Britain’s Car Industry Risks Big Hit from Brexit

Access to the European single market is vital to the viability of the British car industry.

The car industry in the UK will take a big hit if the country loses access to the single market. Rising costs due to increased tariffs might even determine automakers to move production to countries in Eastern Europe. 

This stark warning comes from Matthias Wissmann, the head of Germany's auto industry lobbying group, quoted by the Financial Times. "If there is a 'hard Brexit' then we will see a shift to central and south-eastern Europe," explained Mr. Wissmann. He also added that countries such as Slovakia and Poland are very attractive to investors due to lower labor costs than in Britain.

In London, there is still a lot of optimism regarding the kind of deal Britain might get when negotiating leaving the EU. British ministers have speculated that certain sectors might get special treatment in order to maintain access to the EU single market. 

However, such ideas are nothing more than mere wishful thinking. The German chancellor Angela Merkel has warned that "comfortable deals" for certain sectors like car manufacturing are out of the question. And they are out of the question for very good reasons. “The UK is an important market for us but the EU market is much more important,” Weissmann added. “If the EU were to fall apart, that would be a lot worse for our industry.” 

What this basically translates to is that the remaining members of the EU are likely to give no special treatment to the UK in order to maintain the unity of the 27 member states bloc. This warning coming from Germany is the second alarm bell for the car industry in the UK. The Japanese government has recently formulated concerns about what the consequences of Brexit might be for manufacturers such as Nissan and Toyota, that now have a strong presence in the UK.