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The UK Car Industry at Risk! Brexit has no mercy, MPs warn

The UK MPs warn that hundreds of thousands of jobs are at risk resulting Brexit

Brexit continues fearing the businesses in the UK and now government and MPs are also predicting the possible effects of the Brexit on the UK economy. In the recent meeting with the MPs and other automotive industry heads, the outcomes were not that promising. Since the vote to leave the EU, the car industry especially has seen fewer ups but many downs, where many big players have left the UK and moved their businesses to Europe. There are still many to leave the UK according to the news.

Is Brexit a Mistake?

The UK government or any business across the country has not seen wholeheartedly admiring the decision in the past. This behavior confirms that there is something happened wrong during the referendum, if not, then the outcomes of the vote going to be adverse.

The government has not confirmed any deal to facilitate the car industry in the UK while appending the Brexit and leaving the EU.  All these exertions have left the hundreds and thousands of industry workers in an uncertain condition. Almost all international car makers are leaving the UK one by one, for example, the Japanese automaker Nissan has recently moved a major part of their business operations to Spain and France.

What is the industry situation?

The overall industry is in an uncertain condition in the UK and the latest efforts towards negotiations with the MPs have left no results and industry has pushed back into the damage limitation state. The industry experts said that there are no benefits and paybacks connected to the UK economy from leaving the EU laws. The UK business and trade law will indeed impose more tariffs and taxes on the industry as almost all industry is directly dependent on different EU countries for their operations e.g. many automakers manufacture parts in Europe and assemble them in the UK. Deliveries of the parts and finished goods come and go on daily bases.

It is roughly estimated that overall manufacturing cost will increase by 20 percent after implementation of the Brexit. All these costs will incur in terms of new taxes and tariffs. On the other hand, the industry is exporting more than 85 to 90 percent finished goods to the European countries that mean a direct loss of 20 percent for just 10 percent sales of their cars in the UK. This is why companies are leaving the UK and settling their businesses in the European countries.

All this situation has left thousands of industry workers in an uncertain condition and a fear of job loss. In the meeting with the business committee, MPs confirmed the situation and admits that divergence from the EU laws will only increase the costs.

The government approach to Brexit

There is more bad news for the industry when the verdict will come for the Theresa May’s latest approach to deal with the situation, “ambitious managed divergence” – was scorned by Jeremy Corbyn in Prime Minister’s Questions.

In the report published last week, he said that there is no benefit to be earned at all for the automotive industry as a foreseeable future in the UK. The negotiations with the government will not bring anything more than an exercise in controlling the damage.

What does business committee say?

The business committee is concerned about the industry future and thinks that Brexit will ultimately kill the car industry and in turn, the car engine industry in the UK. Almost all international automakers will have no choice but leaving the UK. They have following concerns

  1. The independent export policy will incur costs in terms of tariffs
  2. Hard to export finished goods and import parts
  3. The industry will face a loss of more than 20 percent
  4. 900,000 jobs are at risk
  5. The shifting costs will further damage the businesses
  6. Minimum 10 percent increase in the prices of the vehicles produced locally is also expected after the Brexit

These costs could make the manufacturing environment in the UK highly unviable and the production units would be forced to shift outside the country. The profit margins are already very low due to the competitiveness of the market.

What government need to do?

The government needs to be more pragmatic to save the sector and acknowledge the expected loss subjected to the Brexit. If the government would not oversee the situation and let it go as it is, the future of the car manufacturing in the country would be worse than it is in third world countries.

The business committee also said that during the consultation with the MPs, it had heard not even a clue of an advantage that Brexit would bring to the industry.

The chairperson of the committee Rachel Reeves said that the friction-free trade and regulatory consistency in the imports and exports actually benefit the car industry. The prime minister now actually needs to safeguard some common sense pragmatism overcomes and push the government to seek some serious trading and regulatory alignment with the EU laws for the automotive sector.

The government should seriously think about the capacity of local automakers and must acknowledge the importance of international automakers. In the mass production of cars, local automakers are producing less than a quarter of total local market need. These international brands fulfill more than 75 percent of market need by producing locally. When they would move from the UK, the 75 percent local production would be gone along with thousands of jobs. MPs said that these barriers are actually stopping the UK attempting to leave the Bloc independently.

The UK needs Free trade agreements

Typically a free trade agreement or FTA in the EU bloc requires more than 60 percent part of the product must be manufactured locally then they can come under the EU trade deals. This is the only point where government should prioritize the rolls to secure the free trade agreements and necessary amendments to freely export the UK manufactured cars to the EU and other unfinished goods to the UK.

The business committee says that the government must act on the findings of the report rather than overlooking the truth and reality.

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