

Brexit: snakes and spiders 29/09/2016

Follow @eureferendum



The trouble with Mike Hawes of the Society of Motor Manufacturers and Traders is that he represents a thoroughly Europhile organisation which took an active part in the referendum campaign, calling for voters to resist the lure of Brexit.

But now, the same Mikes Hawes has been leading a delegation of motor manufacturers to Paris, in advance of the Paris Motor Show, to



Hawes fears that ministers are being "blinded" and "lulled into a false sense of security" by the current buoyant car production and sales performance. All this could come abruptly to an end if the industry sees the re-imposition of tariffs and other barriers to trade. Leaving the Single Market could also put thousands of jobs and billions of pounds of investment at risk.



It is a pity that this was not the message Mr Hawes was delivering before the referendum, whence it might now have more credibility.



Nevertheless, Hanno Kirner, executive director for strategy at Jaguar Land Rover freely admits that his firm had always wanted Britain to remain in the EU. But now that it has voted to leave, he says, he wants the UK to stay in the Single Market.



Trading relations with "Europe" are vital to JLR's success, he adds: "Tariffs would affect not only what we sell, but what we buy. We need to be able to attract global talent without barriers".



If anything, though, the car industry is understating its own case. The manufacturing sector is



This "lean" manufacturing is notoriously prone



Last year the UK exported a record 1.23million cars, with 58 percent going to the EU, and new records are being set this year. But, depending on the manufacturer, between 20-50 percent of the components are imported from EU Member States, only for the bulk to be re-exported.



In essence, the



A finished car, comprising thousands of products, relies on this extraordinarily complex web, so complex that it is very difficult to work out the precise proportions of national inputs. And by the time R&D, design, computer software and other inputs – including finance – have been factored in, the value chain is near-impossible to apportion.



The very last thing the automotive industry wants or needs, therefore, is a huge spanner in the works called "leaving the Single Market". And, as an industry which contributes the best part of four percent to the UK GDP, and seven percent of our entire export earnings, this is something the UK can do without as well. But now, the same Mikes Hawes has been leading a delegation of motor manufacturers to Paris, in advance of the Paris Motor Show, to tell us that Britain's record-breaking car export boom risks stalling if the UK leaves the Single Market.Hawes fears that ministers are being "blinded" and "lulled into a false sense of security" by the current buoyant car production and sales performance. All this could come abruptly to an end if the industry sees the re-imposition of tariffs and other barriers to trade. Leaving the Single Market could also put thousands of jobs and billions of pounds of investment at risk.It is a pity that this was not the message Mr Hawes was delivering before the referendum, whence it might now have more credibility.Nevertheless, Hanno Kirner, executive director for strategy at Jaguar Land Rover freely admits that his firm had always wanted Britain to remain in the EU. But now that it has voted to leave, he says, he wants the UK to stay in the Single Market.Trading relations with "Europe" are vital to JLR's success, he adds: "Tariffs would affect not only what we sell, but what we buy. We need to be able to attract global talent without barriers".If anything, though, the car industry is understating its own case. The manufacturing sector is fully integrated with complex cross-border flows of components, allowing plants to operate on a "just-in-time" basis, cutting out expensive stock inventories and storage.This "lean" manufacturing is notoriously prone to disruption and the delays that might be encountered by resuming border checks could prove the death-knell of the British industry.Last year the UK exported a record 1.23million cars, with 58 percent going to the EU, and new records are being set this year. But, depending on the manufacturer, between 20-50 percent of the components are imported from EU Member States, only for the bulk to be re-exported.In essence, the industry is one of "snakes" and "spiders". "Snakes" involve a sequence in which intermediate goods are sent from country A to B, and incorporated into intermediate goods sent from B to C, and so on until they reach the final stage of production. "Spiders" involve multiple parts coming together from a number of destinations to a single location for assembly of a new component or final product.A finished car, comprising thousands of products, relies on this extraordinarily complex web, so complex that it is very difficult to work out the precise proportions of national inputs. And by the time R&D, design, computer software and other inputs – including finance – have been factored in, the value chain is near-impossible to apportion.The very last thing the automotive industry wants or needs, therefore, is a huge spanner in the works called "leaving the Single Market". And, as an industry which contributes the best part of four percent to the UK GDP, and seven percent of our entire export earnings, this is something the UK can do without as well.





