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Brexit and UK Trade in Vehicles – InterAnalysis Trade Snapshot

Brexit and UK Trade in Vehicles – InterAnalysis Trade Snapshot

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Brexit and UK Trade in Vehicles

InterAnalysis Trade Analysis Snapshot

Written by Dr. Michael Gasiorek (InterAnalysis), 15th Novemeber 2016


What are the risks and opportunities?

  • Vehicles is a significant export and import industry for the UK accounting for a high proportion of exports both to the EU and to non-EU countries
  • This is also an important industry for the EU, and in terms of EU exports to the UK
  • There are substantial risks to trade in this industry being disrupted following Brexit. These risks are linked to both tariff and non-tariff barriers.
  • The opportunities from Brexit are more limited. Currently the UK is losing market share in certain key markets such as China and Japan.


Did you know that in 2015…..?

  • The UK exported Motor Vehicles[1] to 206 countries.
  • 50 countries accounted for over 95% of these exports.
  • Of those 50 key export markets, 17 of these were EU countries and 2 were EEA countries.
  • The EU is an important trade partner:
    • 10.5% of UK exports to the EU are in vehicles, and of total UK exports of vehicles over 56% of these went to the EU.
    • 19.5% of EU exports to the UK are in vehicles, and for the EU the UK market accounts for 11.6% of their total vehicle exports

[1] Based on the Standard International Trade Classification, category 78 (“Road vehicles, including air cushion vehicles

Who does the UK trade vehicles with?

The charts below show the key countries the UK trades with:

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  • 8 of the top ten destination are in the EU.
  • The key non-EU markets are the US and China. These two countries account for just over 28% of UK exports of vehicles.


  • 8 of the top 10 suppliers are EU countries.
  • Germany alone supplies nearly 40% of UK imports of vehicles.
  • The principal non-EU suppliers are Japan and Turky who account for just over 7% of imports.

Where are the risks?

The key risks concern reduced market access arising from Brexit. There are two categories of countries which matter most: First, EU countries themselves, and secondly all the countries that the EU has already signed an FTA with. Once Brexit occurs there is a risk that the UK may no longer have FTA access, and will therefore possibly face both tariffs and regulatory barriers. Regulatory barriers are harder to identify and quantify, so the easiest measure to consider here is tariffs.

A natural reasonable assumption to make is that if the UK does not manage to agree free trade either with the EU itself, and also with the EU’s current FTA partners, then the UK would adopt the EU’s tariff book in the WTO, hence the tariffs that the UK would levy would be the current EU MFN tariffs.

Consider first trade for the groups of countries identified above. We see that 11% of UK exports go to the countries that the EU currently has some form of free trade agreement with, and another 11% go to those countries the EU is currently negotiating with. Following Brexit there is a real possibility that the UK will no longer be party to these FTAs and therefore may now face tariffs in these markets, and similarly will levy tariffs on imports from these countries.

Table 1: Share of UK vehicle trade by country groups

Export share Import share
The EU 44% 85%
50+ countries the EU has FTAs with 11% 7%
20 countries the EU is negotiating with 11% 6%
Those the UK may want to sign agreements with: USA, China, Japan, India, Australia 33% 6%

How substantial are these tariffs?

  • The EU average MFN tariff on vehicles in aggregate is 6.2%
  • However, at the more detailed level the tariffs range from 13.8% on “Road Motor Vehicles”, to 2.1% for “Trailers and semi-trailers”
  • If we look at the MFN tariffs levied by the EU’s FTA partner countries they are as high as 22% in Tunisia, and are greater than 10% for 16 of these countries. These are all markets where there is a risk the UK will face these tariffs following Brexit.

In addition to the preceding technical standards are really important.  In the car industry these have long been harmonised across Europe but until 1992 there were trade barriers caused by differences between countries in the ways conformity with the standards was assessed. Fully free trade requires a mutual recognition agreement on “conformity assessment.” This currently exist as part of the UK’s access to the EU’s Single Market – however following Brexit this may not be the case. Moreover even an FTA applies only to cars “originating in” the partner countries and the UK would need to prove the requirements to meet rules of origin for car parts.  Proving that one has done so can be onerous. Failure to be able to do risks disruption to value chains.

Where are the opportunities?

One can identify two types of opportunities:

  1. How to export more vehicles to existing markets
  2. How to export vehicles to new markets

Over the period 2011-15 world demand for vehicles grew by 4%.  Out of the 50 most important destinations for the UK there were 24 countries where global demand for vehicles grew by more than the world average of 4%. The table below compares the performance of UK exports of vehicles to the world to changes in world demand with respect to the fifty most important destination markets for the UK. In each cell of the table we count of the number of countries, and in brackets we give the corresponding share of total UK trade in vehicles.

Take the first cell of the table. Here we identify that there are 17 countries where overall demand declined over the period 2011-15, and where UK exports also declined. Out of the 50 key export destinations, these countries accounted for 31.7% of all UK vehicle exports in 2015.

Consider the bottom right cell. Here we see that there were 24 countries where demand grew and where UK exports grew. These 24 countries accounted for 46% of UK exports. The figures in brackets denote those countries where UK exports grew by more than world exports. These are the markets the UK is doing particularly well in. There are 19 of these, and they account for 41.4% of UK exports.  But this also means that there are five countries where although UK export rose, they did not rise by as much as demand in these markets. In relative terms, therefore the UK is not doing so well in these markets.

More striking, is the bottom left cell of the table. This shows that there are 8 countries where demand grew but UK exports declined. The 8 countries are Greece, Portugal, Finland, Norway, Turkey, Japan, Australia and China. These could therefore be seen as missed opportunities.

Table 2: Where are the UK’s missed opportunities?

Comparing 2011 with 2015 % Change in the UK’s Exports by market
Negative Positive
% change in World exports

by market

Negative 17 1
31.7% 1.2%
Positive 8 24 (19)
21.1% 46% (41.4%)

Based on the Standard International Trade Classification, category 78 (“Road vehicles, including air cushion vehicles”).

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