New European Union trade proposals could severely undermine an €80bn cross-Channel trading relationship, impacting shared investment, consumer choice and competitiveness, the UK’s automotive sector has warned.

The current proposals would put UK production at a competitive disadvantage and would mean higher costs and less choice for consumers

As EU talks on the Industrial Accelerator Act intensify, the Society of Motor Manufacturers and Traders (SMMT) has warned of the repercussions of excluding the UK automotive sector from ‘Made in Europe’ provisions.

Introduced by the European Commission to shore up domestic green industries and combat heavily subsidised competition from China, the draft law includes strict ‘Made in Europe’ local content rules.

Under the current proposals, future UK-built vehicles would be denied access to incentives available to EU-built products, such as support for greener corporate fleets and CO2 super credits. Vehicles would also be excluded from EU Member State procurement, despite the UK’s role in Europe’s automotive supply chain.

The SMMT has warned that such an outcome would put UK production at a competitive disadvantage in its largest market, reducing demand for UK-built vehicles and, in turn, reducing UK sourcing of EU components, goods and services. It would also mean higher costs and less choice for European consumers at the very time the sector needs scale, investment and affordability to meet competitive challenges and accelerate the transition to zero emission mobility.

The deep integration of the EU–UK auto manufacturing industry is laid bare in new analysis published today by the SMMT. The UK is the EU’s largest export market for passenger cars and vice versa, while EU manufacturers sell more automotive components to the UK than to any other global market in a trading relationship worth €80bn annually.

The analysis, carried out by Oxford Economics, estimates that UK automotive production supports €24bn (£20.6bn) of economic activity across the EU, spanning every sector from utilities to financial services and real estate.

The UK auto sector also sustains 250,000 EU jobs through supply chain activity and wage-funded consumer spending, while UK automotive exports to the EU alone generate €5.6bn of spending across the bloc, supporting 58,000 jobs and €1.6bn in tax revenues.

The SMMT is urging the EU to recognise UK-built vehicles, parts and materials as equivalent to EU products, protecting competitiveness, consumer choice and one of Europe’s most valuable supply chains.

Without a rule change, the UK’s exposure would be felt across Europe’s major automotive economies, with the biggest GDP impacts in Germany, France, Italy and Spain – at around €6.3bn, €2bn, €1.7bn and €1.5bn respectively. That economic risk is matched by significant employment exposure, with UK output supporting thousands of jobs in each market, including 69,000 in Germany, 24,000 in France, 22,000 in Spain and 20,000 in Italy. The dependency is even more pronounced in Central and Eastern Europe, where UK automotive production supports 23,000 jobs in Poland, 14,000 in Romania, 13,000 in Czechia and 11,000 in Slovakia – equivalent to as much as 0.46% of total employment in Slovakia and 0.24% in Czechia, reflecting their more labour-intensive industrial bases.

Mike Hawes, SMMT chief executive, said: “The EU is rightly focused on strengthening its industrial base, but the UK remains fundamental to Europe’s automotive ecosystem and is therefore essential to that ambition.

“Excluding the UK from ‘Made in Europe’ would be an own goal, weakening competitiveness, reducing scale and limiting consumer choice. We need a better outcome – one that recognises UK Automotive as a trusted partner in the Industrial Accelerator Act and strengthens, rather than fragments, Europe’s automotive industry.”