After the UK voted ‘Leave’ in the recent EU Referendum, we take a look at what the unprecedented economic and social move could mean for the automotive and classic car industry
Brexit. A term coined to describe the the United Kingdom’s decision to sever ties with the European Union, making a go of it alone. Beating the odds and predictions, 17.4million UK people voted ‘Leave’, against the 16.1million ‘Remain’ voters, meaning that the public has spoken.
Article 50, the process that starts the official two-year countdown for the UK’s exit, has not yet been triggered – but the the referendum result has already had some serious economic the impacts. The value of the pound dropped dramatically in the hours following the decision, however it has since seen a slight recovery.
The long-term impacts cannot be predicted accurately at this stage – we simply don’t know how this fundamental change will affect us further down the line. A lot of it comes down to what kind of trade deal the UK can make with the EU. Any major effects on the classic car industry are likely to be felt further down the line, with potential positive and negative impacts to consider.
Classic car prices – A weak Pound will mean more exports after Brexit
While nobody knows how Brexit will develop in the long term, the short term impact on the Pound Sterling – currently weak against the Euro and the Dollar – will make our British classics much more appealing on the international market, especially the USA.
Robert Johnson, managing director at Classic & Sports Finance, said: ‘While there is still plenty of uncertainty about the future of the wider UK economy following the referendum result, the outlook for the classic car market is largely positive. Lower interest rates will drive investment in classic cars, while exchange rates will not affect the majority of UK buyers, and credit remains readily available.’
Classic car auctions – Business as usual?
Almost straight after the Brexit announcement, a number of auctions suffered from poor results, but as the short-term uncertainty subsides any effects of Brexit should be minimal. Nick Whale, managing director of Silverstone Auctions commented: ‘The immediate effect we anticipate is that it may be cheaper for European and US buyers to purchase cars from the UK, so that’s a positive. However, the classic car market has always been and is increasingly an enthusiast lead market, and there’s no reason for the levels of enthusiasm to change.
‘Clearly there’s a degree of general uncertainty, particularly at the top end of the market, but demand for sub £100k cars is strong at present, and we expect this trend to be a stable one.’
View from the top of the market: Simon Kidston
‘From the view of the UK car collectors, Brexit has been a hindrance rather than a boost. In the first instance it has reduced their purchasing power abroad from 10 to 15 per cent, illustrated by the fact that not a single buyer in the Le Mans auction last weekend was British, and I’d expect that to continue at Pebble Beach in a few weeks time. Perhaps not a complete lack of British buyers, but I’m sure the number of percentage of British buyers will definitely be reduced over previous years.
‘Thinking further ahead, perhaps the more relevant and longer term question that collectors should ask themselves is, does Britain leaving the EU mean that cars registered in the UK will no longer be able to circulate freely and be sold freely within the rest of the EU, and vice versa?
‘For a UK collector at the moment, he or she could go to Italy, Germany, France, the Netherlands, wherever it might be, buy a car there, and bring it back without any tax implications. They haven’t had to pay those taxes since the end of 1992, when we got the free market, and cars that previously had to come in with tax payable were now allowed in tax free.
‘For the past 23 years, we have been in the lucky situation where everything has moved around Europe freely. Now with the UK leaving, will we go back to a situation where cars coming in and out of the UK have to have T forms, or transit papers, as they used to once upon a time? Will they have to pay customs, VAT and if applicable duty at the border in Dover or Felixstowe? I certainly hope that we don’t go back to that situation, but that’s something that will only become evident going forward.
‘Everything is all still to be negotiated at this point, and i’m sure that plenty of European countries will want it to be as difficult as possible for Britain, in order to discourage other countries from doing the same, but equally there’s a lot of potentially lucrative business that could be lost if a deal on both sides can’t be agreed upon.
‘The classic car world is of course a microscopic fraction of the overall import/export business that the UK does during the course of the year, but nonetheless one would hope that a sensible deal could be negotiated.
‘Was Brexit a good move for the UK classic car market? I have to say if you’d asked me before the vote I would have been ambivalent, I can see the pros and the cons on both sides, and having lived most of my life outside of the UK – and in particular Switzerland where of course we’re not members of the EU – I’ve seen both sides.
‘I was in the business before we had the free movement of goods, and I remember what it was like when I used to organise auctions in Germany, for example. The amount of extra work that it used to create, including the need to have the correct customs forms for each and every car. And indeed all the years that I organised auctions in Switzerland, long after the free market existed, it was always much more hassle moving cars in and out.
‘Personally, leaving aside all of the political ramifications, from the pure perspective of the classic car business, Brexit is is a hindrance rather than a boost.’
How else could leaving the European Union affect classic car owners in the UK?
There has been a lot of legislation coming from the EU when it come to the historic vehicle movement, with FIVA (Federation Internationale des Vehicules Anciens) at the forefront. The FBHVC, the UK arm of FIVA, has always been keen to fight for the rights of British classic enthusiasts, something that it won't be able to do after the UK leaves the EU. Over the last number of years, various aspects of EU legislation around historic vehicles has made its way into the UK. With the ‘Out’ vote, this could also change.
While not welcomed by everyone, the EU Roadworthiness Directive was on track to being implemented in the UK for 2018, and at the moment there are no plans for this to change. At present, vehicles built before 1960 are no longer required to undertake an MoT test to be road-legal in the UK. If the new legislation comes into force by 2018, then the UK can exempt vehicles of 30 years or more from requiring a valid MoT – something that was certainly on the cards.
Wider impacts of Brexit on the automotive industry?
The UK is a huge importer, exporter and producer of new vehicles and parts, and depending on what kind of trade agreement is negotiated following the UK’s exit, it’s possible the long-term future of these UK operations could be moved elsewhere. While production remains competitive in the UK, extra taxation on new vehicles moving into the EU could seriously impact prices, while importing new vehicles into the UK from the EU would become considerably more expensive. It’s possible that new car sales in the UK could drop by as much as 20 per cent, especially if the UK drops into a recession.
Another casualty of the weak pound will be fuel prices, which are likely to rise in the short term. Car insurance companies are also watching how everything is unfolding, because much of the law written into UK car insurance policies comes from the EU. While talking to Auto Express, a spokesperson from the British Insurance Brokers' Association commented: ‘This is an unprecedented situation for the UK and BIBA is conscious that this will create a considerable amount of work and concern amongst members and their customers.
‘The process of negotiating exit terms, setting out future arrangements with the EU and creating trading deals is likely to take some considerable time and will impact our industry during that period.’