The European Union has a €24bn economic stake in the success of Britain’s automotive manufacturing industry, highlighting the depth of cross-Channel supply chains as Brussels considers new rules that could exclude UK-built vehicles from key industrial incentives.
Analysis by Oxford Economics, commissioned by the Society of Motor Manufacturers and Traders (SMMT), shows that UK automotive production supports €24bn of economic activity across the EU, spanning industries from utilities and financial services to real estate.
The findings come as negotiations over the EU’s proposed Industrial Accelerator Act (IAA) intensify, raising concerns within Britain’s motor industry that new “Made in Europe” provisions could put UK production at a disadvantage in its largest export market.
The UK is the EU’s largest export market for passenger cars, while the EU is the UK’s largest. Automotive trade between the two markets is worth around €80bn a year, with European manufacturers selling more automotive components to Britain than to any other global market.
According to the SMMT analysis, UK automotive production supports around 250,000 jobs across the EU through supply-chain activity and consumer spending funded by wages.
UK automotive exports to the EU alone generate €5.6bn of spending across the bloc, supporting 58,000 jobs and generating €1.6bn in tax revenues.
The economic exposure is particularly significant among Europe’s major car-producing economies. Germany faces the largest estimated GDP impact, at around €6.3bn, followed by France at €2bn, Italy at €1.7bn and Spain at €1.5bn.
The employment effects are similarly broad. UK automotive output supports an estimated 69,000 jobs in Germany, 24,000 in France, 22,000 in Spain and 20,000 in Italy.
Central and eastern European economies also have substantial exposure to British production. UK automotive manufacturing supports around 23,000 jobs in Poland, 14,000 in Romania, 13,000 in Czechia and 11,000 in Slovakia. In Slovakia, the jobs supported are equivalent to as much as 0.46 per cent of total employment, while the figure reaches 0.24 per cent in Czechia.
The SMMT argues that these links could be threatened if the IAA’s proposed “Made in Europe” rules exclude UK-built vehicles from incentives available to EU-produced cars.
Under the draft provisions, British-built vehicles could be denied access to measures including support for greener corporate fleets and CO2 super credits, as well as being excluded from procurement by EU member states.
The industry body warns that such restrictions could reduce demand for UK-built vehicles in the EU, with knock-on effects for European suppliers that depend on British production.
A reduction in UK vehicle output could, in turn, mean fewer components, goods and services being sourced from EU manufacturers, weakening the very industrial ecosystem the IAA is intended to strengthen.
The SMMT also argues that fragmentation could increase costs and reduce consumer choice at a time when Europe’s automotive industry is under pressure to achieve greater scale, attract investment and accelerate the transition to zero-emission vehicles.
Mike Hawes, SMMT chief executive, said: “The EU and UK automotive sectors have traded, invested and grown together over many years. Despite Brexit, supply chains remain deeply integrated and the cross-Channel trading relationship is worth €80 billion a year, supporting jobs, growth and investment.
“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.”
The figures underline the extent to which Brexit has not dismantled the manufacturing relationships built between British and continental European carmakers.
Instead, the automotive sector remains bound together by a network of cross-border suppliers, investment and consumer markets — leaving both sides exposed to the economic consequences of policies that make that integration more difficult.
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