UK automotive industry urges Brexit rethink

Published:  26 June, 2018

The SMMT today (Tuesday 26 June)  called for swifter progress on Brexit and a deal that, as a minimum, maintains customs union membership and delivers single market benefits.

The call came as the organisation published figures showing record turnover, but amid growing concern that progress could be reversed.

UK Automotive’s 19th annual Sustainability Report reveals the manufacturing sector turned over a record £82 billion in 2017, marking an eighth consecutive year of growth. The sector’s economic contribution now stands at £20.2 billion, although a recent SMMT study showed its impact on adjacent sectors as significantly larger, at around £202 billion – some 10% of UK GDP. Jobs in the UK automotive manufacturing sector rose 2.8% to 186,000, with employment across the wider industry reaching 856,000.

Despite this positive performance last year, the first six months of 2018 have been less encouraging. Production output has fallen alongside slowing demand in the new vehicle markets; job cuts have been announced and investment has stalled, with just £347.3 million earmarked for new models, equipment and facilities in the UK – almost half the sum announced in the same period last year.

Speaking at the industry’s annual Summit, Mike Hawes, SMMT Chief Executive, said, “Today’s figures show the critical importance of the automotive industry to the UK economy. There is growing frustration in global boardrooms at the slow pace of negotiations. The current position, with conflicting messages and red lines goes directly against the interests of the UK automotive sector which has thrived on single market and customs union membership. There is no credible ‘plan B’ for frictionless customs arrangements, nor is it realistic to expect that new trade deals can be agreed with the rest of the world that will replicate the immense value of trade with the EU. Government must rethink its position on the customs union.

Mike added: “There is no Brexit dividend for our industry, particularly in what is an increasingly hostile and protectionist global trading environment. Our message to government is that until it can demonstrate exactly how a new model for customs and trade with the EU can replicate the benefits we currently enjoy, don’t change it.”

Related Articles

  • Head for the Brexit 

    We've been talking about Brexit for a while now. At least once in every issue there will be a story about the process of leaving the European Union, and the potential impact on the automotive sector.  
        
    While progress is hard to gauge, with every issue there is some new angle. It's difficult to keep up, so that handy phrase "as we went to press" gets used a lot. Using it yet again, as we went to press for the October issue, a deal with the EU seemed more likely. Reports were surfacing of Germany and the UK dropping certain demands that would enable an agreement. A positive development then.
        
    Have we been giving a balanced view through the process though, and are we asking the right people what they think? Maybe, and maybe not.

    Positive aspects
    David Dawson, co-owner at Preston's Car Doctor contacted Aftermarket to express frustration regarding the coverage of Brexit in the magazine. He had this to say:  
        
    "You’re becoming as biased as the BBC. this is Project Fear all over again. Try balancing your reporting with some positive aspects and opportunities that Brexit may provide us with. BAE Systems has won a £20bn contract to build frigates that will form the backbone of the Australian navy, beating off rival proposals from Italian and Spanish groups for the biggest naval defense deal of the past decade.
        
    "I know it’s not automotive news but there will be many opportunities like this for the automotive industry outside of the EU post Brexit. The Germans French and Italians will still want to sell cars to the UK. It just annoys me that the media constantly go on about how bad it will be when we leave the single market. There will be many opportunities and upsides out of the EU even on WTO tariffs."
        
    David added: "I read Aftermarket magazine, both online and the printed version and have done for many years. However in recent times many of your articles paint a dim picture for the industry outside the EU would be nice to read something positive for
    a change."
        
    Now, as a publication we stand by our reporting, and will cover positive and negative views on key issues as they arise. We do listen to our readers though, and David's argument did make us think. It also raised another issue – one of representation.
        
    Having heard from David in the north of England, we thought we might take views from other businesses around the UK, to see what they think the impact of Brexit will be on their business.

    Access
    Turning our attentions south, we asked Kevin Pearce from 2018 Top Garage winners Cedar Garage in Worthing his views on whether Brexit will have a positive or negative impact on the aftermarket. "I think it could go either way," mused Kevin. "I don't see any positives it can necessarily bring. On the negative side, I think we could struggle to get hold of technical data and manufacturer-specific information." According to Kevin, UK consumer buying choices have built up a car parc that could swing things 'our' way: "Considering the number of vehicles we actually import, especially the German stuff, we should actually be in a very strong position to dictate terms. If they want to continue to sell cars to us, whoever is negotiating for the UK should be able to dictate terms on that. Going forward, in terms of telematics we need to make sure the aftermarket stays on the right side of the manufacturers to make sure we continue to get access."
        
    Cedar Garage recently opened a German marques-only outlet, so we wondered if he thought Brexit might have a specific impact on the business's ongoing endeavours: "If it does, not for a long time," replied Kevin. "I think generally it will all come down to how well the negotiations go. We have good access to all the data we need for the German brands. So long as Brexit does not get in the way of that, I can't see how it could cause a problem.
        
