UK car body warns output will slump if Brexit leads to tariffs with EU

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© Reuters. UK car body warns output will slump if Brexit leads to tariffs with EU© Reuters. UK car body warns output will slump if Brexit leads to tariffs with EU

By Costas Pitas

LONDON (Reuters) – British annual car production will drop by a third to 1 million by 2024 if Brexit leads to tariffs with the European Union, a trade body warned on Tuesday, saying output would be lost to other countries.

Britons head to the polls in just over two weeks to elect a new government with Prime Minister Boris Johnson promising to pass his Brexit deal as soon as possible, whilst the opposition Labour Party would renegotiate and call a referendum in 2020.

If Johnson, leading in the polls, is re-elected, next year is set to be dominated by talks with Brussels on future trading terms, with British automakers seeking the continuation of free and frictionless trade with their largest export market.

The sector, Britain’s biggest exporter of goods, warned on Tuesday that World Trade Organisation tariffs on components imported into Britain and exported vehicles would add more than 3.2 billion pounds ($4 billion) a year to manufacturing costs in the worst case scenario.

“By 2024, falling demand and model reallocation to more competitive and welcoming production locations would see annual output falling to just 1 million vehicles per year,” the Society of Motor Manufacturers and Traders (SMMT) said.

Production stood at 1.5 million cars in Britain last year but has fallen by 16% so far this year, hit by a slump in demand for diesel vehicles, falling sales in China and a hit to consumer confidence due to Brexit uncertainty.

Honda (T:) and Ford (N:) have announced plant closures this year but both blamed factors other than Brexit.

Peugeot (PA:) has said a decision to keep open its Vauxhall car factory in northern England is dependent on the final terms of Brexit.

“The next government must deliver the ambition, the competitive business environment and the commitment needed to keep automotive in Britain,” said SMMT Chief Executive Mike Hawes.

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