Total alignment with EU rules will help minimise the harmby Rachel Reeves / March 13, 2018 / Leave a comment
The car industry is one of our great manufacturing success stories and supports thousands of jobs across the UK. We need to be more vigilant than ever about potential risks to this key sector.
One area that presents the automotive industry with an array of challenges is Brexit. The Business, Energy and Industrial Strategy Select Committee, which I chair, decided to investigate.
Our report—the second of our sector-based Brexit inquires—was published last week. The Committee recognises the potentially different impacts of Brexit on different sectors of the economy and the need for different negotiating priorities in each.
Getting stuck into the detail of how sectors operate highlights the reality of what Brexit could mean for jobs, trade, investment decisions and, ultimately, prices and consumer choice. On all these fronts, our Committee is unanimous in wanting to ensure the government pursues in negotiations an outcome that is beneficial for the UK, rather than one guided by some abstract sense of ideological purity.
For the automotive sector, most of our trade is with Europe. Global companies make tough decisions about where to locate production for the European market, which is served by complex supply chains. Profit margins are small; efficiency is everything. Shared standards for components make production more efficient and underpin consumer confidence. We found no benefit to post-Brexit regulatory divergence, only costs.
We looked hard at potential new opportunities outside the European Union, but found that, given the way the market works, it is simply unrealistic to expect an expansion of trade to the rest of the world to outweigh the loss of trade to Europe arising from Brexit. No-one seriously argued against this for the automotive sector. We are still examining the pharmaceuticals, food and drink, and aerospace sectors and will report shortly.
“We found no benefit to post-Brexit regulatory divergence, only costs”
The day after we published our report, the prime minister, in her Mansion House speech, appeared to accept this need for pragmatism and recognise that in some areas regulatory alignment serves the interest of both the UK and the EU. Theresa May acknowledged the need to maintain undamaged our integrated supply chains and to work with EU regulators to maintain high standards, which are subject to mutual recognition.
For cars, this means agreeing that cars approved in the UK can be sold in the single market and vice versa. This would avoid the added burden and costs for manufacturers of seeking two sets of vehicle approvals for sales in Europe.
Outside the EU we will have the freedom to choose, but for the foreseeable future, it’s vital for the survival of our car industry that we remain in alignment and retain the advantages for consumers, car companies and workers of frictionless borders, common standards and tariff-free trade. What is now needed is a government commitment to such alignment for the long-term to give companies the confidence to invest in jobs and production in the UK. In this scenario, we could also continue to help shape the rules, with our expertise in new technologies such as electric vehicles, and our leadership role in Europe on reducing carbon emissions.
A focus on jobs should be key to Brexit negotiations. When we visited the Honda plant in Swindon, we saw not only a highly efficient “just-in-time” delivery system supporting production, but also learned about the engineering and management opportunities for ambitious workers there. Government and businesses now must make it a priority to ensure we develop the right skills for the needs of our post-Brexit economy. But where there are skills gaps—and engineering is one example—businesses located in the UK must be confident of being able to secure these skills from Europe and beyond to ensure we remain competitive in the global economy.
It was encouraging to hear that Toyota will build the new Auris at its Burnaston plant in Derbyshire. The continued investment by Japanese companies is essential to supporting the UK automotive industry, which is at the heart of the government’s industrial strategy. But that is built upon an understanding that the UK will secure a deal with the EU that allows tariff-free trade and the easy movement of components across the continent.
Ministers are finally starting to wake up to the importance of these crucial issues. We will continue to press them to secure a deal that safeguards the automotive industry and all the jobs that depend on its continued success.