The clock is ticking.
On Friday, March 29, 2019, the UK will officially leave the European Union. Needless to say, there has been much controversy, debate, and political ramifications ever since 2016’s stunning referendum outcome. But what about corporations, in this specific case, UK-based automakers? How will Brexit affect them? In more negative ways than they’d like, and a no-deal Brexit is simply not an option for them.
Reuters reports that Britain’s car industry simply cannot afford for Prime Minister May’s government not to cut some sort of trade deal with the EU post-Brexit. A spokesman for the country’s main automobile industry group said the carmakers are growing “increasing concerned” about not only the lack of a deal so far, but also that negotiations are currently not going well.
If there is a no-deal Brexit in eight months’ time, then Britain would be forced to fall back on World Trade Organization rules that would, sadly, leave British car exporters facing EU import tariffs of about 10 percent. "No deal… is just not an option. It would be seriously damaging to the industry not just in the UK but in Europe as well,” the spokesman said. At stake are around 850,000 jobs in Britain. Fortunately, there has been some progress regarding a post-Brexit deal. Automakers were encouraged by May’s Brexit proposals announced a few weeks ago, but concerns remain regarding the costs of new customs arrangements.
The fact of the matter is that tariffs, if remain unresolved, will essentially kill the British car industry because automakers like BMW, which owns both Mini and Rolls-Royce, will likely shut down its UK production facilities and move them elsewhere, likely to mainland Europe. It’s as simple as that. Privately held companies, such as McLaren, are said to be in a better position compared to the larger automakers. McLaren already keeps its production facilities solely in Britain along with many of its suppliers.
Often times, it simply builds the components in-house. And because it’s a niche supercar brand, customers can already afford to pay six-figure prices for its cars from the get-go. Mini, however, is not in the same boat. Rolls-Royce, which like McLaren also caters to a wealthy clientele, still has to contend with its BMW parent company’s big picture considerations, and an English future likely isn’t one of them. In the meantime, British car manufacturers are getting as “ready as possible” for potential no-deal Brexit disruptions.