From the minute in June 2016 that it was announced that the country had voted to leave the European Union, to the turn of a calendar page that took us from January to February 2020, Brexit has caused much debate on the subject.
Would we be better off outside of Europe, or would the sky fall in?
The real answer looks to be a bit of both – depending on the reader’s viewpoint.
Back in May 2023, The Guardian commented that “Brexit has wrecked Britain’s car industry, but so have the Tories.”
Specifically, the paper referred to a remark from Stellantis that, it said, “warned that a commitment to make electric vehicles in Britain is in jeopardy unless the government renegotiates its Brexit deal with the EU to maintain existing trade rules until 2027. Jaguar Land Rover (JLR) has said much the same. So has Ford.”
At the heart of the dispute, say the car manufacturers, is the Trade and Cooperation Agreement between UK and the EU. Signed in 2020 it includes ‘rules of origin’ that require 40% of an electric vehicle’s parts by value to originate in the UK or EU in order for it to qualify for trade without tariffs. As most batteries come from China, it’ll be hard to satisfy those rules, harder now that the threshold rose to 45% this year, and near on impossible from 2027 when it rises to 55%.
And at the start of 2024, the Mayor of London Sadiq Khan cited independent analysis from Cambridge Econometrics that reckoned that the cost of Brexit to the UK’s economy has been £140bn. Further, the research found that “the average Briton was nearly £2,000 worse off in 2023, while the average Londoner was nearly £3,400 worse off last year as a result of Brexit. It also calculates that there are nearly two million fewer jobs overall in the UK due to Brexit – with almost 300,000 fewer jobs in the capital alone.”
But is this hyperbole?
It’s not according to Bloomberg. It reported, in March 2024, on how – since Brexit – sterling dropped in value and not recovered against the dollar and euro, that British stocks and bonds are similarly worth less compared with EU alternatives since Brexit, and that post-Brexit poll positivity crashed as soon as the result was announcedsand “UK productivity and global trade have been in a funk ever since. No one doubts now that Brexit hindered rather than helped the ailing British economy.”
Challenges
From a sector perspective, Sue Robinson, National Franchised Dealers Association chief executive, takes a more measured line. She says that yes, there were challenges, but that automotive seems to have coped.
As she comments, “before Brexit was finalised, there was significant concern and uncertainty about the impact on supply chains, tariffs, and regulatory changes.” She acknowledges that automotive is a global industry that relies on complex supply chains across borders which have witnessed issues made worse by the pandemic. Even so, she says that “despite these challenges, the industry has shown remarkable resilience and an ability to adapt. Both the new car and van markets have experienced consecutive months of growth spanning almost two years.”
Kevan Wooden, CEO at LKQ UK & Ireland, sees the same challenges but thinks too that they’re not insurmountable.
He says that “Brexit brought about challenges and opportunities for the independent automotive aftermarket.” He explains that “supply chain disruption is often highlighted as having been a key challenge presented by Brexit. But robust planning, combined with supplier relationships, warehouse capacity and inventory, meant we have maintained a consistently reliable supply of parts for our customers’ continuity.” In other words, Brexit has been a non-problem for the company.
But that’s not to say that it’s not come without cost and management intervention.
Wooden tells how the company “made a significant investment into increasing stock levels and used supply chain planning tools to help forecast demand.” At the same time, he says that LKQ updated administrative processes to “ensure we could operate as seamlessly as possible within the new regulatory and customs system.”
Trade agreements
As for how UK/EU trade has been affected, Robinson sees the unique position that Northern Ireland occupies – it’s the only region of the UK that shares a border with the European Union. She also sees that both the UK and Irish governments have made efforts to ensure a smooth transition. That said, there have been disagreements on either side that necessitated a new legal agreement, the Windsor Framework.
Robinson adds that “the extension of the Trade Cooperation Agreement at the end of last year would have certainly helped in the avoidance of tariffs on electric vehicles. However, other issues such as GB Type Approval also see Northern Ireland thrust into the spotlight with NFDA Northern Ireland calling for the government to craft a GB Type Approval framework that considers Northern Ireland’s position and maintains the attractiveness of the UK market to European manufacturers.”
But there is another issue for some in the automotive sector to worry about – the EU’s Security-related Repair and Maintenance Information (SERMI) scheme.
Hayley Pells, Policy and Public Affairs Lead at the Institute of the Motor Industry, outlines that SERMI has been “profoundly influenced by Brexit. It requires technicians to gain authorisation to access vehicle security-related information, a move with far-reaching implications for garages across the UK.”
However, she says that the UK’s approach to integrating SERMI, particularly in the context of a voluntary scheme, is still under development. She worries that “the lack of a definitive approval framework raises concerns about potential barriers for businesses, especially the smaller independents that form a vital part of the sector.” Her body along with others – the IGA and the IAAF are “actively engaged in dialogue with regulatory bodies” in advocating for fair access and adaptation to SERMI.
It should be said that Pells has concerns that firms in the sector are grappling with the need for additional training, certification, and the associated costs, all of which are essential for compliance with SERMI. Worse, she sees the “potential for vehicle manufacturers to use SERMI as a tool to restrict access for independent operators, which could upset the competitive equilibrium in the aftermarket sector.”
Pells too draws a distinction between the UK and a Northern Ireland that is bound to follow EU regulations, including SERMI. For her, “this regulatory difference within the UK underscores the need for a strategic approach to ensure uniformity and compliance across different regions.”
The next UK government
Moving forward, Robinson hopes that the next government works “as quickly as possible with NFDA and the wider industry to tackle the concerns of dealerships and consumers alike.”
Change is happening. This is why before the European Parliament election in June, Robinson says that the NFDA attended an Alliance of European Car Dealers and Repairers meeting in Rome so as to “work closely with our European counterparts to understand how any changes will impact the sector in the UK.”
But ultimately, as Pells comments, “the resilience and adaptability of the UK’s automotive aftermarket will be key in navigating regulatory changes, ensuring the sector’s sustainability and growth in a rapidly evolving landscape.”
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