The auto industry dodged disaster when the UK and the European Union sealed a post-Brexit trade accord, but not before automakers announced factory closures and called off plans to make several new vehicles in the country.
More damage may still be done even with last week’s deal. Automakers including Nissan might struggle to qualify some UK-assembled models for tariff-free export to the EU as they evaluate whether they source enough of their components locally.
Costs associated with having to switch suppliers and the burdens of customs declarations, certifications and audits could still leave car companies convinced that they are better off investing elsewhere.
“This is still a thin deal with major implications and costs for automotive,” said David Bailey, a business economics professor at Birmingham Business School. “Much will depend on the degree of flexibility allowed and the degree of phasing in.”
The stakes for the UK economy are huge. The country’s auto industry employs more than 860,000 people, over a fifth of whom work at vehicle and parts factories. The sector sent 42.4 billion pounds ($57 billion) worth of cars and components overseas last year, 13 percent of the nation’s total exports.
The Brexit deal eliminates the risk of widespread exodus but still could fall short for automakers with too little leeway to take on more expenses.