Competitiveness and investment in UK sector could be hit by ‘slow-burning’ impact of vote to leave EU, warns trade body chief

British car manufacturing is at risk of “death by a thousand cuts” if companies invest in other countries rather than the UK after the Brexit vote, an industry leader has warned.

The UK industry faces the threat of gradual decline should foreign carmakers overlook the UK when choosing where to build a new model or factory according to Mike Hawes, chief executive of the trade body the Society of Motor Manufacturers and Traders.

Hawes said the recent decision by Japanese carmaker Nissan to invest more in its Sunderland plant was encouraging for the broader industry, but said the UK was in a constant battle to attract and retain investment. He told a House of Lords select committee that any impact on the UK car industry from Brexit would be slow-burning.

“It’s never going to be immediate. You wouldn’t wake up on 24 June [the day after the referendum] and say ‘OK, that’s the end of Sunderland’. But what you would see is a gradual reduction,” he said.

“If a decision was taken that [a company is] not going to build model X in that particular plant, or potentially it was going to be split between two sites, then production capacity will go down. Your competitiveness may be affected, and then the next decision is taken, so it would be more like death by a thousand cuts rather than just shutting the gates overnight.”

Hawes said larger carmakers would always have alternatives but he hoped they would not be as attractive as the UK.

The SMMT backed the remain camp in the run-up to the EU referendum, and Hawes said members were most concerned about possible tariffs being imposed on parts imported from the EU after Brexit.

The average UK-built car has about 6,000 parts and the majority come from the EU. Hawes said parts could sometimes pass through four countries before reaching the UK.

“The margins the industry operates on are wafer thin … so any tariff is immediately going to be a critical challenge to a company, especially when their competitors may not be subject to those tariffs.”

Hawes said SMMT members, which include parts suppliers and engine makers as well as the larger car manufacturers, were also fearful of the delays caused by additional customs checks on vehicles and parts once the UK is no longer a member of the EU. “The non-tariff barriers could be as punitive in cost as the tariff barriers. Anything that creates delay creates cost,” he said.

Hawes said he was encouraged by the broad message from the prime minister, Theresa May, and Greg Clark, the business secretary, after Nissan’s decision to expand in Sunderland.

“They have been at pains to reiterate that what the government is trying to do is make sure the UK automotive sector – not just Nissan – is competitive. We very much welcome that commitment.”

Nissan announced last week that it would build the next Qashqai and X-Trail models at its Sunderland factory, safeguarding more than 7,000 jobs, in the first major investment decision in the car industry since the Brexit vote.

Nissan’s chief executive, Carlos Ghosn, had been lobbying May’s government for guarantees after the referendum. He said government support and assurances had led to the decision to expand in the north-east.