Germany will fight to the last hour to prevent the UK crashing out of the EU without a deal and is willing to hear any fresh ideas for the Irish border backstop, the country’s ambassador to the UK has said.
Speaking at a car manufacturers’ summit in London, Peter Wittig said Germany cherished its relationship with the UK and was ready to talk about solutions the new prime minister might have for the Irish border problem.
“My country is ready to talk and the chancellor [Angela Merkel] once said she would be willing to talk to the last hour not to have a no-deal scenario,” he said.
“It’s a mindset. We are not giving up in achieving an orderly Brexit. Germany has been a very pragmatic voice in this whole tortuous Brexit process and we will continue to be that.
“Even if we have a short window while the new prime minister is in place, we will welcome any idea how to solve that famous backstop issue and we will be willing to work towards a negotiated deal which is long term the only viable and sensible option for Europe,” he added.
Asked if Germany would support another extension in the Brexit process, he said: “We can’t be more specific. It is now the turn of the UK government to come up with the plan and talk to us [the EU].
“Our mindset is to explore all pathways to come to a negotiated deal.”
The German envoy’s comments came as motor industry leaders warned that the cost of car manufacturing would go up £70m a day if the UK leaves the EU without a deal, making the British automotive industry more vulnerable to closures,.
They also warned for the second time this year that car prices will go up by an average of £1,500.
“Leaving the EU without a deal would trigger the most seismic shift in trading conditions ever experienced by automotive, with billions of pounds of tariffs threatening to impact consumer choice and affordability,” said the Society of Motor Manufacturers and Traders (SMMT) at an industry conference in London.
“The end to borderless trade could bring crippling disruptions to the industry’s just-in-time operating model. Delays to shipments of parts to production plants are measured in minutes, with every 60 seconds costing £50,000 in gross value added – amounting to some £70m a day in a worst-case scenario,” it added.
In a ‘no deal’ scenario, the UK would leave the single market and the customs union immediately with no ‘divorce’ arrangement in place. The European Court of Justice would cease to have jurisdiction over the UK, and the country would also leave various other institutions including Euratom and Europol.
The UK would no longer be paying into the EU budget, nor would it hand over the £39bn divorce payment. There would be no transition period. Free movement of people into the UK from the EU27 would stop.
Trade between the UK and the EU would be governed by basic WTO rules. The UK government has already indicated that it will set low or no tariffs on goods coming into the country. This would lower the price of imports - making it harder for British manufacturers to compete with foreign goods. If the UK sets the tariffs to zero on goods coming in from the EU, under WTO ‘most favoured nation’ rules it must also offer the same zero tariffs to other countries.
WTO rules only cover goods - they do not apply to financial services, a significant part of the UK’s economy. Trading under WTO rules will also require border checks, which could cause delays at ports, and a severe challenge to the peace process in Ireland without alternative arrangements in place to avoid a hard border.
Some ‘No Deal’ supporters have claimed that the UK can use Article 24 of the General Agreement on Tariffs and Trade (Gatt) to force the EU to accept a period of up to ten years where there are no tariffs while a free trade agreement (FTA) is negotiated. However, the UK cannot invoke Article 24 unilaterally - the EU would have to agree to it. In previous cases where the article has been used, the two sides had a deal in place, and it has never been used to replicate something of the scale and complexity of the EU and the UK’s trading relationship.
Until some agreements are in place, a ‘no deal’ scenario will place extra overheads on UK businesses - for example the current government advice is that all drivers, including lorries and commercial vehicles, will require extra documentation to be able to drive in Europe after 31 October if there is no deal. Those arguing for a ‘managed’ no deal envisage that a range of smaller sector-by-sector bilateral agreements could be quickly put into place as mutual self-interest between the UK and EU to avoid introducing or rapidly remove this kind of bureaucracy.
In a report, the SMMT said the imposition of tariffs for trade in passenger cars along would be £4.5bn, a “knockout blow” to the sector’s competitiveness.
While neither Honda nor Ford cited Brexit as a cause, the industry fears Britain’s competitiveness and unstable political environment will deter future investment by global car manufacturers.
Mike Hawes, the SMMT chief executive, said: “We are already seeing investment stall. As a manufacturer you constantly invest in machinery to make sure you are more efficient, make sure you are competitive.
“When the big investment decisions come with a new model, that’s when you are competing with other plants, that’s when you need to be at your most efficient and if in the previous two or three years you have underinvested it makes it much harder.”
Few car companies want to go public on their fears over Brexit because of the backlash in the media and some political interests, sources say.
Hawes said the analysis of tariffs was based on facts, on industry and government data and warned that his pleas were not fearmongering.
“We are not making claims that the entire industry will close doors overnight, this industry is adaptable and agile, but it can only do so much if the barriers are particularly high,” he said.
He warned the industry would decline with a “death by a thousand cuts”.
Costs could be hit by stoppages in production lines in the event of delays to supply of components over the Calais-Dover transit route and also by the imposition of tariffs of between 2% and 4.5% by the EU.
The car industry has little to no warehousing capacity to stockpile in the event of no deal with production based on just-in-time and just-in-sequence systems.
“We have 1,100 vehicles a day coming into the UK with parts, components, we need them to move seamlessly. If we have delivery delays, that means production stops,” he said.
Some component manufacturers have also been hit by the Brexit uncertainty, Hawes said, including one company in south Wales.