There was more bad news for the UK car industry that has already been hit by a slump in demand during the pandemic. Now Brexit negotiations could damage trade even further as Britain struggles to secure a satisfactory deal.
British car manufacturers could still face higher export tariffs even if there is a post-Brexit trade deal with the EU, according to a letter to the car industry from Britain’s chief Brexit negotiator.
In the letter seen by the BBC, Lord David Frost said the European Commission had rejected proposals for components from non-EU countries used on UK car production lines to be considered British.
Lord Frost admitted in the letter to the car industry that the UK had failed to persuade the EU to agree to the idea – adding that they “obviously cannot insist on it”.
Public Policy Editor at the Financial Times, Peter Foster Tweeted: “It *might* comes as surprise to UK car workers and voters who were told by @BorisJohnson on the stump that it is “absolutely vital we protect supply chains, we protect Nissan Motors, we make sure people continue to want to invest in our country.”
As part of a thread on the issue he also tweeted: “Is there a risk that the No 10 machine is underestimating the impact of #brexit on the car industry? And whether voters might feel angry or short changed? Genuine question – because I bow to them on this stuff; they are masters of the “narrative” and alternative facts.”
This means that even if a zero tariffs trade deal is agreed between the two parties, UK-manufactured vehicles that do not have enough British components will attract tariffs when exported to the EU.
The BBC said it has also obtained a separate draft legal text in which the UK requested the manufacturing of goods such as electric cars and batteries to be treated leniently, even if the majority of components are imported.
An anticipated deal is expected to allow any components sourced from EU countries to count as British, an idea known as “cumulation”.
However, the letter from Lord Frost says the EU has denied the request to extend cumulation to include other partners of the UK and EU, including Turkey and Japan.
According to the BBC, the letter said: “The commission has made clear that it will not agree third-country cumulation in any circumstances, which we regret, but obviously cannot insist upon.
“I am sorry to say that so far they (EU negotiators) have neither been willing to discuss these nor share any proposed text with us.”
Trade body the Society of Motor Manufacturers and Traders (SMMT) called for the sector to be prioritised in the negotiations, “not traded off against other industries”.
Chief executive Mike Hawes said: “The UK Government has repeatedly expressed support for our automotive industry as the nation’s biggest exporter of goods.
“Given its importance to the economy and livelihoods and the damaging consequences of tariffs, we need the sector prioritised in negotiations, not traded off against other industries.
“Any agreement must work for automotive, so we need both sides to strike a deal that safeguards the global competitiveness of the sector and consumer choice in the market.”