Honda re­veals huge cost of cus­toms de­lay

The Guardian - - NATIONAL | BREXIT - Dan Roberts Brexit pol­icy edi­tor

The dev­as­tat­ing im­pact of a hard Brexit on the UK car in­dus­try was laid bare to MPs when they were told that ev­ery 15 min­utes of cus­toms de­lays would cost some man­u­fac­tur­ers up to £850,000 a year.

Pre­sent­ing the in­dus­try’s most de­tailed ev­i­dence yet to the busi­ness se­lect com­mit­tee, Honda UK re­vealed yes­ter­day that it re­lies on 350 lor­ries a day ar­riv­ing from Europe to keep its gi­ant fac­tory in Swindon, Wilt­shire, op­er­at­ing with one hour’s worth of parts on the pro­duc­tion line.

The Ja­panese com­pany said it would take 18 months to set up new pro­ce­dures and ware­houses if Bri­tain left the cus­toms union but that, with 2m daily com­po­nent move­ments, even mi­nor de­lays at Dover and the Chan­nel tun­nel would force hun­dreds of its lor­ries to wait for the equiv­a­lent of 90 hours a day.

“Out­side of the cus­toms union there is no such thing as a fric­tion­less bor­der,” said its gov­ern­ment af­fairs man­ager, Patrick Keat­ing. “I wouldn’t say the just-in-time man­u­fac­tur­ing model wouldn’t work, but it would cer­tainly be very chal­leng­ing.”

Un­til now many large multi­na­tion­als have cho­sen to present such com­mer­cially sen­si­tive data to the gov­ern­ment in pri­vate, but with MPs still strug­gling to force dis­clo­sure of 58 sec­toral anal­y­sis re­ports pro­duced by White­hall of­fi­cials, there is grow­ing de­mand for the im­pact of leav­ing with­out a deal to be spelled out.

Wit­nesses said new tar­iffs would add an es­ti­mated £1,500 to the price of an im­ported car. Rachel Reeves, the Labour MP and for­mer Bank of Eng­land econ­o­mist who led yes­ter­day’s hear­ing, en­cour­aged the ex­ec­u­tives to out­line how ex­porters might also face a pos­si­ble £300 cost due to tar­iffs on their im­ported com­po­nents.

If Bri­tain leaves with­out a trade deal, min­is­ters plan to ap­ply World Trade Or­ga­ni­za­tion tar­iffs that stand at 10% for fin­ished ve­hi­cles and about 4.5% for au­to­mo­tive com­po­nents. More than a third of the 690 cars a day pro­duced by Honda in Swindon are sold in Europe, which is also the source of 40% of its parts.

But Honda and other wit­nesses from As­ton Martin and the So­ci­ety of Mo­tor Man­u­fac­tur­ers and Traders (SMMT) ar­gued that cus­toms and trade threats were only the start of their con­cerns.

Man­u­fac­tur­ers also fear a “sem­i­catas­trophic” end to EU recog­ni­tion of UK reg­u­la­tory ap­proval, some­thing Keat­ing re­vealed Brus­sels was threat­en­ing in the event of a no-deal Brexit. Honda pointed to a re­cent study sug­gest­ing the cost of con­vert­ing an EU car to match US stan­dards is equiv­a­lent to an­other 26% tar­iff in­crease.

The in­dus­try also fears the im­pact of new im­mi­gra­tion rules for EU na­tion­als. Al­ready 14% of Honda’s 3,500- to 4,000-strong Swindon work­force are from other EU coun­tries, but this is grow­ing fast: of the 600 ex­tra work­ers hired to build the new Civic model last year, 40% were from the EU, as are 30% of the staff at the com­pany’s Euro­pean head­quar­ters in Brack­nell, Berk­shire.

On Mon­day, Euro­pean busi­ness lead­ers in­clud­ing Bri­tain’s CBI warned that the gov­ern­ment had just two weeks to make progress on a Brexit di­vorce agree­ment if they were to get the clar­ity they ur­gently need by the an­niver­sary in March of ar­ti­cle 50 be­ing in­voked.

“Peo­ple are sit­ting on their hands wait­ing for more clar­ity about the likely trad­ing re­la­tion­ship with our big­gest part­ner,” Mike Hawes, the head of the SMMT, told the busi­ness com­mit­tee yes­ter­day.

Though Honda de­clined to dis­cuss its UK prof­itabil­ity in pub­lic, the SMMT said car man­u­fac­tur­ing was a low-mar­gin busi­ness yield­ing an av­er­age 2-4% re­turn on in­vest­ment.

“You are pretty quickly get­ting into neg­a­tive ter­ri­tory,” said Hawes when asked what this would mean in the event of a hard Brexit. “If we went on to WTO terms it would be in­cred­i­bly dif­fi­cult.”

He pre­dicted there may be a di­min­ished choice of cars on sale for Bri­tish con­sumers if there is di­ver­gence in reg­u­la­tory stan­dards as some niche im­porters would not bother to have ad­di­tional test­ing just for the UK mar­ket.

“If there is any sort of di­ver­gence, man­u­fac­tur­ers will have to de­cide whether they want type ap­proval on that UK ve­hi­cle, so there might be a con­trac­tion in terms of choice,” ex­plained the SMMT chief ex­ec­u­tive.

The in­dus­try lead­ers dis­missed ar­gu­ments that mu­tual in­ter­est among Euro­pean man­u­fac­tur­ers would be enough to au­to­mat­i­cally force a so­lu­tion. While 56% of Bri­tish car ex­ports go to Europe, just 7% of EU ex­ports go to the UK. “The UK is an im­por­tant mar­ket but what mat­ters more is pro­tect­ing the EU sin­gle mar­ket,” said Hawes.

Al­though some 10% of the SMMT’s 800 mem­bers were re­vealed in a sur­vey to have sup­ported Brexit dur­ing the ref­er­en­dum, its chief ex­ec­u­tive said he had yet to meet a mem­ber who sup­ported leav­ing now.

“This is a fiercely com­pet­i­tive in­dus­try, yet this is a sub­ject that is pretty uni­fy­ing across the in­dus­try,” he told MPs on the com­mit­tee.

‘I wouldn’t say the just-in-time model wouldn’t work, but it would cer­tainly be very chal­leng­ing’ Patrick Keat­ing, Honda UK

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