overseas and 69% of that from the EU.
Mike Hawes of SMMT said: “No one would profess to being Brexit-ready because there are too many variables in there. We need a deal. If we have no deal, there is no transition, there is no implementation period, that would kick in less than eight months away. You can operate on WTO trade rules but it would be at a significant extra cost and burden than we currently enjoy.”
The UK car industry employs 186000 people directly with many more jobs dependent on secondary activities. Jaguar Land Rover recently suggested that it may have to pull out of the UK entirely if there is a “no deal” Brexit.