Luxury British carmaker Aston Martin has warned it faces the “semi-catastrophic” prospect of pausing vehicle production if there is no deal in place when the UK leaves the European Union (EU).
The warning came as executives from the car industry gave evidence to the Business Select Committee on the impact of Brexit on the sector.
Under current law, cars certified by the British regulator can be used in other EU states under reciprocal arrangements.
However, Mark Wilson, Aston Martin’s chief financial officer, said if the UK were to leave the EU without a deal that continues the arrangement, it could mean stopping production at its UK car plants until a new certifying authority is found so vehicles can be sold abroad.
“We are a British company and build our cars only in Britain where they are certified by the Vehicle Certification Agency,” he said.
“We need to make sure they pass certification and that puts us in a stark position—if they could not pass then we would be in the semi-catastrophic position of having to stop production until we can get them re-certified to a new approach, whether that is EU or US.”
Wilson added that because only about 40% of the components used to build cars in the UK come from British suppliers, vehicles being exported from the UK could fail to meet “rules of origin” requirements and attract hefty trade penalties.
He said that while this situation might seem to be an opportunity for the UK supply chain, the capacity is not there.
“The idea we could somehow swap 60% of our European supply base into the UK, which is strong but does not exist at that level, is an extraordinary ask,” he said.
MPs also heard that UK car sector—which has an annual turnover of £79.5bn and exports about 80% of cars built in the UK—has seen investment in plants tumble since the referendum as uncertainty grows.
Mike Hawes, chief executive of car industry trade body SMMT, said investment had been averaging £2.5bn a year but fell to £1.6bn in 2016 and is heading to be less than £1bn this year.
“What attracts suppliers to the UK is a strong and growing vehicle manufacturing base. If you do not have that, then why would you invest?”
Meanwhile, Rolls-Royce voiced its concern about potential border checks disrupting its global supply chain after Britain leaves the EU.
Speaking at the launch of a new partnership with Indian software firm Tata Consultancy Services, Ben Story, Rolls-Royce’s head of strategy and marketing, laid out a range of concerns the company has over the Brexit process.
“We are worried about border checks and whether that will make our supply chain flow less fluidly,” he said.
“We are worried about the talent and making sure that we always get the right talent. We also work very closely with European universities and we worry that may break down and some of the research funding may fall away.”
Slow progress in Brexit negotiations with Brussels has unsettled businesses and drawn warnings that unless a transition is agreed soon, some manufacturers may begin activating Brexit contingency plans—which may include moving out of the country.
Story said for Rolls-Royce, Brexit uncertainty has made the company re-think their strategy going forward.
“We built our whole supply chain assuming a kind of globalising world and an open world,” he said.
“What Brexit has made us do is … step back and think about that a little more. Going forward, we need to be thoughtful and careful about where we make investments, where we build capabilities, how to build in redundancy.”
He added the company has “a lot of flexibility and choice” as it has manufacturing facilities outside Britain, in Germany and Singapore, among others.
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