SMMT Brexit Update

There is a new Prime Minister in No.10 and things are once again moving quickly in relation to Brexit. Boris Johnson has appointed a cabinet that is committed to leaving the EU on 31st October, “with or without a deal”, and with only 94 days left until the UK’s scheduled departure, the risk of a no-deal Brexit is all too real.

New Secretaries of State can now be found in all our key departments. Andrea Leadsom has replaced Greg Clark as Business Secretary. Grant Shapps takes over as Transport Secretary, his first senior cabinet role. Liz Truss, a free market Conservative, is the new International Trade Secretary. Theresa Villiers makes a return to the front benches as Environment Secretary, replacing Michael Gove who will lead the country’s “turbo charged” preparations for a no deal Brexit. Sajid Javid is the new Chancellor, replacing Philip Hammond.

While the Prime Minister has stated that his preference is to leave the EU with a deal, he has set a new red line that is incompatible with the EU’s objectives – the complete removal of the “backstop” from the Withdrawal Agreement – and refuses to meet until the EU acquiesces to his demand. There are no signs that the EU will move on its own red lines, with Michel Barnier, Jean-Claude Junker, Leo Veradkar and Angela Merkel (to name a few) all restating that the Withdrawal Agreement will not be reopened and that any deal has to include the backstop. At present, the UK and the EU are in a stand-off.

Should a no-deal Brexit occur, we will not only lose preferential trading terms with the EU, but also a number of third countries around the world. At present, only a limited number of countries have agreed to replicate existing preferential trading agreements in the event of no-deal, the most important being Switzerland, Chile, and Israel. South Korea has agreed in principle, but the replicated deal has yet to be made public.

In the event of no-deal, we will almost certainly lose preferential access to major markets such as Turkey, Japan, Canada, Mexico and South Africa. In addition, although replicated agreements aim to ensure trade continuity, they fall short of guaranteeing the status quo. The status of all government replication negotiations can be found here.

SMMT Engagement

Last week I wrote to the Prime Minister to set out our priorities for the new administration, highlight the costs of no-deal and make clear that a no-deal Brexit is not an option for our sector. Yesterday we published the latest production figures and once again emphasised the importance of securing a deal.

Our engagement with Ministers, MPs and officials, continues apace. Our summer Parliamentary Reception was attended by over 40 MPs, with the then Secretary of State for International Trade, Liam Fox, and his opposite, Barry Gardiner, both delivering keynote speeches. Numerous meetings have been held with influential backbench MPs and automotive has been mentioned 25 times during Parliamentary debates on Brexit, more than any other sector.

We have also given evidence to two separate Parliamentary committees on the impact of a no deal Brexit. The House of Commons Exiting the EU Committee has already published its report, which draws heavily on our evidence and reiterates many of the sector’s concerns. My evidence to the House of Commons International Trade Committee on no-deal, FTA replication and preferential trade with third countries can be viewed here.

With Parliament now on recess, our focus is on ensuring that we forcefully promote the interest of automotive when MPs return in September. The party conferences will provide a valuable opportunity to do this, and we are hosting events at the Liberal Democrat (14-17), Labour (21-25) and Conservative (29-2 Oct) conferences.

No-Deal Preparation

With no sign of negotiations resuming soon, government are focusing instead on no-deal preparation. We expect the government to intensify its communications on no-deal between now and the end of October. All of the existing government documents aimed at helping citizens and businesses to plan are available on the GOV.UK website. Included here are notices on vehicle type approval, reporting CO2 emissions for new cars and vans, regulating chemicals (REACH) and employment and citizens’ rights, the most relevant issues for the sector in the event of no-deal. Other relevant notices include those on trading with the EU, classifying goods in the UK trade tariff, existing free trade agreements, and VAT for businesses

In addition to these technical notices, government has produced a Partnership Pack on customs, which aims to set out what changes are likely to take place at the UK border in the event of no-deal being reached, and what businesses can do to help ensure that goods continue move as freely as possible across the border.

Brexit Readiness and Webinar Programme

SMMT continues to run its Brexit Readiness Programme, where you can access expert advice on how best to mitigate the business risks associated with no-deal. We have collaborated with a range of consultancies and legal firms who are offering advice and guidance to SMMT members, often at a discounted rate. Our partners offer advice on 11 topics ranging from tax to contracts and customs to intellectual property. This advice includes articles highlighting the impact of no-deal and one-to-one discussions that allow you to get bespoke advice that takes into account the unique circumstances of your business.

We also continue to run an extensive webinar programme, through which we provide the latest news and analysis of the negotiations, as well as expert advice on specific business issues related to a no-deal Brexit.

Our programme of webinars will resume in September and will cover:

  • Negotiations Update – 4th September
  • No-Deal, Trade and Tariffs – 11th September
  • No-Deal and Customs – 17th September
  • No-Deal and Regulation – 24th September
  • No-Deal and Immigration – 3rd October
  • Negotiations Update – 10th October

Should you wish to make use of the Readiness Programme, register for upcoming webinars or listen to previous webinars, please go to https://www.smmt.co.uk/member-services/brexit-readiness-programme/

At this challenging time, everyone here at SMMT stands ready to assist all of you as you try to address the issues that arise from Brexit for your business, so please do not hesitate in getting in touch. In the meantime, I hope you are able to enjoy the summer and that I will see you soon.

Michael Hawes
Chief Executive 
The Society of Motor Manufacturers and Traders Limited