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UK car industry risks 'slow death' after Brexit

Industry news

London - The British car industry could “face death by a thousand cuts” if foreign carmakers chose to take their investment elsewhere in the European Union.

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Nissan has committed to building the next Qashqai at Sunderland, but there is no guarantee other carmakers will follow suit after Britain leaves the EU.

Society of Motor Manufacturers & Traders chief executive Mike Hawes said the UK car manufacturing industry could find itself in a spiral of decline should companies overlook the UK and invest in other countries instead. His comments came after Nissan announced it will build its next Qashqai SUV in Sunderland in one of the first major investment decisions in the car industry since Britain voted to leave the EU.

Hawes said the decision was encouraging but he emphasised that the threat to the industry remained. He told a House of Lords committee: “If a decision was taken that a company is not going to build model X in that particular plant, or potentially it was going to be split between two sites, then production capacity will go down.”

He added: “Your competitiveness may be affected, and then the next decision is taken, so it would be more like death by a thousand cuts rather than just shutting the gates overnight.”

If Britain failed to conclude a free trade deal with the rest of the EU and was forced to fall back on basic World Trade Organisation rules, British car exporters could face tariffs of as much as 10 percent. Business secretary Greg Clark said on Sunday the government had told the Nissan it would seek a tariff-free deal with the European Union for the car sector in Britain.

800 000 jobs at risk

Shadow chancellor John McDonnell has previously demanded the government extend assurances provided to Nissan to the entire manufacturing sector. His comments were later supported by Aston Martin chief executive Andy Palmer, who said carmakers that have factories in the UK, including Honda, Ford and Toyota, should benefit from the same deal as Nissan after the UK leaves the EU.

As the SMMT has pointed out previously, the auto industry is important for the UK economy. The sector supports 800 000 jobs across the UK and contributes £15.5 billion (R260 billion) annually to the economy.

Kenichi Ohmae, one of Japan’s top business strategists, said Nissan’s decision to build new cars in Britain will not be enough to persuade other businesses to remain in the country following the Brexit vote. He predicted investment in Britain will decline in the wake of the referendum result and said he is advising companies to hold fire on similar decisions.

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