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The impact of Brexit on the automotive sector: new report says a 'no-deal' would be "hugely damaging"

The impact of Brexit on the automotive sector: new report says a 'no-deal' would be "hugely damaging"

  • United Kingdom
  • Automotive

01-03-2018

The House of Commons Business, Energy and Industrial Strategy Committee has today released a paper on the potential impact of Brexit on the automotive sector – its fifth report in the series.

The report’s intention is to inform the public and influence key decision makers as Britain prepares to leave the EU. It suggests that a ‘no-deal’ Brexit will have a huge impact on the sector, including a 10% tariff and trade barriers, which could ultimately see car manufacturers move production to within the EU.

In November 2017, the government placed the automotive sector at the heart of its Industrial Strategy, but this recent report claims to “not have identified any potential benefits from a regulatory divergence from the EU”, and that Brexit negotiations are “an exercise in damage limitation”.

The report comes just hours after Toyota committed to producing the third generation of the Auris model in Derbyshire, a move which Toyota Motor Europe president and chief executive, Johan van Zyl said, "shows our confidence in the skills and capabilities of our TMUK (Toyota Manufacturing UK) members".

Adam Fisher, Head of Automotive sector at Eversheds Sutherland, said:

Businesses active in the automotive sector at all levels, will be well aware of the potential damage that a ‘hard’ Brexit could have on their immediate future when Britain leaves the EU. The message from this report to the government is clear – leaving the EU without a deal could be “hugely damaging”, may involve tariffs and is likely to result in a shift of volume manufacturing to other EU countries. The news yesterday that Toyota committed to making a new generation of cars in the UK is welcome positivity given the current uncertainty, but as the Chief Executive of Toyota noted upon announcing their continued commitment to the UK, “free and frictionless trade between the UK and Europe will be vital for future success.

The government has been proactive in giving its commitment to encouraging investment in the UK’s automotive sector. Recent developments such as Business and Energy Secretary, Greg Clark’s £80m funding commitment in November 2017 to create a new national battery facility are clearly highly significant to growth and being seen to be a leading country in this space. External investment and enthusiasm however remains a critical piece in the puzzle. As a part of that, there is still much work to do to ensure that the UK is seen as the place to be investing on the international stage.

It is universally accepted that businesses need to carefully plan for a multiplicity of potential outcomes. We are actively working with our clients in this space to consider and protect against strategic risks. The most common themes run across the following issues: stability of the workforce and the impact of changes in freedom of movement; building in mechanisms to address concerns over the introduction of tariffs in and other barriers to trading; what the position could be and how to address concerns over the ability to enforce judgments post Brexit."

Adam is a partner in the Eversheds Sutherland litigation and dispute management practice group. He is also head of the firm's automotive sector and specialises in a wide range of commercial and corporate disputes. To talk to us about Brexit, or anything else affecting the automotive sector, contact Adam below.

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