Government's Brexit extension 'utterly unacceptable' for UK automotive

The Society of Motor Manufacturers and Traders (SMMT) has expressed concerns that the Government’s six month Brexit extension has extended the current period of uncertainty for the automotive sector.

European Union leaders granted the UK a six-month extension to Brexit following five hours of talks in Brussels overnight, extending the deadline to October 31 and averting the prospect of the UK having to leave the EU without a deal tomorrow (April 12).

The BBC reported that European Council president, Donald Tusk, had said his "message to British friends" was "please do not waste this time".

But SMMT chief executive, Mike Hawes, said today that it was “utterly unacceptable that, more than two years since negotiations started, industry still does not know what the UK’s relationship with the EU will be in the coming weeks and months”.

Hawes said: “Uncertainty has already caused serious damage – car plants are on enforced shutdown, investment has been cut and jobs lost.

“This cannot go on. Government and Parliament must use this extension purposefully to take ‘no deal’ off the table for good, and guarantee a positive long-term resolution that delivers frictionless trade. If they fail, we face yet another devastating ‘no deal’ precipice on October 31.”

National Franchised Dealer Association (NFDA) director, Sue Robinson, said that it was positive that the UK had avoided a ‘no deal’ Brexit on Friday, but added that Government must now ensure that the extension to agree on a deal "protects the interests of the automotive retail sector, one of the strongest contributors to the economy of the UK".

Robinson added: “With more than half a million people employed in automotive retail, the stability of our industry cannot continue to be undermined by the political uncertainty that has been affecting businesses and consumers for more than two years."

Speaking to in relation to the findings of AM’s recent Brexit Survey this week – the results of which will be published in the coming edition of the magazine – Paul Goodwin, managing director or Arbury Group, described the three years since 2016’s EU Referendum as a “disastrous period in terms of the flow of information reaching businesses and the general public about Brexit”.

“For me, the biggest concern is that there has never been a bigger disconnect between Government and the people,” he added.

The political and economic climate in Europe is being mirrored by a fragility across the globe according to a report published by the IMF this week.

The IMF says the global economy is facing growing threats and financial markets need to act now to head off the growing risk of a major downturn, the Fund’s Financial Counselor and Monetary and Capital Markets director, Tobias Adrian, said at the launch of the Global Financial Stability Report (GFSR) Wednesday in Washington.

“After years of economic expansion, global growth is slowing, sparking concerns about a deeper downturn. The credit cycle is maturing, financial vulnerabilities continue to build in many countries and could amplify a slowdown,” said Adrian.

“In advanced economies, corporate debt and financial risk-taking have increased. The creditworthiness of borrowers has deteriorated. So-called leveraged loans to highly indebted borrowers continue to be of particular concern.

“In the euro area, fiscal challenges remain in countries that have worries about the sovereign financial sector nexus. If sovereign yields were to rise sharply banks with large holdings of government debts could face significant losses. Insurance companies could also face losses on their bond portfolios.”

In China, meanwhile, authorities are working to balance sometimes conflicting needs, according to the IMF.

Adrian said: “In China, authorities face a difficult trade-off between supporting growth in the face of external shocks and containing leverage through regulatory tightening.”

Particularly of interest is the level of housing prices and vulnerabilities surrounding mortgages and lending risk in some markets.

A copy of the IMF’s full report is available at IMF.org/GFSR.