You can enable subtitles (captions) in the video player
Jaguar Land Rover has warned that a hard Brexit would make it very difficult to continue operating in the UK. The company said the potential for paying tariffs could set it back 1.2 billion pounds a year, wiping out the company's entire profit, and forcing it to look outside Britain for manufacturing options in the future.
JLR's the latest carmaker to warn about this. BMW, Honda, Toyota, and others have all said that a Brexit - a hard Brexit season paying tariffs - could make their UK manufacturing operations very hard to sustain in the long term. Now all the carmakers in Britain are worried about this. The reason is not just the potential for paying tariffs on their cars that they export, but huge disruption to their supply chain.
All of Britain's car plants operate on what's called a just in time delivery system, where the components arrive at the plant hours - and sometimes minutes - before they're needed on the line. More than half of those components are imported, many of them from mainland Europe.
Right now they travel across the border freely and without checks. But any Brexit that sees them stopped for customs checks could delay that supply chain, and totally tear up the model that the manufacturers have been used to for the last 30 years.
Ultimately, for all the car plants in Britain, this comes down to competitiveness. All of the car plants around the world compete for work every time a manufacturer makes a new model. Right now, Britain wins a lot of that work. We have some of the best car plants in the world. But anything that puts those plants at a disadvantage makes it less likely that future work will come to Britain. And tariffs of 10% on exported vehicles - that's what the carmakers would have to pay under WTO - that puts the car plants at a significant disadvantage to rival plants in Europe and further afield.
Recently Jaguar Land Rover moved the whole production of its Land Rover Discovery vehicle to a brand new plant in Slovakia. That plant has the capacity to make hundreds of thousands of cars a year, and JLR could very easily send more work there. Almost all of the big manufacturers in Britain have other plants in Europe where they could divert work if manufacturing in Britain becomes uncompetitive in the future.
[MUSIC PLAYING]
Advocates of Brexit say that leaving would free the car makers to do deals around the world and export without tariffs. The problem is Britain has been a member of the EU for a long time. Many of the car plants in Britain were built-- especially by the Japanese manufacturers-- as export bases to Europe. Britain exports 80% of all the cars it makes.
[MUSIC PLAYING]
The problem of tearing up the system is that it's been so well-established. It's very difficult to repurpose Britain's factories to make cars to sell to other places without doing serious damage to the existing supply chain, and the existing business models on which many of these car plants are built.