UK carmakers form united front to save suppliers from Brexit

Carmakers including Jaguar Land Rover and Nissan Motor Co. have joined with lenders to create a network to protect the industry’s supply chain from succumbing to Covid-19 and a no-deal Brexit.

Under the so-called safe harbor plan, suppliers in financial difficulty can lean on carmakers for improved payment terms, and lenders will be called upon to step in with financial assistance, according to the Society of Motor Manufacturers and Traders, which is organizing the network.

With Britain’s future relationship with the European Union yet to be agreed, the industry faces the specter of border chaos if the trucks criss-crossing the channel with components are held up. The SMMT‘s goal is to minimize the risk of insolvencies while staying within the boundaries of U.K. and EU competition law.

The U.K. left the European Union at the beginning of the year, and the transition agreement with the bloc comes to an end on Dec. 31. Without a deal, U.K. carmakers will face the prospect of duties being levied on exports to the EU, the largest market for U.K.-made cars, as well as tariffs on parts.

The erosion of the domestic supplier base is “just one potentially devastating consequence” of tariffs potentially being implemented in the midst of a worsening pandemic, the SMMT said in the statement. “Given the integrated nature of automotive supply chains and reliance on just-in-time manufacturing techniques, if one link in a chain hits trouble it can undermine all the companies involved, including vehicle manufacturers, threatening an entire sector.”

The SMMT has repeatedly warned that uncertainty about the economy and the U.K.’s exit from the EU would weigh on carmakers that are already struggling to recover from the effects of Covid-19. Car production plunged 40% in the first eight months of the year.