20/06/2017 14:10 BST | Updated 20/06/2017 20:47 BST

Honda Executive In Stark Warning Against Customs Union Withdrawal

The UK's withdrawal from the customs union poses a threat to Honda's British vehicle production, a key European executive of the car giant has warned.

Honda Motor Europe senior vice president Ian Howells said that the introduction of trade tariffs between Britain and the EU stand to "seize up" the auto supply chain, as small businesses struggle under the weight of higher administrative costs.

"Leaving the Customs Union will also imply extra costs for SMEs," Mr Howells said.

"The Treasury has estimated that the cost of dealing with rules of origin declarations alone could add 4% to the cost of transactions – a significant bite into the margins of an SME component supplier.

"What would the impact be if small suppliers are unable to manage the complexity of moving goods across the new EU/UK border, or the administrative costs become prohibitive?

"Put simply, the supply chain will start to seize up, with obvious impacts on our ability to manufacture vehicles efficiently."

Mr Howells made the comments as part of a keynote speech at a conference held by the Society of Motor Manufacturers and Traders (SMMT), which also issued its own warning about a potential "cliff edge" for the auto industry unless an interim agreement between the UK and EU can be reached.

The SMMT said a transitional arrangement was necessary as the industry has abandoned hopes that a final agreement on a new arrangement between the bloc and Britain will be achieved by March 2019.

Chancellor Philip Hammond hinted at a softer Brexit in his Mansion House speech to City leaders on Tuesday morning, saying it was in Britain's interest to negotiate "mutually beneficial transitional arrangements to avoid unnecessary disruption and dangerous cliff edges."

Mr Howells stressed that Honda - which has its UK manufacturing hub in Swindon - was committed to Britain despite its divorce from the EU.

"Honda remains committed over the long term to its sales and manufacturing activities in the UK and Europe.

"The recent £200 million investment into Swindon's UK plant (Honda of the UK Manufacturing) has evolved the facility into the global production hub for the Civic Hatchback, exporting to North America, Japan and the EU.

"My request would be for the UK Government to do all it can to seek a deal that will promote free and frictionless trade between the UK and the EU, while ensuring the continued competitiveness of the small and medium-sized businesses that make up our supply chain."