The Auto Industry Is Begging the U.K. for a Brexit Deal

April 4, 2019, 4:46 PM UTC

The trade association for the U.K. auto industry has called for an urgent end “to the political and economic uncertainty” caused by Brexit, following the latest signs that Britons are sharply pulling back on buying cars due to economic jitters.

Figures from the Society of Motor Manufacturers and Traders (SMMT) show that new car registrations slumped by 3.4% in March to their lowest level in six years, with the drop felt in both the private and business sectors.

Britain, the world’s fifth largest economy, will crash out of the EU in just over eight days unless Parliament passes Prime Minister Theresa May’s withdrawal agreement, or the European Union agrees to extend the existing April 12 deadline. Should a no-deal Brexit happen, then Britain would have to operate under WTO rules, meaning all cars would incur 10% tariffs the moment they cross the U.K.-EU border.

“Anything that puts tariffs or friction at the borders in place would be a significant inhibitor to our business,” said Sue Robinson, Director of the National Franchised Dealers Association (NFDA). “We’ve been very clear in saying that could cost us up to a billion dollars a year.”

Car demand across March is considered to be a key bellwether for the U.K. auto industry, as it coincides with the yearly change in license plates. Traditionally, this has driven buyers into showrooms for the prestige of owning the very latest registration number.

SMMT figures show that demand for private vehicles fell by 2.8% during the month, while business sales nosedived by 41.4%. Declines were also registered across almost every vehicle segment, including popular SUVs (-1.8%) and small family cars (-4.0%).

“March is a key barometer for the new car market, so this fall is of clear concern,” said Mike Hawes, chief executive of SMMT. “While manufacturers continue to invest in exciting models and cutting-edge tech, for the U.K. to reap the full benefits of these advances, we need a strong market that encourages the adoption of new technology.”

He continued, “We urgently need an end to the political and economic uncertainty by removing permanently the threat of a ‘no deal’ Brexit and agreeing a future relationship that avoids any additional friction that would increase costs and hence prices.”

According to the SMMT, only superminis and vans bucked the negative trend, registering 4.3% and 10.6% increases respectively—a development made more surprising by the fact that most British vans run on diesel, which is currently 10p per-liter more expensive than gasoline at the fuel pumps. However, diesel car sales sank by a dramatic 21%—the 24th straight monthly decline.

In the first quarter overall, new car sales were down 2.4% compared with the same period last year, at 701,306.

“The stark truth is that the uncertainty in Westminster continues to set the tone for consumer confidence across the country,” said James Fairclough, chief executive of car dealership AA Cars. “With little clarity on what’s happening over the next couple of weeks, buyers are being decidedly cautious in paying for big-ticket items.”

The March sales figures are the latest bad news for the U.K. car industry. In 2018, new car sales fell at their fastest rate since the global financial crisis a decade ago, with car purchases down 6.8% on the previous year.

The auto sector, which employs over 850,000 workers, has also been hit by the recent decisions of Japanese car giants Nissan, Honda and Toyota to scale back production in the U.K., partly as a result of Brexit but also because the recent EU/Japan trade deal enables Japanese firms to export cars directly into Europe tariff-free.

On Wednesday, Ford Europe Chairman Steven Armstrong told the Associated Press that the automaker would also “have to consider seriously the long-term future of our investments in the country” in the event of a no-deal Brexit, adding that “a no-deal Brexit, would be a disaster for the automotive industry in the U.K. and within that, of course, I count Ford Motor Company.”