Brexit damage to automotive industry

These days, you can't flip through pages of news headlines and not be bombarded by various polls, opinions, in huge bold headlines reading:

Brexit has or Brexit will damage the U.K. industries when it eventually happens.

Whether you are a leaver or in the remain camp, you are seeing the effects of Brexit and the greater need for faster-paced government negotiations, to remove uncertainty and provide some comfort to British businesses.

This uncertainty has also been felt by the British Car industry, and there is an urgent need of government intervention, to prevent trends such as failing consumer confidence and slowing car sales to take root.

A recent study has directly linked Brexit to failing of domestic demand for new cars, that is a decrease of 2.9% in October last year alone. However, all is not doom and gloom, exports of British-built cars, by comparison, grew by ~5%, ensuring that the nation’s overall output actually increased by 3.5%.

An inside study has revealed that an estimated 1100 lorries, supply various parts from Europe to the car industry of U.K. per day, majority arriving without any customs checks.

If the figure from HM Revenue and Customs is to be believed, that is a contribution of around £35 million worth of components to car plants across the country a day, with almost 80% of the cars being exported – mostly to Europe.

There is no denying the facts, our close ties with Europe for import and export, emphasises the priority and importance of securing a deal with the European community.

No Deal....let's walk out

Britain’s departure from the European Union will happen on 29 March 2019. What does this mean for us?

Okay, So this is the doom and gloom scenario in my humble opinion, this could leave the industry faced with severe shortage of parts desperately needed. The same source has mentioned this shortfall to be at least £4.5 billion of World Trade Organisation tariffs per year.

Expert Opinions

The Society of Motor Manufacturers & Traders (SMMT) Mike Hawes - CEO clarified his position further in his recent speech "UK Automotive is great at technology. And we are damn good at internal combustion engines in particular – just look at Formula One for proof. Yet we seem to be hell bent on destroying that reputation".

If what the experts are painting, remotely resemble the truth and the reality is as bleak they say it is, then we must agree that U.K. government needs "a wakeup call". Mike Hawes said "the industry is agile, it can adapt. But it needs certainty, sensible timescales and supportive conditions".

Additional taxation - Diesel

There are additional tariffs introduced by the UK Chancellor that have caused concern for automotive industry. The new Diesel tax hike will be applied to new diesel cars that don’t conform to next-generation emissions testing standards, the new tariffs themselves won’t come into force until 2020.

in a recent speech Mike Hawes stated that the new law, which has been introduced to reduce the number of diesel vehicles on Britain’s roads, would hinder “the ability of the industry and government to achieve CO2 limits”.

This is yet another short-sighted vision of the UK government. If the chancellor believes by targeting the newest and lowest polluting models is the most effective way of reducing the ever-growing air quality problem, and meeting his emission targets, then he will be sorely disappointed.

Mike Hawes further added, "We tell the world we want to ban petrol and diesel cars by 2040. We introduce taxes, charges and budget measures which ignore technological development, which undermine our industrial capability, and which demonise one technology, diesel, despite the benefits it delivers - consumers".

Another Complication - Safety Regulation

Unknown to many including this writer, The UK is actually rather instrumental in forcing through new safety regulations. This rather surprising position also led to the formation of Euro NCAP in 1997 because it could gain support from other nations in the European Parliament.

I don't believe I need tp spell this further, The UK leave vote has effectively removed UK as a rule maker and in effect has make us a rule-taker on the world stage of car safety standards and legislation.

David Ward Global NCAP secretary General in an interview said, “In leaving the EU, the UK will be withdrawing from a complex ecosystem of vehicle regulation that has hugely improved car safety and saved tens of thousands of lives.

Ward further lambaste Prime Minister Theresa May’s recent declaration, that the United Nations Economic Commission for Europe (UNECE) is considered the main decision-maker in car safety standards. She went further by pointing out that 28 of the UNECE's 56-member states also belong to the EU.

"May got it backwards," said Ward. "It's EU decision-making that underpins the adoption of UNECE regulations, not the other way around."

He continued: "Post-Brexit, the UK will be free to exercise its sovereign rights to vote as it likes on new UNECE vehicle standards. But this will be a kind of mini-decision to be taken alongside the mega-decision already taken by the EU. And most likely we will vote the same way as the EU to avoid being on the losing side. So, outside the EU, even in the UNECE, the UK will effectively be just a rule-taker."

This, Ward says, constitutes "a relegation to the second division in automotive regulations".

He continued: "We will also be unable to participate in the EU’s framework programme for research and innovation that is closely related to the automotive regulatory process. This will harm our universities, research laboratories and automotive suppliers."

Department for Transport (DFT) spokesman responded to these comments: "We are committed to securing the best deal for Britain as we leave the EU and will work hard to ensure the UK motor industry and authorities continue to thrive and that Britain’s roads continue to be among the world’s safest.

“The Vehicle Certification Agency is internationally recognised and respected. We are confident it will remain one of the world’s leading type approval authorities after we leave the EU and it will continue to grow its influence within the UNECE system.

“By leaving the Customs Union, we will be able to forge new trade relationships with our partners around the world for the first time in 40 years while maintaining our commitment to high standards.

"Since we first joined the UNECE road vehicle agreement in 1963, we have been a leading contributor across all aspects of new vehicle technology. This will continue, as will our leadership role, as we chair several working groups and task forces.

"The UK currently chairs several technical committees and is an active member of the supervisory policy group, and this will continue through Brexit and beyond.

"The environmental regulations are led from Brussels, but these are subsequently aligned to the Geneva standards and so, once adopted, we will continue to influence the direction and stringency of any new measures."

Conclusion

There is definitely a difference of opinions between the experts and the government. Given the track record of our current government, I know whom I believe. However, one aspect of this leave that we can all agree on is, we need a deal and Prime minister and the cabinet need to be more hands on and involved. Leaving EU with no deal is and never will be a good deal and the impact will cripple our already failing car industry.

One of my favourite old Top Gear episodes was where they celebrated the British car Industry (Season 20 ep 6).

This is what we have or some cases had, but the road ahead is uncertain and bleak.