The SMMT has blasted ongoing Brexit uncertainty for the UK's automotive sector as 'utterly unacceptable' following the overnight decision by the EU's council of ministers to agree an extension to the deadline for the UK's departure. The date for the UK's planned departure from the European Union has now been extended until 31st October.
The extension means that a possible 'no-deal' Brexit, which could have happened tomorrow (12th April – itself an extension from the original 29th March departure date) without an EU27 unanimous agreement for an extension, is now averted.
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A no-deal Brexit would mean reverting to WTO rules (with new tariffs imposed on UK exports of goods to the EU) and more border checks as the UK would be immediately outside of the EU's customs area and single market. Analysts say that it could harm the smooth working of just-in-time supply chains and impose additional costs on UK companies that would harm sector competitiveness.
Prime minister Theresa May was seeking a shorter Brexit extension to 30th June, arguing that the time is needed – while maintaining pressure on politicians – to secure a withdrawal 'deal' that can be agreed by lawmakers at the House of Commons in London.
The longer extension to 31st October can be cut short if the UK government can get a withdrawal deal – likely based on the existing proposed agreement between the UK government and EU, but requires ratification – agreed by a majority of lawmakers in London. Thus far it has been defeated in votes due to the combined force of opposed politicians seeking a 'harder' Brexit and those seeking a 'softer' one (for example, with a closer customs union commitment).
The UK's domestic political arguments will likely continue, although the prime minister has said she wants to reach a consensus in the House of Commons by talking to the opposition Labour Party. Those talks are continuing, but with little sign of a breakthrough.
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By GlobalDataThe latest developments will likely be met by a sigh and shrug from many in UK industry who will at least be relieved that a no-deal Brexit is looking less likely. However, uncertainty on future UK-EU trade arrangements remains (with another six months of heated London political debate possible). If agreement remains elusive, no-deal still cannot be ruled out and that's a worry for auto companies.
Mike Hawes, SMMT Chief Executive, highlighted the damaging impact of ongoing uncertainty on company investment decisions. "While we've avoided a 'no-deal' Brexit on Friday, it is utterly unacceptable that, more than two years since negotiations started, industry still does not know what the UK's relationship with the EU will be in the coming weeks and months," he said.
"Uncertainty has already caused serious damage – car plants are on enforced shutdown, investment has been cut and jobs lost. This cannot go on. Government and Parliament must use this extension purposefully to take 'no deal' off the table for good, and guarantee a positive long-term resolution that delivers frictionless trade. If they fail, we face yet another devastating 'no deal' precipice on 31 October."
