The Government faces a growing revolt from carmakers in Britain unhappy at the slow pace of clarity over post-Brexit customs arrangements crucial to their business model.
Sky News has been shown internal industry memos, circulating at the Frankfurt Motor Show, expressing exasperation at the state of preparedness for changes to customs – which could come in in March 2019 and for which immediate investment and staffing is required.
A recent meeting with Government was described as “disillusioning” because of a “lack of detailed information and blocking of our questions”.
Officials were described as having “no concrete idea of how to apply [customs] proposals”.
Instead of communicating detailed proposals, the meeting was taken as a “desperate attempt” to find out basic information and “get the industry to suggest solutions”.
At a separate meeting, Jaguar Land Rover boss Ralf Speth was said to have had a “heated” exchange with the Prime Minister at a Number 10 round table over summer, imploring Theresa May to avoid a “no deal” Brexit and to immediately prepare a transition arrangement with the same customs and trading arrangements.
A senior Jaguar Land Rover executive told Sky News, as part of our Brexit Forensics investigation, that its recent investment in a massive facility in Slovakia has “become a hedge” against a post-Brexit deterioration in its trading conditions.
“It’s become a hedge by default – we will assess everything in the cold light of day,” said group sales operations director Andy Gross.
Jaguar Land Rover is booming on global exports but played down the positive impact of a weak sterling or even the need for independent trade deals with its key markets in China and the US.
Between 40-50% of the company’s parts come from the EU, including expensive gear boxes from Germany.
The industry has watched with trepidation as the Government has downgraded reassurances, especially as businesses perceive that it does not prioritise – and in some cases even understand – its “just-in-time” manufacturing methods and its pan-European “integrated supply chains”.
At the Conservative Party conference a year ago, the Prime Minister promised British firms would maintain the ability to trade freely with and operate within the EU’s single market.
Mrs May’s words then shifted to “frictionless trade” – and are now “as frictionless as possible”.
This weekend, Foreign Secretary Boris Johnson claimed “traditional carmakers would vanish” within the next 20 years, to be replaced by new manufacturers of “automated” cars.
Any friction in the free flow of parts and cars with Europe could have a severe impact on the competitiveness of UK car plants, which are routinely measured against their European counterparts, competing for production of new models within the same group.
We don’t know how Brexit is going to unfold… all this completely changed the business model
At the Mini plant in Oxford, bosses told Sky News they were preparing contingencies that could require a 50% increase in stock levels to cope with predicted delays of between 12 and 24 hours from customs checks at ports.
“We don’t want to end up with an army of customs people in our plants… it’s not just going to affect our operations, but things across the supply chain,” chief financial officer Jeremy Stoyle told Sky News.
In common with other UK facilities, 95% of parts for the 220 trucks arriving at the plant every day do not currently require a customs check.
The industry is unimpressed with a proposal floating around Government that factories essentially enforce customs arrangements themselves, through a massive expansion of a current EU scheme for the accreditation of “authorised economic operators”.
There is also some tension over the Government repeatedly claiming investment decisions as endorsements of its Brexit strategy.
One Cabinet minister was refused permission to conduct interviews from company premises, for this reason.
The industry has been told, however, that the UK will not apply regulations different to the EU.
Jaguar Land Rover goes further, saying the Government already accepts there will be no deviation from European standards at all.
“We made it quite clear that there is only one set of compliance in Europe – no noises from the UK Government that they (expect) any different from that,” said Mr Gross.
Last week at the Frankfurt Motor Show, a key boss at Toyota, which a few months ago invested £240m in its Derbyshire plant after assurances about zero tariffs, said the Government was “not any more” giving those assurances.
BMW also played down the extent of its investment in a new electric Mini as at an “early stage”.
Of particular focus right now is the future of the Vauxhall plant in Ellesmere Port, Cheshire, now under the ownership of Peugeot group.
Carlos Tavares, its cost-cutting boss, said: “We don’t know how Brexit is going to unfold… all this completely changed the business model.”
Latest figures show overall levels of investment in car manufacturing as sharply down over the period of the EU referendum and since, as executives await some certainty on post-Brexit trading.
“As of today, nobody knows,” Mr Gross told Sky News.
His BMW counterpart Ian Robertson, asked if he was sure of the trading environment within which his company would be operating in the UK, replied: “No, I’m not… clarity is a fundamental part of decision-making.”
He also played down claims from Brexiteer politicians that German carmakers would oblige Chancellor Angela Merkel to offer a special deal to the UK to protect their exports.
“We are not likely to be lobbying in any particular direction… We’re not politicians,” he said.