LONDON (Reuters) – Uncertainty over Brexit has halved new investment in the British car industry and Prime Minister Theresa May should urgently change tack and keep the world’s fifth largest economy in the EU’s customs union, the country’s main car lobby group said.
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Public announcements of fresh investments into new plant, machinery, models and model development fell to 347.3 million pounds ($461.1 million) between January and June 21, down from 647.4 million pounds in the first half of 2017.
“There is growing frustration in global boardrooms at the slow pace of negotiations,” said Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT).
“Government must rethink its position on the customs union,” Mr Hawes said, referring to the Ms May’s position that Britain will leave the customs union which groups EU members in a duty-free area where there is a common import tariff for non-EU goods.
With only nine months left until Britain is due to leave the EU, little is yet clear about how trade will flow as Ms May, who is grappling with a rebellion in her party, is still trying to strike a deal with the bloc.
In a sign of just how worried big business is getting about Brexit, Siemens, Airbus and BMW have publicly cautioned Britain in the past week that their businesses will be hurt by a disorderly Brexit.
When asked about business worries by ambassadors, British Foreign Secretary Boris Johnson was reported by The Daily Telegraph newspaper to have quipped: “F*** business”. A spokesman disputed that he had used bad language.
Under the current timetable, both London and Brussels hope to get a final Brexit deal in October to give enough time to ratify it by Brexit day in March 2019, though few diplomats expect the deal to be struck until months later.
The nature of the future relationship with the world’s biggest trading bloc remains unclear and there is deep concern in boardrooms about the prospect of Britain crashing out of the bloc without a deal or with a deal that would silt up the arteries of trade.
Even a small increase in paperwork or customs checks after Brexit, for example, could lead to spiralling costs for big manufacturers who depend on vast supply chains that stretch across Europe and the globe.
Supporters of Brexit admit there may be some short-term pain for Britain’s $2.9 trillion economy but that long-term it will prosper when cut free from the EU which they cast as a failing German-dominated experiment in European integration.
The average car has about 30,000 parts.
The world’s biggest car makers including Toyota, BMW and Ford have urged Britain to ensure that they can import and export without hindrance after Brexit.
At stake is the future of one of Britain’s few manufacturing success stories since the 1980s: a car industry employing over 800,000 people and generating turnover of $110 billion. Much of the industry is owned by foreign companies.”