UK car industry to face damaging tariffs due to Brexit

Worker on the production line at Nissan's factory in Sunderland. - Credit: PA

UK car manufacturers could be hit hard with tariffs whether or not the government succeeds in getting a Brexit deal.

The European Commission (EC) has rejected proposals for components from Japan and Turkey used on UK car production lines to be considered British.

According to a letter to the car industry from Britain’s chief Brexit negotiator David Frost, seen by the BBC, the EC rejected the key request.

The BBC said it has also obtained a separate draft legal text in which the UK requested the manufacturing of goods such as electric cars and batteries to be counted as British, even if the majority of components are imported.

Both documents reportedly refer to the need for UK manufacturers, even if a deal is reached, to ensure that goods exported from the UK are British-made and contain a certain amount of British parts, believed to be about half.

An anticipated deal is expected to allow any components sourced from EU countries to count as British, an idea known as “cumulation”.

However the letter from Frost reportedly says the EU has denied the request to extend cumulation to include other partners of the UK and EU, including Turkey and Japan.

According to the BBC, the letter said: “The commission has made clear that it will not agree third-country cumulation in any circumstances, which we regret, but obviously cannot insist upon.

“I am sorry to say that so far they (EU negotiators) have neither been willing to discuss these nor share any proposed text with us.”

Mike Hawes, the chief executive of the Society of Motor Manufacturers and Traders, said: “Given its importance to the economy and livelihoods and the damaging consequences of tariffs we need the sector prioritised in negotiations, not traded off against other industries.”

Lucy Powell, Labour’s shadow minister for business and consumers, said: “This is really worrying for our country’s automotive industry. The government must listen to businesses and trade unions, and crack on to deliver the trade deal with the EU they promised during the election.”

The original Brexit deal negotiated by former prime minister Theresa May contained a route to minimise checks on what are known as “rules of origin”.

That option was removed as part of the revision to the Withdrawal Agreement a year ago.