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Factory owners will be forced to begin laying off staff within “months” unless Sir Keir Starmer can strike a trade deal with Donald Trump, MPs have been warned.
On Tuesday, industry lobby group Make UK said tariffs imposed on foreign imports to the US were hurting demand for British-made products.
Without a trade deal, the drop in orders would leave domestic manufacturers with no choice but to start cutting back production and staff numbers, the business and trade select committee was told.
It comes as Sir Keir, the Prime Minister, is seeking a deal with Washington to exempt British exports from Mr Trump’s general 10pc tariff on all goods, and tariffs of 25pc on steel products and cars.
Stephen Phipson, the chief executive of manufacturers’ industry body Make UK, said: “We don’t know from one day to the next whether Trump is going to carry on, whether he’s going to suspend [the tariffs], whether he’s going to change. It makes planning your business and your investments extremely challenging.
“Some manufacturers are putting in temporary contingency plans at the moment, hoping that in the next month or two we can get some sense and they don’t have to do the next level, which will be, if you see a demand reduction, scaling back factory capacity.”
Asked whether this meant lay-offs, he confirmed they could begin as soon as this summer, adding: “They will absolutely have to.
“Many of those large companies have put contingencies in place in one form or another, which gives them two, maybe three months of gap. That gives you an order of timescales before there would be a reduction in capacity planned.
“For [small and medium-sized enterprises], they’re living hand to mouth ... So for them, it’s a much more direct impact.
“The larger ones can put this off for a few months, but the smaller ones are going to see it now.”
Carmakers are among the companies warning of a grave risk to their industry if no deal can be reached, with Jaguar Land Rover pausing exports to the US this month to take stock of the impact on demand.
Nissan, which makes cars in Sunderland, also warned it was too expensive to run a car manufacturing plant in the UK.
Alan Johnson, Nissan’s senior vice-president, told the committee: “The biggest challenge we have is that no matter what we do ... we (the UK) is too expensive.
“The Sunderland plant is the one of the most efficient and well-run in Nissan, but by the time you’ve paid your electricity and gas, and paid the staff their wages, we are still way too expensive – and industrial strategy has to get to that. If it doesn’t, it’s just a waste of time.”