U.K. Car Industry Urges EU Deal to Stem Decline in Production

(Bloomberg) -- With just a day until the U.K. leaves the European Union, British automakers warned a free-trade agreement with the bloc is needed to reignite investment in the industry and stem tumbling production.

Output already dropped 14.2% last year to 1.3 million cars, the lowest level for a decade, partly on disruption caused by Brexit, the Society of Motor Manufacturers and Traders said in a statement. It’s expected to drop a further 2.3% in 2020 to 1.27 million units.

The U.K.’s renaissance in carmaking, fueled by decades of investment from foreign manufacturers, is at risk of unraveling if tariffs are imposed and supply chains impacted by Brexit, the SMMT said. About 55% of all cars made in the Britain are exported to the EU, loaded with parts that have traversed the border multiple times during the manufacturing phase.

“We need to avoid tariffs and quotas, which could cost us billions,” SMMT Chief Executive Mike Hawes said at a briefing in London Wednesday.

Maintaining ties with the EU would rekindle investment in new models and capacity that’s been put on hold amid all the trade uncertainty, Hawes said.

Following a landslide victory for Prime Minister Boris Johnson, Britain will quit the EU on Jan. 31, triggering in-depth trade talks. Tariffs on imported parts and exported vehicles under World Trade Organization rules would inflate manufacturing costs by 3.2 billion pounds ($4.1 billion), the SMMT said in November, forcing prices to rise and global demand for U.K. cars to shrink.

A bright spot for the industry in 2019 was the production of alternatively fueled vehicles, such as electric and hybrid cars. The segment grew 35% to 192,304 cars.

To contact the reporter on this story: Siddharth Philip in London at sphilip3@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Andrew Noël, Frank Connelly

©2020 Bloomberg L.P.