British auto industry will face significant disruption in case of a cliff-edge Brexit

The Society of Motor Manufacturers and Traders (SMMT) has made it amply clear to the British government that a no-Brexit deal is not an option.

On Tuesday, Britain’s automobile industry group made it lucidly clear to the government that a no-Brexit deal is not an option given their sunken costs and the disruption that it will bring to the country’s famous automotive industry and to consumers.

British carmakers are “increasingly concerned” on the lack of clarity surrounding Britain’s departure from the bloc, said Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT).

With less than 8 months to go, British Prime Minister Theresa May has yet to find a workable solution that will maintain the country’s economic ties with the European Union, the world’s largest single trading bloc. If Brexit were to happen without a trading deal, Britain will have to fall on WTO rules which will mean British car exporters will face 10% import tariffs from the EU.

“No deal… is just not an option. It would be seriously damaging to the industry not just in the UK but in Europe as well,” said Hawes to reporters as he presented SMMT’s mid-year update on British car production.

The automotive industry in the country employs more than 850,000 people directly and indirectly.

Although carmakers were encouraged by May’s Brexit proposals which were published earlier this month, said Hawes, there are some major burrs that need to be ironed out, including the costs of any new customs arrangements.

By the second quarter of 2018, Britain’s car manufacturing output fell by an annual 3.3% to 834,402 vehicles with disappointing domestic demand canceling out strong exports, said SMMT. Further, in June, production of vehicles fell by 5.5% compared to the previous year, despite a surge in the export market by 6%.

British automotive manufacturing

The British automotive industry contributes to nearly one tenth of the country’s manufacturing output. This makes the industry particularly vulnerable to disruptions in supply chain management when Britain exits the EU.

While large companies are used to mitigating complex issues surrounding global trade, managing smaller companies across the supply chain is more of a concern, said Hawes.

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