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The Brexit Debate: Motor Trade Industry

The Brexit Debate: Motor Trade Industry

Posted by Grant Georgiades on May 31, 2016.

The debate regarding Britain’s position within the EU continues to rage and will do so until the UK public vote in a referendum on the subject on June 23rd 2016. Central to most peoples’ decisions will be their job security.

A number of industries within the UK appear to be evenly split on the subject, with informed opinions coming forward to give vehement support on either side of the argument.

Undecided voters looking for a mast to nail their support to will be confronted with an avalanche of: statistics, rebuttals, opinions and counter opinions that they must wade through. That is unless you’re part of the U.K. Motor Trade industry where workers appear to clearly know which side their bread is buttered on.

 

The sector has been a shining light of the Chancellor George Osborne’s desire to rebalance the economy away from financial service towards manufacturing. British manufacturers made almost 1.6 million cars in 2015, which was more than any other time in the last decade. Motor trade provides 800,000 jobs across the UK and generates £15.5 billion to the UK economy.

The Government is also desperate to address the country’s trade deficit to prevent us continuing to import more than we export. In regards to that effort the motor trade industry is again teacher’s pet. In 2015 77.3% of total production was shipped overseas.

Brexit campaigners who are promoting the vast trade possibilities of the world beyond Europe’s boarders will have been down hearted to learn that demand fell by 37.5%, in China and 69.4% in Russia.  Conversely in Europe, the UK’s biggest car trading partner, demand increased for UK-built cars rose by 11.3% over the same period. The EU now accounts for 57.5% of all UK car exports.

 

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No doubt it was these figures that prompted The Society of Motor Manufacturers and Traders, which represents an array of UK businesses within the motor trade industry, to canvas opinion from their members on the referendum.

 

The SMMT found that more than three-quarters believe the UK leaving the EU will be harmful to business. 88% of large motor industry businesses are against leaving the EU.  It’s easy to see why large trade companies would hold that opinion.

A boarder-less EU enables large influxes of cheap, skilled labour to enter the UK without restriction from eastern Europe on demand. With pre-agreed manufacturing and safety standards agreed across all member states exporting is more cost effective and swifter.

However 73% of small to medium sized motor trade firms also want to remain in the EU. And as a whole 77% of the industry were in agreement that Europe was best for their businesses.

SMMT members that completed the poll are in agreement that remaining in the EU, with its potential market of over 500 million consumers, is imperative for the UK to remain competitive. However many did express the opinion that a certain amount of reform is needed.

 

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Toyota have two manufacturing plants in the UK and export nearly 90% of their UK-made cars, largely to EU countries have come out in support of the remain campaign. Nissan who produce more than 475,000 vehicles a year in the UK, 80% of which are exported have also joined the debate on the remain side.

 

 

Opinion from Industry Leaders

Tony Walker, Toyota’s deputy M.D. said a potential Brexit would, “Open up a very uncertain future of technical difficulties and increasing costs.”

Nissan Chairman and CEO Carlos Ghosn said that the UK voting to stay in the EU,

“Makes the most sense for jobs, trade and costs. For us, a position of stability is more positive than a collection of unknowns. However, this is ultimately a matter for the British people to decide.”

Dr Ian Robertson, a member of BMW’s Board of Management, “Our experience shows that the free movement of components, finished products and skilled workers within the EU is extremely beneficial to British-based business.

Mercedes-Benz boss Dieter Zetsche believes the economic impact of a Brexit would be, “Much more serious for the UK than for the rest of Europe.”

 

 

Cropped image of salesperson shaking hands with female customer. Horizontal shot.

Brexit’s Potential Impact on 2nd Hand Car Values

The above opinions relate largely to the manufacturing of new vehicles. However a Brexit would poise difficult questions for the used car market.

