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SMMT calls for interim trade agreements with European Union as Brexit talks begin

20 June 2017

Hawes said Brexit was the biggest challenge the auto industry had faced in a generation, and warned that an untidy exit from the customs union would damage the industry permanently.

The British automotive industry called on government on Tuesday to seek an interim arrangement with the European Union, because it does not believe a comprehensive agreement can be reached by March 2019 - just over 20 months' time. Otherwise Britain could face a "cliff-edge" in 20 months that would be the "worst foreseeable outcome for the sector" and possibly mean tariffs. If the United Kingdom can not secure - and implement - a bespoke and comprehensive new relationship with the European Union in two years' time, we need a back-up plan.

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Britain's departure from the European Union's customs union would ramp up costs for small and medium-sized vehicle part suppliers to such an extent that supply chains could seize up, a senior European executive at Honda said on Tuesday. It needs that trade to be tariff-free, as frictionless as possible to support the "just in time" manufacturing process and with consistent regulation.

SMMT chief executive Mike Hawes said that United Kingdom automotive industry accepted Britain would be leaving the European Union, but raised doubts whether a final deal on a future relationship could be finalised and implemented by March 2019. "This would undermine our competitiveness and our ability to attract the investment that is critical to future growth".

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"We need government to seek an interim arrangement".

Previous research has shown that if the United Kingdom was unable to reach a trade agreement with the European Union it could fall back on the World Trade Organisation (WTO) regime, where finished cars could face a 10 per cent tariff with components facing a 4.5 per cent fee.

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James Broadhead, CEO of Close Brothers Motor Finance added: "The automotive industry is unquestionably one of the leading lights of the British economy, with turnover in 2016 totalling a record £71.6 billion".

SMMT calls for interim trade agreements with European Union as Brexit talks begin