Vauxhall-maker warns Brexit may force it to close UK factory

Vauxhall-maker warns Brexit may force it to close UK factory
# 17 May 2023 21:27 (UTC +04:00)

One of the world's biggest carmakers has warned it may have to close UK factories if the government does not renegotiate the Brexit deal.

Stellantis, which owns Vauxhall, Peugeot, Citroen and Fiat, had committed to making electric cars in the UK, but says that is under threat.

It warned it could face tariffs of 10% on exports to the EU due to rules on where parts are sourced from.

In response to the comments, Rishi Sunak said he believed in Brexit.

"I voted for Brexit, I believe in Brexit," the prime minister told reporters while travelling to the G7 Summit of world leaders in Japan.

Mr Sunak listed what he called "Brexit benefits" he introduced as chancellor, which he said included the introduction of freeports, reforms on alcohol taxes and cutting of VAT on sanitary products.

"By the end of this year we would have reformed and repealed around 2,000 different pieces of retained EU law…reform to the bureaucracy around the working time directive that is going to save businesses, particularly small businesses, a billion pounds a year," he said.

He did not directly address concerns made by Stellantis, but a spokesperson said the government was "determined" UK car making would remain competitive.

It is the first time a car firm has openly called for a renegotiation of the terms of the Brexit trade deal, though the BBC understands all major manufacturers in the UK have raised similar concerns with the government.

Stellantis warned that if the cost of electric vehicle manufacturing in the UK "becomes uncompetitive and unsustainable, operations will close".

The car giant called on ministers to come to an agreement with the EU to keep rules as they are until 2027, and it also wants arrangements for manufacturing parts in Serbia and Morocco to be reviewed.

Following the calls, Labour leader Sir Keir Starmer said the country needed "a better Brexit deal" to ensure firms such as Vauxhall could continue to operate in the UK.

Business and Trade Secretary Kemi Badenoch had a virtual meeting with senior executives from Stellantis on Wednesday morning, which sources said was "constructive" and that conversations with the EU led them to be "cautiously optimistic" that the bloc recognised a deal would be in both parties' interest.

Chancellor Jeremy Hunt told a conference that the government was "very focused on making sure that the UK gets electric vehicle and manufacturing capacity".

Just two years ago, Stellantis, which the world's fourth biggest car maker, said the future of its Ellesmere Port and Luton plants was secure.

But in a submission to a House of Commons inquiry into electric car production, the firm said current trade rules posed a "threat to our export business and the sustainability of our UK manufacturing operations".

From next year, 55% of the value of an electric car should originate in the UK or EU to qualify for trade without tariffs. This will rise to 65% in 2027.

But Stellantis said it was "now unable to meet these rules of origin" due to the recent surge in raw material and energy costs.