Hard Brexit could lead to surge in UK car prices

According to a new report, a “hard Brexit” could result in increasing the cost of assembling a car in the UK by £2,370.

The increase in costs would affect the average UK car if Britain goes back to World Trade Organisation rules after leaving the EU. Even in the case of an agreed 5 percent tariff with the EU on importing and exporting with an extra 2.5 percent on components, £1,202 would still be added to the cost of production.

Chief executive of the Society of Motor Manufacturers and Traders, Mike Hawes, said: “We waited patiently to hear how the Government would square the circle of leaving the single market and the customs union while maintaining our competitiveness. We have asked for clarity and certainty.”

“However, the general election result has not brought that clarity. It has added to the confusion.”

The report warned that it would make more financial sense for car manufacturers if to move from the UK if a 10 percent tariff was introduced.

According to the report, exporting 200,000 cars a year from the UK would cost £920 million after two years, which would “easily” cover the cost of building a new plant in the EU.

Tim Lawrence, global head of manufacturing at PA Consulting, said: “The key point that has come out of it [the report] for me is the potential impact if we don’t come up with a trade deal and we don’t come up with a solution,” he said. “It all depends on the outcome of trade negotiations that will start in the next week or two.”

“Both the EU and the UK would benefit from keeping free trade and supply chains unaffected because any tariffs would be damaging for both sides based on today’s complex supply chain arrangements.” he added.