Transition period will be crucial for trade

THE carmakers, Honda, Ford and Vauxhall, said it was essential the UK negotiated a transition period to allow businesses and officials, including UK border agencies, to prepare for the changes Brexit will bring.

In written papers submitted to the Committee, they raised a series of concerns:

Honda warned leaving the EU Customs Union without a deal to prevent delays at borders would cost it “tens of millions of pounds”.

Honda also said preventing EU nationals from coming to the UK to work could lead to “staffing shortages with a potential impact on manufacturing activity”

Ford said its UK operations are “built upon” access to the single European market and leaving the EU without a deal would “place a very significant cost” on the business.

Ford said it builds engines in the UK for cars manufactured in other parts of the EU – but Brexit could mean the finished vehicles are no longer considered to be “EU-originating”, which would threaten its UK operations.

Vauxhall highlighted the cost of uncertainty, saying: “Clarity on the transition deal is needed as soon as possible.”

Honda employs 4,000 people at a factory in Swindon and 500 at its UK and European headquarters in Bracknell, Berkshire.

It said that “membership of the Single Market and Customs Union provides Honda with several important benefits”, which includes tariff-free trade not only with EU countries but also with “important markets around the world”.

Turkey is not in the EU but it is in the Customs Union and Honda exports 5,100 vehicles to Turkey each year.

If the UK leaves the Customs Union then this would probably mean exporting to Turkey on World Trade Organisation (WTO) terms, with a 10 per cent tariff imposed. This would cost Honda £7 million, the firm said.

But the imposition of what are called “non-tariff barriers”, such as delays at borders when goods are imported into the country, would be an even bigger threat than tariffs.

Professor David Bailey, Professor of Industrial Strategy at Aston Business School in Birmingham, told the inquiry that Brexit “brings both opportunities and challenges” to the automotive sector.

He said: “The Brexit vote leaves considerable uncertainty over the nature of the UK’s trading relationship with the EU... plants and jobs could be at risk if such uncertainty isn’t ‘nailed down’ quickly in the form of clear parameters for an interim or transitional trade deal – and preferably one that is as close as possible to existing Single Market arrangements.”