Investment in industry slows dramatically as uncertainty over customs union and single market membership bites, study shows (Brexit).

The government must maintain the existing customs union membership and single market benefits as part of its Brexit negotiations or risk causing grave damage to the UK car industry, Society of Motor Manufacturers and Traders (SMMT) chief executive Mike Hawes has warned.

Membership of the customs union and maintenance of the benefits the single market delivers is seen as crucial as the automotive industry relies on the seamless movement of goods around Europe, with more than 1100 trucks from the EU bringing components to UK car and engine plants every day.

Speaking at the SMMT’s annual conference, Hawes said: “There is growing frustration in global boardrooms at the slow pace of negotiations. The current position, with conflicting messages and red lines goes directly against the interests of the UK automotive sector which has thrived on single market and customs union membership.

“There is no credible ‘plan B’ for frictionless customs arrangements, nor is it realistic to expect that new trade deals can be agreed with the rest of the world that will replicate the immense value of trade with the EU. Government must rethink its position on the customs union.

“There is no Brexit dividend for our industry, particularly in what is an increasingly hostile and protectionist global trading environment. Our message to government is that until it can demonstrate exactly how a new model for customs and trade with the EU can replicate the benefits we currently enjoy, don’t change it.”

Hawes comments followed the release of industry figures showing record turnover among automotive businesses in the UK, which he said were the result of long planned investments which were now slowing as a result of uncertainty caused by Brexit.

The UK Automotive’s 19th annual Sustainability Report revealed the manufacturing sector turned over a record £82 billion in 2017, marking an eighth consecutive year of growth. As a result, the sector’s direct economic contribution now stands at £20.2 billion. Estimates suggest the impact on adjacent sectors raises that contribution to £202bn – around 10% of the UK’s GDP.

Employment in the automotive manufacturing sector also rose in the past year by 2.8%, to 186,000, with employment across the wider industry reaching 856,000.

However, in the first six months of 2018 production output has fallen in line with demand, while manufacturers including Jaguar Land Rover have announcedjob cuts and investment by manufacturers has stalled. To date £347.3 million has been earmarked for new models, equipment and facilities in the UK this year – around half the sum announced in the same period last year.

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