In an interview with the Financial Times newspaper, the German auto industry trade association (VDA) chief has warned that the British auto sector faces decline with output moving to central and eastern Europe if the country loses free and unfettered access to the EU’s single market.

The EU’s single market and customs union area allows tariff-free circulation of goods and minimal cross-border administration on goods manufactured within it. As an EU member, the UK currently enjoys the trade benefits of being within the single market. A so-called ‘soft Brexit’ would see UK membership of the single market continue, but a ‘hard Brexit’ would see its cessation.    

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“If there’s a ‘hard Brexit’ then we will see a shift to central and southeastern Europe,” Matthias Wissmann, President of the VDA, told the Financial Times. He also told the newspaper that countries such as Slovakia and Poland “are very attractive, have low labour costs and are part of the EU”.

Wissmann said that Britain’s car industry could suffer a sharp decline in output and cited the example of Italy, which has seen a sharp decline to output over the past twenty years.

“If the UK doesn’t want to suffer the same fate as Italy’s car industry, it must be concerned to retain full access to the single market,” he said.

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The UK’s prime minister, Theresa May, recently said that she would trigger a two-year negotiation of the UK’s exit terms from the EU by the end of March 2017, at the latest. That would result in the UK leaving the EU by the middle of 2019. However, she also appeared to signal that the UK would lose its single market membership, because UK control of immigration from other EU states took priority over the single market (membership of which requires the acceptance of free movement of EU labour).

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Nissan’s Carlos Ghosn recently raised fears that UK plants could face increased costs post-Brexit and said that increased costs would therefore impact the company’s UK investment plans. However, he had a meeting with Theresa May at the end of last week after which he said he was “confident the [UK] government will continue to ensure the UK remains a competitive place to do business.”

German carmakers exported some 810,000 cars to Britain last year, more than to any other country in the world, and Germany’s powerful industry lobby is thought to be a supporter of favourable future trade terms for the UK in its EU exit. However, Wissmann also emphasised that the VDA’s priority was to keep the EU together.

“The UK is an important market for us, but the EU market is much more important,” he told the newspaper. “If the EU were to fall apart, that would be a lot worse for our industry.”

See also: 

Carlos Ghosn and UK prime minister have ‘productive’ meeting

SMMT chief bangs EU single market drum – Interview