The UK Auto industry has issued a last-chance plea for a positive trade deal after research from the Society of Motor Manufacturers and Traders (SMMT) revealed the stifling costs to the sector in preparation for Brexit.

Findings from the SMMT revealed that costs have already amounted to £735m, with upwards of £235m spent in 2020 alone.

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As Brexit negotiations near completion, the automotive sector is struggling to avoid the devastating impact that a ‘no deal outcome’ will bring. Such an outcome is expected to cost the sector up to £47bn in lost trade in cars and vans within the next five years.

The industry is banking on a zero-tariff, zero-quota trade deal with highly ambitious rules of origin provisions and a phase-in period that would facilitate operational adjustment.

Failure to obtain these requirements represents the equivalent of no deal at all, further compounding the damage from COVID-19.

Mike Hawes, chief executive of SMMT, said: “As the UK-EU FTA negotiations enter the endgame, now is the time for both sides to deliver on promises to safeguard the automotive industry. Securing a deal is absolutely critical but it cannot be any deal. To work for UK Automotive it must deliver for UK products and that means securing the right terms and conditions that allow our exports – now and in the future – to be zero tariff and zero quota trade.

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“A deal that failed to achieve this would be the equivalent to no deal at all, devastating jobs and slamming the brakes on the UK’s ambitions to be a world leading manufacturer and market for electrified mobility and battery technologies.”

Bracing for disruption

The study by SMMT revealed that 67% of firms across the industry are doing everything in their control to prepare for new processes that will come into being on 1 January 2021.

In anticipation of disruption to supply chains, 70% have secured GB Economic Operators Registration and Identification (EORI) numbers and 52% have employed customs agents, whilst 60% are spending significantly on stockpiling.

However, ambiguity surrounding the nature of the UK-EU’s future relationship continues to limit the industry’s ability to plan, affecting 86% of firms surveyed.

As an industry reliant on Just-in-Time deliveries, “firms cannot afford any supply chain delays”, said the statement from SMMT.

Consequently, clarity on the operation of key new customs systems such as the Goods Vehicle Movement Service (GVMS) and the Permission to Progress (P2P) process, is critical.

Even in the case of a Free Trade Agreement, uncertainty surrounding how companies will prove origin or products will remain. In failing to offer such proof, firms will not benefit from preferential trading terms.

Urgent Brexit preparedness tasks

Worth roughly £78.9bn and responsible for more exports than any other sector, the automotive industry is one of the UK’s most valuable economic assets, said the SMMT. The industry also supports around 180,300 manufacturing jobs in communities across the UK whilst generating £15.3bn in annual added value to the UK economy.

In attempts to limit damage from Brexit disruption to this valuable industry, the SMMT provide a list of ten preparedness tasks:

  1. A temporary grace period for exporters of at least one year to obtain supplier declarations.
  2. Clarity on the format of the upcoming origin declarations and the necessary supporting documents and IT processes.
  3. Certainty on preferential origin formalities for export to the UK’s other FTA trading partners.
  4. Guidance on valuation and origin of used products, or ‘cores’, imported into the UK for remanufacturing purposes.
  5. Detail on the Permission to Progress (P2P) process and Goods Vehicle Movement Service (GVMS) to mitigate the risks to Just-in-Time manufacturing. If there is substantial time between a company submitting a customs declaration and receiving a P2P there is a risk the manufacturing site becomes a lorry park and production gets significantly disrupted.
  6. Draft legislation on how UK government will handle returnables/stillages/empty packaging that was committed to back in April 2020.
  7. Support in connecting with third party customs intermediaries.
  8. Extend access to the £84 million customs funding to all traders to boost their customs capacity and preparedness.
  9. Publish a full list of ports and which operating model they will use as a matter of urgency.
  10. Significantly more operational level information from government on the workings of the Northern Ireland Protocol.