Pressure on Sunak to rewrite Brexit deal as car makers face ‘existential threat’

Rishi Sunak is facing demands to renegotiate the UK’s Brexit deal amid warnings the car industry in Britain faces an “existential threat” without changes, putting thousands of jobs at risk.

Vauxhall’s parent company Stellantis told MPs it will be unable to keep a commitment to make electric vehicles n(EVs)  in the UK without changes to the Trade and Co-operation Agreement (TCA) with the European Union.

Labour leader Sir Keir Starmer said “we need a better Brexit deal” to ensure firms such as Vauxhall can continue to operate in the UK.

Business and Trade Secretary Kemi Badenoch has raised the issue with Brussels, the Government said, and she has a pre-arranged meeting with Stellantis chiefs on Wednesday.

She has also raised the motor industry’s concerns about the TCA with Chancellor Jeremy Hunt and Foreign Secretary James Cleverly, according to Whitehall sources.

Mr Hunt told the British Chambers of Commerce conference there is global pressure on the supply of batteries for electric vehicles but hinted at further announcements on UK capacity.

“The reality is there is a supply shortage. Everyone is trying to develop supply of EV batteries. We need to have that supply here in the UK,” he said.

“All I would say is watch this space because we are very focused on making sure the UK gets that EV manufacturing capacity.”

Stellantis – which also owns Citroen, Peugeot and Fiat – employs more than 5,000 people in the UK.

The firm told a Commons inquiry into the supply of batteries for EVs that their UK investments were in the balance due to the terms of the trade deal.

Under the TCA, from next year 45% of an electric car’s value should originate in the UK or EU to qualify for trade without tariffs, with higher requirements for batteries.

Without meeting the requirements, cars manufactured in the UK would face a 10% tariff, making domestic production and exports uncompetitive with cars built within the EU or countries such as Japan and South Korea.

Professor David Bailey, from Birmingham Business School, said: “I think there is a kind of existential threat to the UK car industry.”

He told BBC Radio 4’s Today programme:  “Car makers have been saying for some time, they can’t meet those rules as they tighten up, and they’re going to potentially be facing tariffs.”

Meanwhile, the Labour leader told BBC Breakfast that although re-entry to the EU was not on the table “we do need to improve that deal”.

“Of course we want a closer trading relationship, we absolutely do. We want to ensure that Vauxhall and many others not just survive in this country but thrive,” Sir Keir said.

“Because there are jobs bound up, there are families watching this morning either employed by Vauxhall or a similar place who are deeply worried about what this means.

“So yes we need a better Brexit deal. We will make Brexit work. That doesn’t mean reversing the decision and going back into the EU but the deal we’ve got, it was said to be oven-ready, it wasn’t even half-baked.

Stellantis, the world’s fourth biggest car maker, committed to making electric vehicles at its Ellesmere Port and Luton plants two years ago.

But in a submission to the Commons Business and Trade Committee, the company said the Brexit deal was a “threat to our export business and the sustainability of our UK manufacturing operations”.

It called on the Government to reach agreement with the EU to maintain existing rules until 2027, rather than introduce next year’s planned changes.

Stellantis said the rise in the cost of raw materials during the pandemic and energy crisis meant it was “unable to meet these rules of origin”.

The company said that 10% tariffs would mean manufacturers “will not continue to invest” and will relocate.

“To reinforce the sustainability of our manufacturing plants in the UK, the UK must consider its trading arrangements with Europe,” Stellantis told the inquiry, listing Honda’s closing of its site in Swindon and investment in the US as examples of its impact.

Stellantis said there will be “insufficient battery production” in the UK or Europe to meet government targets in phasing out petrol and diesel vehicles by 2025 and 2030.

“It we are unable to rely on sufficient UK or European batteries, we will be at a major competitive disadvantage. In particular against Asian imports,” it said.

“We need to reinforce the competitiveness of the UK by establishing battery production in the UK.”

Electric cars and batteries were among the final parts of the Brexit deal agreed between then prime minister Boris Johnson and president of the European Commission Ursula von der Leyen in 2020.

Darren Jones, Labour chairman of the Business and Trade Committee, said the Government “has failed to secure UK car battery production”.

“Exports to the EU will be more expensive and car production will leave the UK, according to evidence submitted to our inquiry,” he added.

A Government spokesman said: “The Business and Trade Secretary has raised this with the EU and is determined to ensure the UK remains one of the best locations in the world for automotive manufacturing, especially as we transition to electric vehicles.

“We are supporting the industry through the Automotive Transformation Fund and Advanced Propulsion Centre to develop a high-value end-to-end electrified automotive supply chain in the UK and support cutting-edge automotive technologies.

“In the coming months, the Government will build on these interventions with decisive action to ensure future investment in zero emission vehicle manufacturing.”