Investment and thousands of jobs could be lost in booming automotive sector, committee warns

The UK government must put the car industry at the heart of Brexit negotiations or risk the loss of thousands of jobs and hundreds of millions of pounds of investment, MPs have warned.

In a gloomy assessment of prospects for UK car manufacturing, the business, energy and industrial strategy (BEIS) select committee said Brexit was negative for the sector, with “damage limitation” the best possible outcome.

The committee said the survival of volume car manufacturing in the UK would depend on the government’s ability to secure the closest possible relationship with the existing EU regulatory and trading framework. A no-deal scenario would be disastrous for jobs and investment, it warned.

“The car industry is one of the UK’s great manufacturing successes,” said Rachel Reeves, the Labour MP who chairs the BEIS committee. “Innovative and efficient car plants across the country provide thousands of jobs and the automotive sector is a major contributor to our economic growth.

“There is no credible argument to suggest there are advantages to be gained from Brexit for the UK car industry. Regulatory consistency and friction-free trade benefits car companies, consumers and car workers.

“The prime minister now needs to ensure commonsense pragmatism prevails and spell out the government’s intention to seek continued regulatory and trading alignment with the EU in the automotive sector.”

Britain’s car industry is heavily reliant on exports, with roughly 80% of cars rolling off UK production lines destined for overseas markets and 56% of auto exports heading to EU countries. The Society of Motor Manufacturers and Traders (SMMT) estimates the introduction of trade barriers would result in a £4.5bn drop in exports.

The average UK-built car has about 6,000 parts and the majority come from the EU, with parts sometimes passing across borders between Britain and other European countries several times during the assembly process.

As a result even short hold-ups at customs borders would cause big problems for the complex supply chains involved, making Britain a less competitive place to make cars, the SMMT has warned.

In its report The Impact of Brexit on the Automotive Sector, the BEIS committee said it was unrealistic to expect an expansion of trade with other countries to outweigh the loss of trade to Europe resulting from a “hard” Brexit.

It concluded that retaining good access to the EU single market would be more important to jobs and investment than securing the freedom to secure trade deals with individual countries – an ambition of Liam Fox, the international trade secretary.

UK car manufacturing took a knock last year as uncertainty over Brexit and the wider economy made consumers reluctant to commit to major spending decisions. Waning confidence and a lack of demand for diesel vehicles drove the first annual fall in car production since the depths of the financial crisis in 2009.

The industry has also abandoned a target to build more than 2m cars a year by 2020 – breaking a previous record of 1.92m in 1972 – because of the scale of uncertainty posed by Brexit.