October 29, 2020
As we near the end of the year we also get closer to the UK’s exit from the European Union (EU), and as we get closer to the end of the transition period the deadlines for trade deals are fast approaching.
Earlier today we saw UK representatives arrive in Brussels to continue negotiations for a UK-EU deal. If an agreement is not reached then the UK and EU will still be able to trade goods and services but it will be under rules set by the World Trade Organization. These rules include tariffs that should be applied to imports and exports, meaning it would be harder and more expensive to sell UK goods to the EU as well as tariffs being placed on imports if the UK government decide to apply them, which would see the purchase price for customers rise.
Another reason that both sides are keen to get a deal in place is to prevent full border checks on goods being shipped between the two markets, as this could cause bottlenecks at ports and lead to significant delays for businesses in the UK and EU.
In the car industry, we’ve already seen long delays to the delivery of new vehicles due to factory and port closures due to the pandemic, and a no-deal Brexit could see the time it takes to receive a new vehicle grow even longer, if further checks or documents are needed at ports.
The cost of new import tariffs, which are set at 10% of the imported vehicle price, could also be passed onto customers through a rise in the purchase price and monthly leasing costs could rise from the 1st of January if no deal is reached, though this has yet to be confirmed by any manufacturers or funders.
The British Vehicle Rental and Leasing Association (BVRLA) have written to senior government officials to warn of the estimated costs that the fleet industry would be burdened with if the UK and EU fail to reach an agreement. They have urged the government to continue working for a deal and to protect order banks by confirming if no deal is reached there will be a waiver on tariffs for cars, bans, HGVs and parts if ordered before the 1st of January that arrive after this date. They have also asked the government to implement a tariff review process for key sectors to request tariff reviews after the 1st of January once the full impact is clear, create a process for firms to apply for temporary waivers where there is insufficient supply in the UK of specific products and to support the Battery Electric Vehicles market with additional tax incentives and grants.
The BVRLA estimate 72% of fleet cars and 68% of vans are sourced from the EU, meaning the impact of a no-deal Brexit could have a massive impact on the industry. Tariffs could add £2.1 billion to UK fleet sector’s car renewals and another £310 million to van renewal costs annually.
The Society of Motor Manufacturers and Traders (SMMT) has warned that no-deal Brexit could mean a rise in nearly £3,000 on new electric vehicles, as an average rise of £2,800 per vehicle as a result of 10% tariffs on all imported vehicles if there’s no deal. At a time when the government is pushing for more drivers to go green and choose electric vehicles, this could have a massive impact on the number of drivers making the switch to a new electric vehicle before the sale of new petrol, diesel and hybrid vehicles comes into place in 2035.
It’s not just imports that will be affected in the automotive industry exports are likely to be hit just as hard if there is a no-deal Brexit, with import taxes being applied to goods shipped into the UK.
This comes as we see the worst September for the UK car manufacturing industry in 25 years according to figures released by the SMMT. The current pandemic coupled with the uncertainty over UK trade deals with the EU and the rest of the world has seen car production fall by 35.9% and it’s expected that less than a million cars will be produced in the UK for the first time since 1999.
Other Trade Deals:
The UK government is not only in negotiation with the EU but the rest of the world as well, to try and get the best free trade deals that it promised us.
Earlier in the month, they signed the first Free Trade deal post-Brexit with Japan, the UK’s 11th biggest trading partner.
The agreement is very similar to the one the EU currently has with Japan but has an extra section on digital trade. It also removes British tariffs on Japanese cars, which will impact car manufacturers Toyota and Nissan who both produce vehicles in the UK. However, these plants rely on parts that are sourced in the EU so a deal between the UK and EU is still needed to ensure they remain based here.
The UK is still in talks with the US over a free trade agreement, and as the US is currently focused on their presidential election it may be a little time before we see an agreement in place. The press in America have highlighted how the UK may not be as important to the US in trade negotiations without the rest of Europe behind us.
Driving in the EU:
The Department for Transport has advised it will be mandatory for all HGVs using the Short Straits channel crossing to get a digital Kent Access Permit and hauliers are being encouraged to apply for a European Conference of Ministers of Transport as a precautionary measure, as it’s not yet been confirmed these will be needed to drive in EU but is expected to be likely.
If you currently have a lease vehicle then you will need to obtain a VE103 certificate before travelling abroad. This shows you are entitled to drive the vehicle, as the legal owner is the lease company so you will not have a copy of the V5.
Post-Brexit you might also need to get an international driving permit for some EU countries, but this has not yet been confirmed. Some countries might need you to also obtain a green card or have a GB sticker on your vehicle.
We recommend you always travel with proof of valid vehicle insurance if you are taking your own car, and post-Brexit this may be a legal requirement as well.
CO2 and Regulations:
The UK government have advised that they will mirror EU CO2 regulations for vehicles registered in the UK from January 2021.
From next year UK registered vehicles will no longer count towards a manufacturer’s EU CO2 target and so they’ll be expected to meet the UK’s targets.
We will keep you updated as Brexit talks continue and what impact any deal will have on your fleet and lease vehicles.