German car industry warns UK that 'hard Brexit' could trigger shift south

BERLIN (Reuters) - Parts of Britain’s car industry could move to southeast Europe if it loses access to the EU’s single market in its divorce negotiations, the president of Germany’s VDA auto industry association said.

President of the German Automotive Industry Association (VDA) Matthias Wissmann gestures during a news conference on the media day at the Frankfurt Motor Show (IAA) in Frankfurt, Germany, September 14, 2015. REUTERS/Ralph Orlowski

Prime Minister Theresa May has set a March deadline to begin the formal process to quit the European Union and carmakers are concerned that Britain is heading towards a “hard Brexit” which could expose them to tariffs of up to 10 percent on car exports.

“As long as it’s unclear whether Britain will have unhindered access to the European single market after a ‘hard Brexit’, we have to reckon that investors will hold back in the UK,” Matthias Wissmann said in an emailed statement.

“It could be that production sites in the new EU countries would then be more attractive,” he said, adding that a “hard Brexit” could create uncertainty for between five and seven years.

Earlier, Wissmann named Slovakia and Poland as attractive alternative production locations in an interview with the Financial Times.

The German auto industry alone has 100 production sites in Britain, including suppliers.

Wissmann had also warned in June that a potential trade dispute between Europe and Britain would be a serious setback for the industry and result in some production sites relocating.

German carmakers exported 810,000 cars to Britain last year, more than to any other country in the world, while three-quarters of the 1.6 million cars built in Britain in 2015 were exported, most to the European Union, Wissman said.

However, Wissmann, a former transport minister and powerful lobbyist, emphasised that the VDA’s priority was to keep the EU’s 27 remaining members together.

“The UK is an important market for the German car industry, but the cohesion of the EU27 and with it the single market is more important for this industry,” he said.

Reporting by Caroline Copley; Writing by Caroline Copley and Georgina Prodhan; Editing by David Goodman/Ruth Pitchford