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European Union officials are reconsidering strict regulations that threaten to exclude British car manufacturers from new 'Made in Europe' standards, a development that bolsters UK firms but reignites debate over Prime Minister Keir Starmer's approach to post-Brexit relations.

France , which had been a vocal proponent of banning UK-made cars from qualifying for subsidies under the bloc's upcoming Industrial Accelerator Act, now appears open to compromise .

Trade Minister Nicolas Forissier told the Financial Times that Paris is urging Brussels to resolve the 'problem' of the UK's exclusion, acknowledging the deep economic integration between Britain and the EU despite its non-membership.

'We will have to clarify this problem. They don't belong to the EU, but they are very close neighbours. Of course, they're very much integrated, so how do we solve this? It should be discussed. I think it's an important issue,' Forissier stated.

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The European Commission's Industrial Accelerator Act,designed to protect European manufacturers from competition with China and the United States, is still pending approval from the European Parliament and member states but could take effect later this year or in 2025.

Under current proposals, only vehicles wholly produced within the EU single market would qualify for consumer subsidies and 'Made in Europe' certification, putting UK car plants at a competitive disadvantage.

British-based manufacturers, including BMW's Mini plant in Oxfordshire and other German companies with UK operations, have lobbied intenively for inclusion.

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The Netherlands has also supported British participation, while France and its allies within the Commission had taken a hardline stance insisting that only single-market members should benefit.

Forissier's comments signal a potential breakthrough ahead of the UK-EU summit expected in July, where both sides hope to finalize agreements on youth mobility, emissions trading, and food standards, as well as the car regulations .

The economic stakes are high:UK car production fell 10 percent in the first months of this year compared to the same period in 2023, from 298 ,416 to 266,601 vehicles.

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Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, emphasized that the upcoming summit must address these issues to safeguard mutual competitiveness and growth.

A government source noted that the UK has consistently sought to ensure the IAA does not harm British interests, while Starmer's administration faces accusations of a 'Brexit surrender' by agreeing to dynamic alignment with EU rules without a formal say in their creation.

Eurocrats have warned that closer alignment could cost Britain up to £1 billion annually in budget contributions.