    "Obviously a lot of the parts that we buy come from Europe. Hopefully the prices won't increase too much. At the end of the day, we import so much, that if these people then do not want to sell to us, they are surely going to be the ones that lose out."
        
    We went onto ask if Cedar Garage's customers had displayed any noticeable Brexit jitters: "So far it does not look like that at all. We have not seen anything like that. All of our customers are carrying on as normal. If any of them say, ‘I can't afford this or that’ I don't think it affects our trade that much. Maybe if it was car sales, but definitely not in terms of the repair market."
        
    While garages on the south coast might be closer to the continent than most of the other businesses in the market, it's not like Cedar Garage customers are likely to head over the channel to France for their car servicing is it? Shaking his head, Kevin replied: "Of course not." As far as Kevin was concerned, the market is changing and this should mean the supposed consumer confidence hit that might result from Brexit could be over-stated: "What we are finding is that people are looking more and more for a professional service, and are prepared to pay for that. People are becoming more conscious of what goes into a car and are prepared to pay. They would rather pay a professional to pay to repair their car, rather than someone they met down the pub who does it in the car park."

    Uncertainty
    How you feel about the relative opportunities and threats of Brexit can largely depend on where you are sitting. For businesses in Northern Ireland however, Brexit has its own special issues. Starting with the more general concerns,  Colm Higgins from CH Autoservices  in Magherafelt, Northern Ireland said: "I think the biggest issue for most garages, with the position we are in, particularly the go-ahead guys who are into diagnostics, is access to data. This is the issue we would want to address first and foremost. We rely on the access to manufacturer data that is assured through European regulations like Euro 5, so obviously we are concerned. With Brexit nobody really knows what is going to happen.
        
    "Some of the manufacturers, like Mercedes-Benz, had a very good scheme where you could lease a diagnostic tool, but they removed that recently, and I think it is tied to Brexit.
        
    "Obviously the price of parts and access to parts, is something to be concerned about as well. MOTs too, as well as emissions. Are we going to establish our own standards? Are we going to be governed by European rules? Or are they going to be similar to the European rules? Is it a chance for the UK to make its own emissions standards. If so will they be similar, or less?  
        
    Colm continued: "Also, what affect will it have on the car parc? What cars will we be working on? Are we going to see a change in consumer activity as well? What the good guys seem to do is look at what people are buying and how the market is going and see the trends. Obviously electric vehicles is something we have invested in here. Is that going to be impacted by that? Is it going to be more or less. It is important to get an idea of where things are going to go. The biggest problem is that nobody knows.
        
    "Almost everybody has a German or French car in the UK, or at least a European car. What is going to  happen? Are they going to be taxed more? In the second hand car market we are still seeing the effects of years of uncertainty over diesel."
        
    "The key thing for any business is to be ahead of the curve or at least be aware of where it is going before it gets there. For any business you would be absolutely crazy to  bury your head in the sand. It gives you a very good reason to read the latest industry news so you know what is going on."
        
    One problem that most businesses in the UK don't have to worry about is a land border with the EU. For businesses in Northern Ireland  that is a real concern. Will Northern Ireland motorists head for the Republic for servicing and repairs if prices rise as a result of Brexit?
        
    "There is already a lot of that happening in Northern Ireland" said Colm. "We are about an hour's drive from the border. Some of my customers in trade sales, they sell a lot of cars to the south because the Pound is weak. We can make the most of that depending on the situation, as we can buy stuff from down there and sell it up here, or vice versa. I am optimistic, and we can make the most of that kind of situation. Because we are so close to the border,
    we can be flexible. Northern Ireland is unique that way, and more flexible if we have to adapt. If Brexit becomes
    a complete nightmare there are options in terms of suppliers."
        
    Then there's the threat of a hard border: "That's a big issue," opined Colm, "and a complete minefield. We have enjoyed this border-free situation for a long time now, and no one wants to go back to having a hard border. The flexibility would be gone. No one wants to go back to the old days here."
        
    Despite these concerns, Colm remained confident: "Anyone who is in the higher end of this business is ready to adapt to change. In the next few years you won't see an engine or a piston as it is all going to electric motors. It is change or get out really. Brexit is another factor in the motor trade, albeit one that is going to affect your life in a big way."

    Double meaning
    Next, we looked to Scotland, where the issue of exiting a bloc has a double meaning. Pier Garage is based in Ardrishaig, Mid Argyll. Owner Kris Gordon's first concern, like his counterparts in other parts of the UK, is access to data: "My biggest concern is definitely access to information. You can't get all the information from all car manufacturers. Even with the situation we have at the moment, we still struggle. With someone like Ford, they make it quite difficult to get it, and they do charge you for everything, so whether it works worse or better is my
    main concern.
        
    "I voted to leave at the time, for other reasons. There was so much stuff being put out there that you didn't know who to believe. You just had to pick a side and go with it I think. Nobody knew what chaos would happen as a result of it all. I suppose if you had thought about it, it was obvious what was going to happen. Now we are in a situation where nothing has been answered. It is worrying, because it has been a hard enough few years since the banking crisis in 2008, and now it looks like it is all going to get worse. We will have to ride it out and see what happens."
        
