What does the Brexit deal mean for the UK automotive industry?
The last minute Brexit deal might mean the UK will avoid 10% tariffs on new vehicles but how much cause for relief does the British automotive industry really have?
The trade deal means new vehicles can continue to be imported and exported under the same rules that applied to the UK as a member of the European Union, and the lack of tariffs in the agreement will save consumers thousands on the retail price of a new vehicle. Major investments that had been stalled during Brexit uncertainty – like Nissan’s Qashqai production in Sunderland – should now have the green light too.
But in the wake of the deal, experts warn that it is too thin, raising more questions than answers since several key areas are yet to be defined.
Lack of clarity, even with a deal struck
In reality, the future of vehicle manufacturing is no clearer than it was before the turn of the year. And while there will be the inevitable process of working through the finer details, there is every chance that disruption to supply chains will remain.
Sam Watkins, chair of the Vehicle Remarketing Association said: “It’s quite difficult to separate the negative effects of the pandemic and Brexit but getting hold of a number of popular new models is almost certainly going to be tricky in 2021.”
New car sales were down by 30% year on year at the end of December 2020, and with current uncertainly being piqued by tighter restrictions and a lack of clarity in Brexit negotiations, who knows how much further those numbers could dip?
Knock-on effect for used vehicles
It’s unlikely that the automotive industry’s problems will be short-term ones either. With smaller numbers of vehicles entering the British market, the used vehicle sector could suffer as suppliers struggle to secure used stock.
With more fleet managers and consumers looking for flexible contracts thanks to the pandemic – and fewer drivers than ever paying upfront for their vehicles – there’s every chance that the situation could deteriorate over the next quarter.
According to recent research by Closer Brothers Motor Finance, 49% of British car owners expect to pay for their next vehicle in a lump sum; a decrease of 8% compared to the previous year.
It’s the first time a pay monthly approach to purchasing has taken precedent, and the trend’s only likely to increase, thanks to financial constraints put on so many by the pandemic.
Tariffs not the only concern
Automotive businesses might have breathed a sigh of relief when the Brexit went through, putting an end to the threat of tariffs for European importations, but there are still muddy waters to navigate.
New customs arrangements and as-yet-unknown regulations for importations could add substantial costs. Even with a deal, experts estimate that new customs declarations will cost the UK economy around £15bn, and with likely further certification fees, audit costs and border delays to face, there is still much need for greater clarity and more planning.
Has the last-minute Brexit deal changed your plans for your fleet in 2021? We’d love to know how you’ve been affected, so please feel free to drop a comment below or share your thoughts with [email protected].
