News Analysis: Brexit could cost thousands of jobs in German auto industry

Source: Xinhua| 2017-06-22 19:34:45|Editor: ying
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BERLIN, June 22 (Xinhua) -- A study published on Thursday by the Consulting firm Deloitte has warned that European car manufacturers could suffer a fall in sales of up to 20 percent as a consequence of the United Kingdom's departure from the European Union.

Equivalent to losses last experienced during the financial crisis in 2009, the indicated figure would apply in the event of a so-called "Hard Brexit" in which Britain leaves both the European Union and its Single Market.

Every fifth car manufactured in Germany is exported to the United Kingdom, making it one of the most significant markets for the country's automotive industry.

950,000 German made cars were newly registered in Britain in 2016.

According to Deloitte's figures, 60,000 jobs in Germany depend on automotive exports to the UK, of which 18,000 would be endangered in a "Hard Brexit" scenario.

A spokesperson for Daimler AG, one of the largest German car manufacturers and the owner of the brand Mercedes Benz, told Xinhua that "as a globally active company, (Daimler) monitors international geo-political and economic developments closely", but declined to "partake in speculations over the potential implications of Britain's exit from the European Union".

"Our products are in high global demand. We delivered more vehicles in 2016 than ever before and the first months of this year have been encouraging. The global production at our manufacturing centers, as well as our distribution remain unchanged," said the spokesperson.

Volkswagen reacted similarly when approached for a statement.

"Regarding the Brexit process, our position remains unchanged. As market leader in Europe and with the UK being its second biggest market in Europe, the Brexit negotiations and the respective outcome are very important for the Volkswagen Group. We are monitoring the developments closely. However, at this point in time, it is only possible to speculate about the impacts and consequence," said Volkswagen.

While manufacturers in Europe would be the biggest losers of a "Hard Brexit" following Deloitte's analysis, the study only sees a short reprieve for British-based carmakers.

Gains in competitiveness for the UK automotive industry due to a cheaper pound would likely be wiped-out by higher production costs, tariffs and associated delays and logistical challenges.

Several of the United Kingdom's largest car manufacturers, such as Mini, Jaguar and Land Rover, are foreign owned and rely heavily on the import of internationally sourced inputs for their production.

As the pound declines, obtaining car parts from abroad becomes more expensive. Additionally, car manufacturers rely on tight delivery schedules for seamless vehicle production which could be upset by the introduction of stricter border controls.

Uncertainty prevails in this context, over whether the UK will also quit the Customs Union.

Remaining in the Customs Union would bar British governments from striking trade deals and setting tariff schedules on their own, but would significantly limit the economic fallout of Brexit for regionally-interconnected manufacturers.

Furthermore, with British prime minister Theresa May having emerged weakened from the snap election she called last week, the question has been raised over whether a "Hard Brexit" could be abandoned entirely to avert its cost and a domestic political crisis.

Although the UK imports more from the European Union than it exports in absolute terms, a House of Commons briefing paper indicated that the European Union absorbed 45 percent of total British exports in goods and services in 2014, making it the country's largest overseas market by a wide margin.

Once outside the Union, the UK would account for approximately 16 percent of exports from the EU to non-EU countries.

When intra-European trade is considered, only two countries, Ireland and Cyprus, export more than 10 percent of their total goods and services to Britain.

The UK is currently the slowest growing member of the G7, with GDP increasing at half the pace of the eurozone, according to official statistics.

British Inflation rose ahead of analysts' expectations to a four-year high of 2.9 percent in May, mounting pressure on consumers to cut spending.