Brexit uncertainty

EU quit vote threat to motor retailers –

Scotland’s motor retailers are concerned about how Brexit negotiations may affect the road ahead for their industry.

Sandy Burgess, chief executive of the Scottish Motor Trade Association, said the UK’s vote to leave the European Union has already had an impact on markets and currencies.

“It is inevitable that the automotive industry - one of the strongest advocates for the UK remaining in the EU - will experience some turbulence,” Mr Burgess stated.

“At least domestically, the sector is also one of the UK’s most resilient, particularly at the retail level and is well used to absorbing the effects of global overproduction and financial crises.

“But we want to know if Brexit will present a radically different and tougher challenge for businesses in this sector?

“And what will the potential impacts be in Scotland?”

The UK automotive industry is significant in the UK economy and in its exports.

Last year 57.5% of the 1.58 million UK manufactured cars were sold in Europe.

The industry accounts for £69.5 billion in turnover, contributing £15.5bn of added value to the UK economy.

It employs 160,000 in manufacturing and a further 799,000 across the wider industry, mainly in retail.

Scotland has more than 48,000 people employed in 5,000 separate motor trade businesses.

The Scottish market takes up 10% of the UK total, contributes an estimated £7bn in turnover, and is a big part of the service sector which accounts for about 75% of Scotland’s GDP.

The SMTA chief said the UK automotive industry is anxious about the impact of the UK’s removal from the European single market.

“It is unclear what the future of the UK’s relationship with Europe will look like,” he said.

“It is possible that the UK’s departure from this free trade area will result in the loss of tariff free trade, prompting an increase in the price of imports and exports from and to Europe.”

A 10% levy on UK manufactured cars could reduce demand although the impact could be offset by a sustained drop in the value of sterling which would make UK exports more competitive.

“It is hard to tell how companies manufacturing in the UK would react to tariff and currency fluctuations in the longer term,” he continued.

“If the price of importing components increases significantly, some manufacturers could be prompted to transfer production to EU countries.

“The impact of this on the UK economy could be severe, and lead to an increase in the price of cars for UK consumers.”

At dealer level, dearer EU imports could affect UK franchise-holders’ investment in new premises and the viability of their businesses.

“We have members across Scotland who have poured millions of pounds into new premises,” Mr Burgess said.

“This was on the understanding that they will be dealing with cars and components from mainland Europe arriving at tariff-free costs.

“If tariffs are added after Brexit and the costs of cars and components go up, will dealers get a good enough return on their investment and be able to continue in business?”

On the other side of the coin, the UK is a key market for the European automotive sector and is Europe’s biggest after Germany.

Mr Burgess believed: “It is inevitable that the might of the European car manufacturers’ lobby, whose members have far more to lose than to gain as a result of unhelpful tariff barriers, will focus on ensuring that the current status quo is preserved.”

The British market is also enjoying a steady rise in the number of new cars sold in the UK, although the trend has not been shared in the smaller Scottish market.

The rise is to some extent due to the popularity of Personal Contract Purchase (PCP) leasing deals involving lowcost monthly payments as opposed to outright ownership.

The leader of the body formed 113 years ago to represent those involved in the manufacture, supply and repair of motor vehicles in Scotland, added: “A long term and sustainable agreement between the UK and the EU regarding trade is essential.”