The government quietly released a briefing paper (HERE) on the UK car industry in April. It shows some fascinating figures. The UK built 1.8 million cars in 2016 but 78% were exported while 22% (396,000) were sold here. Total new car registrations was 2.7 million but since only 396,000 were built here, 85% were imported.
Of these imports, 87% were from the EU. Of our exports 56% (760,000) went to the EU. If we exclude the UK's 2.7 million cars, the EU market is about 12.5 million vehicles (HERE). It doesn't take a genius to see we have about 6% of the EU market while they have about 75% of ours. Plus, the majority of the parts used in UK built cars come from the EU as well.
Several things flow from this. One, we don't have capacity to satisfy our own needs. Two, if tariffs are imposed under WTO rules, importers will simply add it to the price because they dominate the market and the UK buyer will actually have to pay the tariff. And three, our exports to Europe will be less profitable because our manufacturers, not being dominant in the EU, will have to absorb the tariff or increase the price and lose sales. Finally, non-EU exports from the UK have been growing and so some manufacturers will probably choose to remain whatever happens. But if the supply chain becomes disrupted and more costly, perhaps they won't. Why should foreign manufacturers, the ones with the money and expertise, invest in the UK in order to boost our exports? From this it is clear to me that the UK has most to lose from a hard Brexit.
An article in Politico (HERE) makes the same points rather better than I have and also raises the Rules of Origin problems. Apparently UK cars contain about 41% UK parts, the rest are from overseas but most Free Trade Agreements specify 55% or even 65% as the minimum local content before a product is considered to be from the exporting territory. Could be another big problem - even if we actually get a trade deal? It looks difficult to me.
Nissan may be feeling a little nervous. The assurances given to them By Mrs May and Greg Clark were that they would "ensure" that trade between the UK and the EU would be "free and unencumbered by impediments" are looking a bit flaky now. This was done before the government confirmed we will leave the single market and the customs union. There is a fog of uncertainty across the English Channel and it is not going to clear anytime soon.
Of these imports, 87% were from the EU. Of our exports 56% (760,000) went to the EU. If we exclude the UK's 2.7 million cars, the EU market is about 12.5 million vehicles (HERE). It doesn't take a genius to see we have about 6% of the EU market while they have about 75% of ours. Plus, the majority of the parts used in UK built cars come from the EU as well.
Several things flow from this. One, we don't have capacity to satisfy our own needs. Two, if tariffs are imposed under WTO rules, importers will simply add it to the price because they dominate the market and the UK buyer will actually have to pay the tariff. And three, our exports to Europe will be less profitable because our manufacturers, not being dominant in the EU, will have to absorb the tariff or increase the price and lose sales. Finally, non-EU exports from the UK have been growing and so some manufacturers will probably choose to remain whatever happens. But if the supply chain becomes disrupted and more costly, perhaps they won't. Why should foreign manufacturers, the ones with the money and expertise, invest in the UK in order to boost our exports? From this it is clear to me that the UK has most to lose from a hard Brexit.
An article in Politico (HERE) makes the same points rather better than I have and also raises the Rules of Origin problems. Apparently UK cars contain about 41% UK parts, the rest are from overseas but most Free Trade Agreements specify 55% or even 65% as the minimum local content before a product is considered to be from the exporting territory. Could be another big problem - even if we actually get a trade deal? It looks difficult to me.
Nissan may be feeling a little nervous. The assurances given to them By Mrs May and Greg Clark were that they would "ensure" that trade between the UK and the EU would be "free and unencumbered by impediments" are looking a bit flaky now. This was done before the government confirmed we will leave the single market and the customs union. There is a fog of uncertainty across the English Channel and it is not going to clear anytime soon.
