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Around 900,000 people depend on the UK auto industry for their jobs (Photo: Shutterstock.com)

Divergence from the EU’s regulatory regime post-Brexit will only bring extra costs and no potential benefits for the UK’s export-led automotive industry, a British Parliament committee report says.

“The automotive sector in Europe is heavily integrated, with highly complex and efficient supply chains relying on the friction-free transfer of components across the continent. The sector is highly competitive, with high volumes and low profit margins,” the business, energy and industrial strategy (BEIS) committee said in a report on the possible consequences of Brexit for the UK’s automotive industry.

The single market, customs union and related regulatory and trading environment have all been instrumental in making the industry one of the country’s most productive and successful sectors, directly or indirectly employing more than 900,000 people and generating almost a tenth of the UK’s manufacturing output.

Effects of diverging from the EU’s regulatory framework include longer journey times, an added risk of delay and extra customs bureaucracy within supply chains, making Britain’s automotive sector less efficient, the report said. It also found that divergence would act as a disincentive to international carmakers looking for a European base.

“In a highly competitive market, small margins can make a significant impact on investment decisions,” the committee said, adding that in recent years UK car plants have often been selected to produce models intended for the European market, which is the biggest for Britain’s vehicle exports.

The committee called on the government to negotiate a trade framework that would help automotive companies maintain their competitiveness.

“If the government wishes to uphold the UK’s reputation as a good location for volume vehicle manufacturing consistent with its industrial strategy, we recommend that it should in its negotiations on withdrawal place a high premium on securing frictionless trade for the automotive sector,” the committee said.

By Steve Garnsey, Automotive Logistics[sg_popup id=14]