A no-deal Brexit would cost Japanese carmakers in Britain more than $1bn a year if 10% tariffs were imposed on trade between the UK and EU, new analysis suggests.
Nissan, Toyota and Honda together account for almost half of UK car production, but trade under World Trade Organization terms could cost the companies $1.17bn (£899m) in operating profit, according to calculations published on Monday by Moody’s Investors Service, an influential ratings agency.
Carmakers view the prospect of tariffs on imports and exports between the UK and the EU as the greatest risk to their British operations, above the shorter-term threat of delays at the border causing major manufacturing delays.
Nissan and Honda have already pulled investment from the UK this year, with Brexit thought to be a factor. Nissan in January said it would build its new X-Trail sports utility vehicle in Japan at the expense of more than 700 potential new jobs in Sunderland, while Honda said it would close its Swindon plant in 2021, causing at least 7,000 job losses.
The direct impact of a 10% tariff, which is currently applied by the EU on countries without a trade deal, could cost Toyota $490m (£376m) annually, Moody’s said. That would dwarf Toyota’s £240m investment into its Burnaston, Derbyshire, plant to start production of its new Corolla.
A financial hit of the order of hundreds of millions of pounds would add to concerns over the future of 3,200 employees in Burnaston and in Toyota’s engine plant in Deeside, north Wales. Johan van Zyl, the chief executive of Toyota Motor Europe, last week told the Guardian that he could give no assurances on jobs until the future relationship of UK-EU trade is settled.
Tariffs of 10% could cost $600m for Nissan, whose Sunderland plant is the largest in the UK. Honda could face costs of $80m, Moody’s said.
Moody’s also cast doubt on the claims of Nissan and Honda that Brexit was not a major factor in decisions to move investment away from the UK.
“We believe the need to prepare for a no-deal Brexit scenario were also considered in the companies’ decisions,” Moody’s said in its report.
The agency also warned that customs checks that delayed parts at the border for just-in-time manufacturing and weakness from UK sales could impact carmakers’ earnings “much more than the direct impact of the tariffs”.