Manufacturers call for ambitious post-Brexit free trade agreement

European automotive manufacturers are putting pressure on politicians in Britain and Brussels to agree an ambitious free trade agreement (FTA) as soon as possible.

The Society of Motor Manufacturers and Traders (SMMT) has joined forces with the European Automobile Manufacturers Association and the European Association of Automotive Suppliers, as well as 22 national associations, to call for an end to the current Brexit-related uncertainty.

The organisations say that the failure to implement an FTA would mean automotive businesses both here and in the European Union would be forced to operate under World Trade Organisation (WTO) non-preferential rules. This would mean a 10% tariff on cars and up to 22% on vans and trucks. With tariffs almost certain to be passed on to consumers, vehicles would become more expensive, reducing choice and impacting demand.

A WTO scenario could cost the European automotive sector €110bn in lost trade over the next five years, putting many of the almost 15m jobs supported by the industry at risk.

In the UK, the automotive industry awaits the Government’s decision on whether to bring forward the current 2040 deadline for ending the sale of new petrol and diesel vehicles. Switching to a 2035 or even 2030 cut-off would be incredibly challenging for manufacturers, and could threaten the viability of thousands of businesses while undermining sales of today’s low emission technologies. 

Plug-in hybrid vehicles (PHEVs), for example, provide a flexibility that few other technologies can yet match with extended range for longer, out-of-town journeys, and battery power in urban areas, reducing emissions and improving city air quality. PHEV range and performance will continue to improve meaning that, for many motorists, they’re an essential stepping-stone to a fully electric vehicle.

On 29 September, we’ll be running a webinar with the Department for International Trade (DIT), SMMT, SPRI (the Basque investment body), and Acicae (the Basque automotive organisation), looking at the excellent trading opportunities in Northern Spain. Details of this event are available here.

Manufacturing sector news

UK Manufacturing Facts 2020-21 has now been published as a joint undertaking between Make UK and Santander – you can access the report here. It shows that the UK’s total global exports stand at £367bn, with the top export markets, in order of size, the United States, Germany, France, Ireland and China.

The report shows that the UK has retained its position as the world’s ninth largest manufacturer with output of £191bn in 2019, up 7% since 2014. Average salaries in the sector are 13% higher than the rest of the economy, at almost £35,000 a year.

Transport manufacturers are not only the biggest exporters, with the 22% share of the market, but also the biggest spenders on research and development – a fact that highlights the critical importance of the automotive and aerospace sectors to the long-term high value growth of the economy.

You can view more of the report’s information during an online interview with Stephen Phipson, CEO of Make UK, here.

Make UK has also recently published its Manufacturing Outlook Q3 2020, in association with BDO, the accountancy and business advisory firm. The survey shows that while the sector has recovered to some extent since the spring lockdown, there look to be challenging times ahead. Output and orders remain way below historic averages, while investment has been cut and just a fifth of firms are operating at full capacity.

Overall, the manufacturing industry is set to shrink by over 10% this year – and Make UK has warned that Brexit-related uncertainty, and the possibility of a no-deal end to the current transition period, are likely to keep investment levels low. However, more companies are feeling positive about the short-term than was the case at the end of the second quarter.

To discuss how Santander can help your business please contact: ccbsectorinsights@santander.co.uk

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