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How Brexit Has Affected the Car Market in the UK

Posted on October 15, 2017

 

A few weeks after the surprising results of the referendum on the future of the UK membership to the EU, we posted an article on how Brexit hadcreated the perfect economic environment to import a car from the UK and how we, at McCullough, had instantly seen the effect of what is known as ‘Brexit’.

The very first consequence of it was the instant weakening of the pound sterling against pretty much all currencies in the world. On May 1st, 2016, one pound was worth AUS$1.92 and NZ$2.09; the day after the vote, it was worth AUS$2.03 and NZ$2.17. You may think that it isn’t much of a difference, but it actually represents an increase of 9% for the AUS$ and almost 7% for the NZ$.

It made any goods from the UK cheaper overnight, and we saw an immediate increase in demand from clients who decided to take advantage of those conditions and import cars from the UK to NZ. It also had an unforeseen positive impact on the UK which experienced a boost on the export of all consumer goods, vindicating supporters of Brexit who had argued that absolutely nothing bad would happen to the UK economy if the country left the EU.

A year later, after Prime Minister Theresa May signed Article 50 – the official trigger to leaving the EU - the negotiation of trade agreements for a post-EU United Kingdon with the rest of the world, and the EU in particular, looks something like an awkward tango – one step forward and two backward. Statements after statements are issued by everyone, either stating that the negotiations are a debacle or good porgress is made.

But the one thing on which everybody agrees is that the terms of the trade relationships of the UK with the world will affect the ability of the industry to remain competitive.

To be or not to be in the Common Market

Being part of the EU gives access to a wide geographical and economical area where tariffs have been abolished between members, which has hugely benefited the British car industry. It currently employs around 800,000 people and it exports more than 80% of manufactured vehicles to over 100 countries; half of which to the EU. But it isn’t only as an outlet that the Common Market is important to the UK: she is also very dependent on the EU to source parts and materials as 63% of her supply expenses are abroad.

Withdrawing from Europe will mean that goods from the UK will become more expensive and therefore be at a disadvantage when exported. If the UK fails to secure special trade deals, she will have to fall back on the World Trade Organisation (WTO) terms, which will mean 10% charge on cars imported and exported and 4.5% increase on any service and industry connected to car manufacturing.

According to the Society of Motor Manufacturers and Traders (SMMT) in the UK, this would translate into an extra cost for the Bristish car industry of £1.7 billion (NZ$3.2 billion) for exported cars and £2.7 billion (NZ$5.1 billion) to cars imported from the EU. For consumers, the SMMT estimates that this would represent an additional £1,500 (NZ$2,800) more per car on average, but PA Consultancy puts it as high as almost £2,400 (NZ$4,500). And this won’t necessarily start only when the UK leaves the EU. Car dealers may well decide to increase prices ahead of Brexit to protect themselves from uncertainty.

On the other hand, it is thought that the used-cars market is less likely to be affected – good news for classic car collectors!

Car emissions

At the moment, emissions standards are ruled by EU legislation and the question is whether it will continue. Although the UK wouldn’t be bound by those rules, it wouldn’t be in her interest not to. Indeed, breaking away from those standards would make her vehicles unsuitable for any country in the EU without significant and expensive adaption. Likewise, cars made in the EU may not be acceptable in the UK if standards were different between the continent and Great-Britain so it looks as though this is unlikely to change, purely because of business common sense.

If you are likely to buy a car in the UK to import it, that is great news as you can be pretty sure that standards won’t differ massively from what is currently in place and that importing a vehicle into NZ isn’t likely to be more problematic than it is now.

Car safety

Currently, the UK follows the Euro NCAP safety tests and ratings but, despite its name, it isn’t an EU legislation; the ‘Euro’ part only referring to a geographical area. The country also adheres to vehicle safety regulations from the Geneva Convention on Road Traffic, another international standard.

So if you think you will be importing cars from the UK in the future, you won’t have to worry about them not complying with NZ standards as the UK won’t have to abandon the current standards she is following.

Insurance costs

You might think that insurance costs in the UK have nothing to do with you. But they might.

British law says that if you are exporting a car temporarily – i.e. less than 12 months – it still has to be insured in the UK so you may well find yourself affected.

When the UK leaves the EU, non-UK insurance suppliers may not be allowed to continue offering their services, which may resut in a less compatitive market and increased premiums. In addition, the Motor Insurance Directive, which applies to the UK and dictates a minimum level of insurance protection in EU countries, may no longer apply, meaning that drivers may need extra cover when travelling abroad with their UK-insured cars.

If you want to take advantage of the lower exchange rate between the NZ dollar and the British pound, call us on +64 9 309 1163 or get an online quote to import your car to NZ.


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