The Brexit dilemma Gets Worse.
Friday, 6. July 2018
We hear so much about the UK, what we think, what we want, our trade relationships etc. etc. but what is going on in the EU? Clearly, companies who import goods from the UK are getting worried about supply and more important, costs if a free trade deal isn’t thrashed out.
Unknown by many is the size of our car components industry. They not only supply parts to UK based car manufacturers but they also export across Europe. The Dutch Government recently announced a Brexit Impact Scan service which asked businesses ‘Do you want to be less dependent on the British market? Consider focusing your activities on other countries’.
Dutch authorities advise that ‘After Brexit, parts made in the UK will no longer count towards minimum production in the EU’. And here’s the rub, goods made in the EU can pass across EU countries without facing tariffs, as long as the proportion of their components, typically around 55% – have been made within the EU.
If the UK leaves without favourable trading arrangements, EU car companies using UK components could push them under the 55% figure, removing their ability to trade freely across the EU tariff-free. The European Commission has previously said that businesses should, ‘Treat any UK inputs as ‘Non-Originating’ when determining the EU preferential origin of their goods’ after Brexit.
To put this into perspective the UK employs 82,000 people in the Automotive Supply Chain industry. 65% of British manufactured components are exported to EU countries with the sector being worth about £4.9 billion (according to the SMMT).
It will be bad enough if we are forced to walk away with no deal and fall within the World Trade Organisation (WTO) rules, whereby imports and exports are subject to tariffs and the issues arising that are related to cost. It has been suggested by the SMMT that new car prices from Europe will increase by an average of £1,500.
But what about the component manufacturers? And where did this 55% rule come from? I’ve never heard of it and yet it is crucial to the negotiations and certainly puts us on the backfoot. It just keeps getting worse! By Graham Hill
