With one year to go until the UK departs the EU, the trade association for the car sector has issued a fresh ferocious Brexit warning, cautioning that a cliff edge – even after the agreed transition period – would be disastrous for one of Britain’s most important industries.

The Society of Motor Manufacturers and Traders (SMMT) said on Wednesday that while the recently established transition deal between the UK and the EU “provides some welcome breathing space” the industry still needs to see rapid progress and clarity on many fronts.

The UK’s continued ability to trade freely with the EU – which is its largest trading partner – is essential, the SMMT said, but so are the local conditions under which manufacturers and developers operate.

“Business rates, capital allowances and energy costs, for instance, must all be globally competitive; training and skills for a productive workforce must focus on new technologies and the UK supply chain must be attractive to investment,” the trade body said.

Across the UK, around 200,000 people are employed in new car retail alone. UK-based car finance firms employ over 45,000 more people, accounting for an annual £12.5bn economic contribution. The vehicle fuel industry supports 40,000 jobs and a further 347,000 people are employed in servicing and repairs. Overall, the SMMT estimates that the sector delivers an annual £22.8bn directly to the Treasury.

“We need concrete action if we are to stay ahead in what is an intensely competitive global environment,” said Mike Hawes, chief executive of the SMMT.

The SMMT has been one of the most vocal trade bodies on Brexit since the June 2016 referendum.

In January it warned that Brexit could lead to a two-year fall in car sales of around 11 per cent in total. Already now, the industry is battling declining consumer confidence, partially driven by a jump in inflation, coupled with the fallout from a sharp fall in diesel sales.

An independent report also published by the SMMT on Wednesday forecasts that there will be a modest fall in UK car and light commercial vehicle production to 1.729 million in 2018 and 1.713 million in 2019.

Decisions from several major producers on whether to produce new vehicle models in the UK are due in the next 12 months. The SMMT said that if those decisions fall in favour of the UK, production could climb to over 1.8 million by 2023.