UK automotive sector welcomes post-Brexit trade deals
Published: 04 January, 2021
After years of anguish over the prospect of trade tariffs being imposed on car parts being imported from the EU once the UK’s reached the end of the post-Brexit transition period, the UK automotive sector was finally able to breathe a sigh of relief at the end of 2020, as a post-Brexit trade deal with the EU was finally negotiated and struck just before Christmas.
In the long run-up to the 31 December deadline, the SMMT had issued a number of stark warnings on the potential impact on the sector if the UK had ended up in a no-deal scenario on WTO terms. The organisation had recently estimated that tariffs could cost carmakers in the UK and Europe £96 billion, on top of an additional £87billion hit resulting from COVID-19.
Agreement was reached on Christmas Eve, with both sides signing the deal. This was then ratified by Parliament in the UK just before New Year’s Eve, with the majority of MPs backing the arrangement.
SMMT Chief Executive Mike Hawes observed: “We welcome the agreement of a new EU-UK trading agreement, which provides a platform for our future relationship. We await the details to ensure this deal works for all automotive goods and technologies, including specifics on rules of origin and future regulatory co-operation.
“A phase-in period is critical to help businesses on both sides adapt and efforts should now be sustained to ensure seamless implementation, with tariff-free trade fully accessible and effective for all from day one.
“We will continue to work closely with government to ensure all companies are as prepared as possible in the limited time left.”
Commenting on the deal Sue Robinson, Chief Executive of the NFDA said: “It is positive that the UK Government has reached a Brexit deal with the EU that avoids tariffs on vehicles and vehicle parts. As an industry, we now have further clarity, which will enable greater investment into the sector and support consumer confidence.”
She added: “Over the coming weeks, we will be looking at the details of the agreement to understand the full implications for our members.”
Meanwhile, the UK continued to secure international trade deals beyond Europe, including with Turkey, which is a major UK market for the vehicle sector. Ford sends UK-made Transit van components to the country, and is responsible for 10% of all trade between Turkey and Britain.
Commenting on this deal. Mike Hawes said: We welcome the agreement between Turkey and the UK to extend preferential trading terms beyond 31 December. We now await the full text of the deal to assess the impact on our future relationship given the UK will now be outside of the customs union which has delivered trade benefits between the two countries.
“Imports and exports of vehicles, engines, parts and components between our two countries contribute hundreds of millions of pounds to the economy, so it is crucial that this deal provides continuity, preserving as much as possible our current relationship.”
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- 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.
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