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Brexit: What’s going on?

Brexit seems to have everyone confused, especially the UK Government. Despite the votes of the last week we are still no cleared to how, or even when, the country will cease to be part of the European Union.

The situation has unnerved the automotive industry for some time, with manufacturers and suppliers calling for clarity, and the continuation of a frictionless trade agreement which will not add to the costs of parts and cars. Despite the vote against a ‘hard-Brexit’ this situation could still happen if the EU decides enough is enough.

The other question currently on the minds of the British public and the automotive industry is ‘when will Brexit happen?’ The current 29 March deadline is looming, although MPs have voted to extend this, should the EU also agree.

Myths busted

The Society of Motor Manufactures and Traders (SMMT) has released a listof the most common myths surrounding Brexit and the automotive industry, together with the situation as it sees:

The body says that leaving the EU without a deal would trigger the most seismic shift in trading conditions UK Automotive has ever experienced. “Overnight, it would be hit by an immediate end to free and frictionless trade with its biggest market, an end to preferential trade with a further 70 countries worldwide, the imposition of billions of pounds of tariffs, severe disruption to supply chains and production, and lasting damage to the global reputation of the UK as an attractive and stable investment destination.”

“The past two years have seen a significant drop in investment, car sales and manufacturing, driving the industry off-course to meet its production target of 2 million cars by 2020,” the SMMT states. “This is a cyclical sector and other issues are also undermining global growth but companies surveyed said that Brexit was costing jobs and competitiveness – one in five automotive companies have already lost business; thousands of jobs are being lost – and the UK hasn’t even left yet.”

“No deal will cost jobs, not create them. Thousands of cuts have already been announced, with one in eight companies reducing headcount as part of contingency planning,” is another statement by the society. “The sector depends on accessing talent; we develop our own but look globally for the best people to fill any skills gaps and need our UK employees to develop international experience.”

Garages stockpile

Meanwhile, almost half (45.3%) of the 12,000 garages signed up to Whocanfixmycar.comhave sourced alternative, UK-based suppliers ahead of the current 29 March deadline, the web-based work provider reports. At the same time, 52% believe there will be an increase in labour costs, with nearly two thirds (61.5%) believing more customers will ignore required repairs for longer due to perceived/expected cost increases.

Additionally, one in six garages had been stockpiling parts ahead of the expected Article 50 date, based on the growing uncertainty of the situation. Since the survey results were made public, it has been announced that vehicle parts will be exempt from import tariffs, while finished cars will be subject to a 10.6% tax should no deal be reached.

Speaking about the findings, Al Preston, co-founder of WhoCanFixMyCar.com, said,

“Since the referendum resulted in the UK government triggering article 50, Brexit has been arguably the biggest talking point for people across the UK and much of Europe. However, with so much uncertainty on what happens when we leave, business owners have been left wondering how to prepare.

“The garage and repair industry is truly global, and many OEM parts are only manufactured outside of the UK. With the news that companies such as Honda and Nissan have closed factories to move production elsewhere, it only fuels worry for garage owners. However, it’s good to see so many taking precautions pre-Brexit, as I’m sure this can’t be said for all industries.”

Companies preparing

It is not just the issue of tariffs however, but increased customs checks that will be required on all shipments should the UK leave without a deal. This will cause delays at ports and could see parts shipments arrive to UK-based suppliers later than required.

Therefore, some businesses are taking the opportunity to ensure they have plenty of stock so that when the UK does eventually leave, they are prepared. 

Absolute Alignmenthas tripled stock levels over the last three months in preparation for the 29 March deadline.

The Farnborough-based company has ensured that all wheel alignment equipment featured on the Absolute Alignment website will still be available for next day delivery throughout the spring and not subject to any delays in reaching customers.

Chris Dear, Absolute Alignment’s Technical Director, said, “It’s of great importance to us that our speed of service is not in any way impacted by Brexit and the uncertainties that may bring.

“We have tripled our stock levels across our entire range, but it has been particularly essential for us to feel comfortable with the quantity of Bluetooth Pro wheel aligners we have readily available for delivery – as this remains our most popular and fastest selling product in the UK.”

Manufacturer confusion

The potential delay in Brexit is going to cause problems for some car manufacturers as well. Last year BMW, Honda and Jaguar Land Rover announced they would bring forward their annual plant shutdown to April, to counter any customs delays on parts and prevent production bottlenecks. 

However, delaying Brexit will mean the factories cease to build cars at a time when the customs union is still valid. While free trade exists, thousands of cars will not be built. Shutdowns are planned months in advance to ensure that worker holidays and contractor maintenance are in place. It is not possible, with a couple of weeks’ notice, to cancel and plan another date. 

This also means that the manufacturers concerned will still be hit by the problems they were hoping to avoid, as they will not require another period of inactivity until 2020. If a short delay, as planned by the Government, means leaving the EU on 30 June, any poor or no-deal scenario will still hurt their supply chains.

Brexit is a minefield. Even today there is uncertainty whether it will actually go ahead or not. Until the situation is clear, a deal (or no-deal) is agreed and a date is firmly set, it is anyone’s guess what the final outcome will be. But while there is uncertainty, there is an effect on business. It is not Brexit that is the issue therefore, but the build-up to it.

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