November 15, 2018 10:47 CET
— UPDATED: Nov 15 12:23 CET – adds deal reaction
LONDON — The UK auto industry said British Prime Minister Theresa May’s tentative Brexit deal with the European Union was a “positive step” for car companies operating in Britain.
Under the terms of the deal announced Wednesday, the UK will enjoy a 21-month transition phase after Brexit takes place next March. During this period nothing will change, and businesses can carry on operating as now.
“For the automotive industry, Brexit is about damage limitation. The outline agreement is a positive step in avoiding the devastating consequences of ‘no-deal’ and securing a transition period,” said Mike Hawes, CEO of the SMMT, which represents auto companies with UK operations.
Hawes said the deal is “only a first step and business seeks certainty and ambition when it comes to securing a competitive future.” He reiterated calls for the UK and EU to ensure that trade between the two are “truly frictionless.”
UK-based sports-car maker Aston Martin reacted cautiously. “I don’t know whether we have more clarity or less clarity but at least we have some sort of plan on the table,” said CEO Andy Palmer.
Palmer said the automaker will not change any of its contingency planning, which includes potentially flying in components and changing ports to maintain its output. There was not enough certainty at this point, he said.
“You can’t stand anything down yet. Yes, the cabinet have agreed, but the Tory [Conservative] party needs to agree and then parliament needs to agree, and I don’t think any of that is that easy,” Palmer said.
Analysts LMC Automotive were pessimistic about the deal. “It seems unlikely that the deal will be passed by Parliament therefore the likelihood of either a no-deal Brexit, a second referendum, or a fresh general election has increased in the last few days,” it said in a statement.
Automakers with UK plants including BMW, Toyota, Nissan and Honda, have warned that production would be hit if parts coming from Europe are held up at by bureaucracy at British ports. Their UK factories rely on the just-in-time delivery of tens of thousands of components.
The SMMT estimates 186,000 people are employed directly in automotive manufacturing across the UK, and 80 percent of the cars made in the country are exported — most of those to the EU.
Auto dealerships have been struck by a sharp reduction in new-car sales in the UK, and Pendragon and Lookers have pointed the finger at Brexit.
While business and finance leaders are pleased that May has finally secured an agreement that gives a bit of clarity, their relief could be short-lived. May’s own team believe that the next few days will be the most perilous she has encountered since becoming prime minister in the aftermath of the referendum vote to leave the EU in 2016.
May said the deal was the best the world’s fifth-largest economy could hope for and that the other options were leaving with no deal or thwarting Brexit.
The ultimate outcome for the UK remains uncertain: scenarios range from a calm divorce to rejection of May’s deal, potentially sinking her premiership and leaving the bloc with no agreement, or another referendum.
Getting a deal through parliament will be difficult. May will need the votes of about 320 of the 650 lawmakers. “The parliamentary arithmetic has looked tight for some time,” Goldman Sachs said in a note to clients. “It now looks tighter, given signs of greater unity among those who object to the draft Agreement.”
EU leaders will meet on Nov. 25 to endorse the deal. “If nothing extraordinary happens, we will hold a European Council meeting in order to finalize and formalize the Brexit agreement,” European Council President Donald Tusk said after meeting EU chief Brexit negotiator Michel Barnier.
After the UK leaves the EU on March 29, the British government and the EU leadership will have to hammer out a trade agreement and other measures defining virtually every aspect of their economic relationship.
Reuters and Bloomberg contributed to this report
You can reach Nick Gibbs at firstname.lastname@example.org.