Glass’s Head of Valuations, Rupert Pontin, recently warned that with no precedents on which to base the potential impact of a Brexit, there will be “significant uncertainty” regarding used car values if the UK were to decide to exit the EU. With few relevant examples to draw upon Pontin is left to surmise that major dealer groups might,

Write down all their stock by a few percentage points if there was a successful exit vote simply in order to be financially prudent in the face of the unknown. This kind of behaviour could, in itself, contribute to something of an economic slowdown, which would compound the effect on values.

The  motor trade plays a significant role in to the UK’s economy, both in terms of income for the treasury and as an employer.

 

Ridding us of Red Tape

A reoccurring message from the leave campaign is that the EU burdens the UK with red tape that holds back business and makes us uncompetitive.

Opponents have highlighted that since 1999 in approaching 2,600 EU votes Britain has voted against only 56 times and abstained 70 times. That means that on 95% of occasions the UK has accepted the EU’s policies without objection. Yet more statistics to take on board I hear you say.

Open Europe estimates the annual cost of EU red tape to be £33 billion. However they provide a parallel estimate based on official impact assessments of the benefits to Britain each year of EU regulations to be £58.6 billion. What could these be? Well a single testing regime for products might be one but let’s not get into the whole VW scandal here.

Motor traders clearly recognise that as an industry theirs is one of the biggest beneficiaries of a united approach to regulation. There are perhaps alternative reasons why Britain is uncompetitive in other sectors. They might include a lack of relevant education and skills, a failure to invest sufficiently in infrastructure contributing to low productivity and an absence of innovation.

The UK motor trade industry can be accused of none of the above. The industry has made an abundance of apprenticeship schemes available. It is also at the forefront of developing new power-train and fuel efficiency technologies to meet the demands of EU emissions standards not to mention advances in driver-less cars. Although it could be argued to be a chicken and egg scenario, for the listed reasons the UK has benefited from significant investment, being awarded the second highest funding amount (behind only Germany) from the EU’s Horizon 2020 fund for automotive innovation.

 

The Brexit debate at CDX16 certain provoked strong opinions from Car Dealers on both sides

 

The Impact of Brexit on Motor Trade Insurance Costs

The UK insurance industry is a integral part of the economy. It manages investments of £1.9 trillion which accounts for 25% of the UK’s net worth. It also employs around 330,000 people. In terms of insurance and long-term savings products the UK enjoys a £21 billion trade surplus with the rest of the EU. That is one of the main reason that the majority of insurers favour the ‘Remain’ campaign.

The insurance industry will need to carefully manage the aftermath of the referendum, whatever the result . This period will be crucial to continuing what is a Global success story and ensuring premium stability for UK consumers.

There are genuine concerns for the prosperity of the UK’s insurance industry either way. A ‘Leave’ vote would instigate the sector having to navigate uncharted waters in the re-negotiation of its trade agreements with the EU. A ‘Remain’ vote  would increase solvency requirements as well as the regulation of capital markets, data protection laws and cyber protection safeguards.
Whatever the outcome of the referendum, the impact on the UK insurance markets will be significant. Large insurers with high levels of capital reserves may be better protected. Alternatively smaller insurers may be more agile and adaptable to the changing circumstances. Like the result, the fallout will be difficult to predict.

 

Fortunately for our motor trade clients we have relationships with over a dozen leading motor trade insurers. Therefore if in the aftermath an individual insurer struggles  we will be able to minimise the impact by sourcing a competitive alternative.

 

Ryan Georgiades, Managing Director of Plan Insurance Brokers

 

 

So in summary….

As many industries struggle to reach an agreed stance on the EU referendum its clear to see that the majority of motor traders are in favour of remain. No matter which way the vote goes, we hope the industry continues to thrive.

 

 

Read more: The 5 Biggest Scandals in Motor Trade History

Read more: 7 Motor Trade innovations you couldn’t live without today

Meet the Author Grant Georgiades

Marketing Mastermind with a love of dark chocolate, Grant is the youngest of the 3 Georgiades brothers. His industry experience is applied to writing blogs on all manner of topics….. but don’t ask him anything about engines.

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