Professor David Bailey considers what 'Brexit' means
for the UK's car industry.
"Death by a thousand cuts" is the risk faced by the UK
automotive industry after the Brexit vote, if car firms start
investing in other countries rather than the UK. That's what
Mike Hawes, chief executive of the Society of Motor Manufacturers
and Traders, said in recent evidence to a Lords' Committee.
It's a view I share - if the UK doesn't get things
'right' when it leaves the EU.
Nissan's decision to invest in building the next generation
Qashqai model at Sunderland was, of course, great news and reflects
the underlying competitiveness of the UK car industry. The Qashqai
is the UK's most-produced model, and it's that success that
the UK needs to build on.
But bigger battles in securing investment lie ahead - at Honda,
Toyota and Vauxhall, all more at risk of switching production to
Europe if uncertainties over trading relationships aren't
clarified sooner rather than later.
There's particular concern over the possible effects of
tariff barriers. With thin margins in the mass volume sector, a
'hard Brexit' that falls back on World Trade Organisation
(WTO) rules could see tariffs as high as 10% for cars and 4% for
components, which would be hugely damaging. But car-makers and
component suppliers also fear non-tariff barriers (things like
regulatory differences) as components can cross European borders
several times before going into modules like drivelines for final
As Hawes noted: "Non-tariff barriers could be as punitive
in cost as the tariff barriers. Anything that creates delay creates
All of which brings us back to Nissan and the Qashqai
'assurances' it received. Nissan was going to make its
decision in early 2017, but appeared to have pulled this forward to
maximise leverage on the government after the Brexit vote and
uncertainty over future EU trading relationships.
The government knew it couldn't afford to lose the
investment and Nissan effectively held a big gun to its head. So
what exactly was offered to Nissan, and what does it tell us about
the government's new industrial strategy and, more broadly, its
Brexit negotiating stance?
On this we've learned a little from the business secretary Greg
Clark. Speaking to Andrew Marr's TV show recently, Clark made
it clear that a key UK objective will be avoiding EU tariff
Clark also made repeated references to industry sectors and
their different needs, implying that the UK would seek to negotiate
sector-by-sector deals. That could see the UK trying to avoid
non-tariff barriers in certain sectors like automotive, effectively
giving those sectors something like access to the Single
All of which suggests the government at least sees access to the
EU's Single Market as a key negotiating objective. Quite
whether Liam Fox, the international trade secretary, agrees with
that is another matter, of course.
Clark's revealing interview raised a number of points which
the government had previously been pretty vague about. First, Clark
seems to be implying that - as a minimum - the UK could remain in a
'customs union' with the EU, which goes a long way to
reassuring the automotive industry on tariffs.
Second, if the UK really does want to trade without tariffs and
non-tariff barriers, then the EU may well extract a 'price'
via a contribution to the EU budget, as made by Norway and
Third, some form of 'referee' may be needed to determine
whether the UK's playing by the rules of whatever trade deal is
agreed - possibly the WTO or an EU-linked body.
Fourth, despite Nissan wanting 'compensation' if tariffs
are imposed, Clark suggested that may not be possible under WTO rules.
Finally, the government appears to have reiterated its support
of the car industry through the industrial strategy it's now
developing, on issues like skills, innovation and reshoring the
supply chain. The latter is welcome, and something of a major
U-turn compared with the reign of previous business secretary Sajid
Javid, who saw a range of key policy interventions like the
Manufacturing Advisory Service axed.
These need to be put back in place - maybe in a more
'place-based' regional approach - if the government's
serious about rebuilding fractured supply chains. But let's be
clear that staying in the Single Market is still seen as key by
many in the automotive industry if the UK's to secure future
That means the Brexit vote still leaves considerable uncertainty
over the UK's EU trading relationship, which has the potential
to impact on foreign investment in the UK, especially when car
firms are replacing models.
Plants and jobs could be at risk if that uncertainty isn't
quickly 'nailed down' by clear parameters for a trade deal
- preferably one that's as close as possible to existing Single
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