Consequences Of Brexit On Auto Industry: Limit The Damages

The auto industry in the U.K. has become the center of attention after the Brexit as it relied upon tariff-free trading, which permitted components to go in and out of the country without any charge.

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Consequences Of Brexit On Auto Industry

The historic verdict given by citizens of Great Britain to exit European Union (EU) has impacted various industries at different levels. Companies across the world have been strategizing to change their business models. Moreover, they have been making moves to shift their European headquarters in the countries that are part of EU. The considerable impact has surged a wave of reconsideration of decision, but reelection process seemed next to impossible. As the decision has been final and negotiations about how the deal will take place are ongoing, every industry is bound to face consequences of the decision. Auto industry is no exception. The government has left with nothing but an only option of limiting the damages. The rules and regulations may change, and the auto industry will undergo damages in this changing scenario.

The recent assessment published by the Business, Energy and Industrial Strategy Committee recommended Prime Minister Theresa May and her cabinet to adopt a practical approach while negotiating with Brussels. The report arrived amid the ongoing negotiations of Theresa May and cabinet with EU. Opposition Labor Party leader Jeremy Corbyn raised the issue of consequences being hard on automakers in the Great Britain after the exit. Though the issue has been raised about the potential benefits of Brexit for the auto industry, the debate about whether the country took the right decision to exit will never end.

“There are no advantages to be gained from Brexit for the automotive industry for the foreseeable future,” stated the report compiled by 11 cross-party lawmakers. “The negotiations are an exercise in damage limitation. The government should acknowledge this and be pragmatic.”

The auto industry has become the center of attention after the Brexit as it relied upon tariff-free trading, which permitted components to go in and out of the country free of charge. Moreover, the country employed nearly one million employees in the industry. The report also stated that the auto sector in Britain manufactured 13 percent of all exported goods, which is the second highest from any sector. The major concern for lawmakers is inclusion of 10 percent tariff on imports and exports, which will be effective if there is no deal about Brexit. This might shift production away from Britain. In addition, charging the tariff will lessen the profit margins. The report outlined that there is no upside for the auto industry if EU regulations are broken. It recommended the government to preserve the existing framework with EU.

Auto manufacturers have made moves post-Brexit to minimize the damages. Citing the Brexit deal, Vauxhall Motors announced that it will cut 650 jobs at its factory at Ellesmere Port. On the other hand, Jaguar Land Rover has been planning reduction in production in the country. Along with major moves from auto manufacturers, investments from Japan would be under threat. Japanese investments have been a key factor in sustaining the auto industry in the country. Japan’s U.K. ambassador warned that there will be no Japanese company operating in the U.K. if profit margins are reduced. With emergence of electric vehicles and self-driving cars, the negotiations of May and cabinet with Brussels hold the key to the future of the auto industry in the country.

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