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Auto firms are at risk of extinction in the UK after Brexit, business chief says

Key Points
  • UK-based manufacturers set to suffer after Brexit, according to the Confederation of British Industry (CBI).
  • Car production speeds are feared to be under threat from extra checks at the border with Europe.
  • Representatives for the U.K. auto industry want "free and frictionless" trade to remain.
Vehicles go through final checks after being assembled on the production line at a Toyota plant on October 24, 2014 in Derby, England.
Peter Macdiarmid | Staff | Getty Images

The U.K. car industry risks becoming extinct after Brexit, according to the president of a prominent business lobby group.

Paul Dreschler from the Confederation of British Industry (CBI) claimed Wednesday that U.K. lawmakers had failed to help businesses in Britain make strategic decisions as the date for leaving the European Union loomed.

"If we do not have a customs union, there are sectors of manufacturing society in the U.K. which risk becoming extinct," Drechsler told BBC Radio 4's "Today" program.

A customs union is the EU agreement that allows partaking countries to set common external tariffs, allowing goods to travel freely between those countries. Whether the U.K. will remain is this agreement or not has been one of the major sticking points of the recent Brexit negotiations.

Getty | Carl Court | Staff

Dreschler said the car industry is particularly vulnerable because of its "just in time" production method. This is a manufacturing technique developed originally by Japanese firm Toyota that allows assembly lines to receive raw materials and components as required by production schedules.

Dreschler warned that manufacturers, especially auto firms, will lose this flexibility as cross-border materials encounter additional cost and time-delays when entering the United Kingdom.

In a sign of nervousness over the post-Brexit landscape, Jaguar Land Rover announced Monday that it is to move production of its Discovery SUV to Slovakia from next year.

Dreschler, who is due to leave the CBI this week for a new role in the City of London, was also scathing of communication from the U.K. government.

"We have a negotiation within the U.K. government that's gone on for nearly three years. We still haven't got clarity about the future direction, about where we're heading, what the future relationship with Europe will be, at a level of detail that matters for investment," he added.

EU has upper hand in Brexit negotiations, analyst says

The Society of Motor Manufacturers & Traders (SMMT) exists to promote the interests of the U.K. automotive industry. Its chief executive, Mike Hawes, told CNBC in an email that "free and frictionless trade" was the main reason for the U.K. automotive industry's recent success.

"Quite simply, any model that fails to replicate the benefits of the trading relationship we currently enjoy with our largest market will be bad for U.K. Automotive, resulting in major disruptions to vehicle manufacturers and their supply chains," said Hawes.

In response to the claims, the Department for Exiting the EU told CNBC Wednesday via email that the U.K government was "focused on delivering a Brexit that works for the whole of the U.K." and that included all businesses across the economy.