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Carmakers say diverging from EU regulation will cost ‘billions’

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Via Financial Times

Britain’s car industry has led criticism of government plans to split from European regulations after Brexit, warning it will cost “billions” of pounds and damage “UK manufacturing and consumer choice”.

The Society of Motor Manufacturers and Traders issued a statement after Sajid Javid, the chancellor, told the Financial Times that there would “not be alignment” with EU rules after Britain leaves the bloc, and that companies would have to “adjust”.

Currently, carmakers are able to sell cars across the EU and the UK under one certificate.

The process, called homologation, involves expensive procedures such as engineering the vehicles to meet emissions standards. Costly crash tests are also required to meet the regulations.

If Britain abandons EU standards and sets its own rules, companies wanting to sell vehicles in the UK are likely to need to obtain a separate certificate to do so, increasing their costs of making vehicles specifically for the British market.

While Europe’s car market is 15m a year, Britain’s market is much smaller at 2.3m cars a year, a figure that last year dropped to a six-year low.

The industry had been hoping that the UK would remain in lock-step with EU rules.

On Saturday, SMMT chief executive Mike Hawes said: “Both sides want a thriving sector and we want to work with government to help reach a mutually beneficial arrangement on regulation that safeguards UK manufacturing and consumer choice by allowing vehicles built in the UK to be sold in the EU and vice versa without additional requirements that would add billions to the cost of development.”

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He added: “Automotive trade between the UK and EU is uniquely integrated and our priority is to avoid expensive tariffs and other ‘behind the border’ barriers that limit market access.”

The CBI said alignment supported jobs and competitiveness for many firms.

Director-general Dame Carolyn Fairbairn urged the government not to treat right to diverge from EU regulation as an obligation to diverge.

“For some firms, divergence brings value, but for many others, alignment supports jobs and competitiveness — particularly in some of the most deprived regions of the UK,” she said.

Unite, the UK’s largest union, said Mr Javid’s refusal to align the UK with EU trading rules could be fatal for automotive, aerospace and food and drink manufacturers.

“Global corporations with options for investment in European plants will view the government’s opposition to future UK-EU regulatory convergence with dismay, the union said.

UK car plants, which are reeling from falling sales and a collapse in investment since the UK voted to leave in 2016, are dependent on Europe for both exports and imported components.

Four-fifths of the cars made in the UK are exported, with half going to the EU and another quarter going to nations that have trade deals with Europe, such as South Korea.

“Unless we continue our alignment with the EU on this, UK manufacturers will fall foul of global rules for the export of high value components like engines, wings and powertrains to European assembly plants, as well as the export of finished products,” Unite said.

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“This double whammy for UK plc demonstrates just how out of touch with manufacturing the government is.”

The latest dispute between the government and the auto industry comes as car factories prepare once again for Brexit at the end of this month.

Car plants from Nissan in Sunderland to BMW’s Mini site in Oxford invested millions of pounds in stockpiling, temporary shutdowns and other contingency measures last year in anticipation of Brexit. The date was pushed back several times, forcing them to ramp up preparations unnecessarily several times.

The Food and Drink Federation said ending regulatory alignment with the EU could lead to price rises.

“This represents the death knell for frictionless trade,” said the federation’s chief operating officer Tim Rycroft.

“It will mean businesses will have to adjust to costly new checks, processes and procedures, that will act as a barrier to frictionless trade with the EU and may well result in price rises.”

On Friday Mr Javid told the FT that businesses “have known since 2016 that we are leaving the EU” and said they would be forced to adjust to new rules.

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