    Kris believes Brexit could be leading Scotland into a period of greater uncertainty than the rest of the UK: "I think it will cause a lot of distraction rather than getting people focused on getting the economy in a better place. Political parties will be thinking 'do we have to have another independence referendum and then rejoin the EU?'  Again, I voted for an independent Scotland, but now it has been decided, everyone has made their choice and is getting on with it. Despite this, the SNP is still focused on a second referendum, rather than just accepting the result and getting on with things. If we have another referendum and it goes the other way, where will it end? It could go back and forth, and the same with Brexit, there is always going to be someone who is unhappy. I think they need to accept it and do the best they can."

    Your views
    We found a mixture of views from business owners on both sides of the argument. Do these views on Brexit chime with your own? Or do you have an opinion not expressed here? We would love to hear from you. Get in touch with us via alex@aftermarket.co.uk to tell us what you think.

  • Temporary is contemporary  

    The shortfall of skills in the UK automotive industry is not new, but with the industry poised for continued growth coupled with the fact vehicles are becoming increasingly computerised and more electric cars are entering the market, the situation has become more pressing.

    No longer is the career path of a vehicle technician a matter of looking over the shoulder of a patient mentor. Progressing in the motor industry today demands digital skills — a diagnostician who can solve puzzles without physical clues, like an engine knocking or an oil leak.

    This is all putting tremendous strain on an industry which is already struggling to find the talent it needs and, while in 2016 pockets of the country were feeling the pinch, in 2017 garages across the whole of the UK were left feeling the pressure as the skills crisis deepened.  Significantly, the impending Brexit is likely to deepen the shortage as, according to The Society of Motor Manufacturers and Traders (SMMT), at least 10% of all people employed within the UK automotive industry are from elsewhere in the EU.

    Highly skilled
    Consequently, garage owners and dealerships are increasingly seeking to recruit the most highly skilled technicians, and there is a growing pool of proficient candidates ready to fill workforce shortages on a temporary basis.
    As the economy thrives on supply and demand, and we are functioning within an industry where the demand is high, but the current workforce supply is straining under the weight of it. For the temporary contractor, there are plenty of opportunities for work. However, the pendulum swings both ways. For the aftermarket business owner, who is looking to increase productivity and ensure they do not suffer any financial losses due to empty ramps through staff shortages, relying on temporary contractors can provide an extremely efficient, quick win solution.

    From reducing the administration requirements, to having less payroll responsibilities, hiring contractors consumes less of a business owner’s time than hiring full-time employees does, and there is growing evidence to support this. With two of his permanent workforce due to attend training days last September, Krunel Patel, managing director of Cambridge Coachworks, a member of the AutoFirst Network, realised that he could face a potential loss of £2,000 per day without cover. “Initially, the thought of taking a temporary worker on was impractical. While I realised the financial loss I would make, and also the fact that my customers would go elsewhere, the prospect of vetting candidates to work on such a short time scale was daunting. However the whole process from requesting support from Autotech Recruit to the arrival on site of the technicians was seamless. Both technicians were not only a pleasure to have as part of the team, but worked extremely hard
    and helped immensely during a busy period.”

    Forward planning
    When should owners be tapping into this growing pool of highly-skilled contractors? Quite often it will be a reactive call, and temporary technicians are frequently being called upon with just a few days notice to cover shortfalls. However, for garage owners who want to run at optimum capacity with the flexibility to meet periods of high demand, forward planning is essential to cover any anticipated workforce shortages.

    While all businesses experience economic highs and lows, demand will generally follow a similar pattern each year. For instance, March and September are traditionally both busy months for MOTs and last year there was a 10% increase on MOTs due to the 2014 car sales boom, which, through consecutive annual sales, is forecast to be repeated this year. Relying on temporary technicians to plug the gap requires deliberation to ensure the right person fits the bill. Therefore it is essential that recruiting temporary technicians is built into an annual business strategy.

    Investment
    For temporary technicians, to ensure the work flows in, it is vital that they continue to invest in training and up-skill to be proficient in all areas of vehicle maintenance. While this requires an investment in both time and money, inevitably it leads to greater flexibility when taking on new work opportunities, allowing them to hit the ground running. Significantly, when faced with reports that the number of jobs in the automotive aftermarket sector expected to rise by almost 17% to 400,000 roles by 2022, there is plenty of scope for work. Couple this with the fact that many of the present workforce do not necessarily hold the required skills to carry out the work, temporary workers can help bridge this gap.

    It is vital that training becomes an integral part for all automotive workers in 2018 to ensure the industry has a flexible, highly skilled and productive workforce. Garages need to stay one step ahead of the game and ensure that any shortfalls in manpower are identified early enough so they can take on highly skilled contractors to safeguard efficiency, and maintain the
    bottom line.




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