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The effect of ‘Brexit’ on car pricing

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17 November 2015

Potential effects of a Brexit

  • Importing cars manufactured in Europe could become more time-intensive and costly, due to changing import requirements and re-negotiated trade agreements.
  • British vehicle exporters may find it more difficult to sell to EU consumers, which may increase pricing of UK-made vehicles.
  • Reduced red tape from European legislation could impact the pricing of vehicles, both positively and negatively.

DEALERSHIPS are being urged to assess carefully the potential impacts that a decision by the UK to leave the EU could have on their businesses, as speculation mounts that a referendum may be called for as early as next June.

James Broadhead, CEO of Close Brothers Motor Finance, has warned of the effect of ‘Brexit’ and spoken of the need for motor dealers to ensure they are fully informed about the likely repercussions of both ‘in’ and  ‘out’ outcomes to referendum voting and to plan now for how these will be managed, in particular should the electorate decide to leave the EU.

“We aren’t concerned with the political elements of the debate but we do think it is crucial that dealers are as informed as possible, and have the opportunity to protect their business and plan for their continued growth whatever the final outcome of the referendum.

“Leaving the EU will inevitably impact the automotive industry considerably given the inter-dependence of manufacturers and consumers across borders. Some will view these impacts as negative, and some as positive.

“We work with all our customers to proactively inform them of all the major issues which could affect their business, including the prospect of a ‘Brexit’. We have a responsibility to help ensure no dealership’s business is undermined as a result of being under-prepared.”

Having spoken with dealers, Broadhead identified three key potential impacts of a Brexit on UK motor dealers – that importing cars from Europe could be more time-consuming and costly, difficulties of British exports to EU to raise prices, and cutting Euro red tape could affect vehicle pricing either up or down.

Broadhead concluded: “Harmonisation of regulations and standards across Europe creates a simpler sales environment across borders, so if we leave the EU market, relationships with European manufacturers may be affected.

“The Department for Business, Innovation and Skills (BIS) estimates that the cost of EU regulation for UK businesses is £9.4 billion per annum. With no EU regulation affecting them dealers need to determine whether this will help or hinder their strategies for growth. Vehicle pricing could be also affected given that European legislation affects a huge range of issues that impacts dealers’ businesses, from tax bands to import costs to consumer rights.”

“While the date for a referendum is uncertain, it’s crucial that dealers consider placing contingencies in budget forecasts for 2017/2018, as if a Brexit does occur, it will certainly be followed by a period of uncertainty as the market adapts to the new situation.”

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