Initial automotive industry reactions to UK Brexit deal

Just before Christmas, the UK Government and the EU announced that they had thrashed out a no-tariff trade deal. Negotiations went down to the wire, but, a mere four and a half years after the UK voting to leave the EU, agreement was approved by both sides.

It would be nice to think that that draws a line under Brexit; nice, but naïve, as the agreement will be scrutinised, discussed and dissected by many and diverse industries and it is not realistic to think that every industry will approve of the final agreement. To put it bluntly, not everyone can be a winner, and there will be some sectors who will feel let down – take for instance the less-than-enthusiastic response of the fishing industry.

Fortunately, Tyres & Accessories is not concerned with fish, so we can restrict ourselves to reactions from the automotive and tyre industries. There have been some initial reactions from this sector, but if one thing is certain, it is that this is a topic that will run and run as individual companies, trade associations and the like analyse and digest how the agreement will affect them.

One organisation that was very quick off the mark was the National Franchised Dealers Association (NFDA), whose response arrived in our Inbox on Christmas Eve. The NFDA represents franchised car and commercial vehicle retailers in the UK, and its Chief Executive, Sue Robinson, gave the agreement a cautious welcome. Said Robinson: “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.

“Franchised retailers will now be able to focus on what they do best, ensuring that customers get great service and value for all their vehicle-related needs.”

However, Robinson made it clear that this was very much only an initial reaction, as she added: “Over the coming weeks, we will be looking at the details of the agreement to understand the full implications for our members”.

The sound of one hand clapping

If the NFDA was broadly in favour, the response of the Society of Manufacturers and Traders could best be described as ‘the sound of one hand clapping’. The SMMT, which has always been pro-Europe (Europe accounts for 80 per cent of UK vehicle exports) is calling for “the immediate ratification by UK Parliament of the draft UK-EU Trade and Cooperation agreement (TCA), to ensure all automotive companies benefit from continued tariff-free trade with our largest market from 1 January 2021.”

The phrase ‘damning with faint praise’ springs to mind, as the SMMT continues; “While no substitute for the benefits provided by remaining in the EU, the TCA provides hope for the future, with a foundation on which to build, domestically and internationally, in 2021.”

Mike Hawes, SMMT Chief Executive, commented; “For automotive, Brexit has always been about damage limitation, and the draft Trade Cooperation Agreement, while no substitute for the completely free and frictionless trade with Europe we formerly enjoyed, will address immediate concerns. The TCA provides the opportunity for tariff and quota-free trade, foundations on which the industry can build.”

Hawes is concerned about the time scale though, adding; “Even with immediate ratification, however, there will be just hours to adjust to new trading rules, so a phase-in period is critical to help businesses adapt. All efforts should now be made to ensure its seamless implementation, with tariff-free trade fully accessible and effective for all from day one.”

‘Thin’ agreement leaves questions unanswered

The agreed deal “leaves many unanswered questions that could have serious implications for the UK motor industry” the Vehicle Remarketing Association is warning, saying that “several key points surrounding the future of manufacturing and cross-border movement of vehicles remain vague or undefined.”

Sam Watkins, VRA Chair, concedes that any deal is better than no deal, but she points out that “there are several areas where there is very little detail for the motor industry or remarketing.”

On the plus side, Watkins says; “The threat of motor manufacturing in the UK potentially unravelling overnight has been removed, and this should mean that there is no immediate question mark over UK factories and supply chains.”

However, on the debit side, she says; “Looking ahead, substantial costs have been added in terms of the new customs arrangements, and the regulatory background against which car makers operate is unclear in several important areas. “Presumably, these will be clarified in the coming months and years but it does perpetuate an effect that has been present ever since the Brexit referendum – that it is difficult to make plans and for investment decisions to be finalised without all of the facts available. There remains a lot of uncertainty.”

Watkins ends on an optimistic note, however, saying; “If 2020 has underlined anything, it is that the used car sector is incredibly flexible and innovative, and that people will continue to want to buy despite substantial practical barriers in their way.”

These are the initial reactions of part of the automotive sector, but, as we said at the beginning of this article, we can expect many more comments

from our industry to come on this subject – let’s just hope that it doesn’t keep going for another four and a half years.