If you drive one of the 1.7m cars built in the UK last year it is likely the power steering on the vehicle was manufactured in Germany; the electronic control units came via Romania; and the shock absorbers travelled all the way from Poland. Indeed, more than half the 30,000 components in an average British-made car come from somewhere else.
Until June 23 last year that represented a triumph of modern supply chain logistics. Now, with the UK leaving the EU, it is less a marvel and more a problem.
The auto sector, which employs more than 800,000 people in the UK with 170,000 in manufacturing roles, is one of the most important tests of how Brexit will impact British industry. Under trade rules that the UK is likely to face after it leaves the EU, British auto exports could attract hefty tariffs if carmakers are unable to source a far higher proportion of the components going into the average Nissan, Honda, or Vauxhall from within the UK.
“World Trade Organisation rules would mean a 10 per cent tariff on vehicles and an average 4.5 per cent tariff on components,” says Mike Hawes, chief executive at the Society of Motor Manufacturers and Traders, the industry body. “The cost of our production would increase more than our competitors. British competitiveness would be undermined. The cost of cars for British consumers could increase.”
While the supplier base has expanded in recent years, UK automakers still rely on the EU. “We have a huge dependency on Europe,” says Ralf Speth, chief executive of Jaguar Land Rover, Britain’s largest carmaker. “You simply can’t buy some components in the UK.”
Nissan earlier this year invited a large group of international component manufacturers to its UK base in north-east England and made a simple pitch: please come to Britain. In the wake of Brexit the Japanese carmaker had received assurances from the government that its operations would be insulated from its worst effects and it had…