For many in the sector the big question was (and is) whether the Brexit vote causes a big downturn in new car sales – or otherwise badly affects the sector. Clearly there are a range of factors that could impact this, including:

  • consumer drop in confidence leading to recession
  • the weaker Sterling exchange rate to the euro and yen, etc
  • any trade tariff – such as the 10% tariff under the World Trade Organisation (WTO) Rules - on the import of cars from the EU into the UK
  • a weaker UK dealer property market
  • changes in the legal landscape – including the Block Exemption Regulation (and related competition legislation) (BER), data protection regulation, etc.

Taking each of these in turn:

  1. Consumer drop in confidence leading to recession: thankfully, for now at least, a combination of factors from the economic and business (including employment, export and other economic data plus Britain’s (arguable!) ranking as fifth biggest economy by GDP this summer), to the political landscape and even to the Olympic medal success of ‘Little Britain’ (as the Chinese apparently referred to us in their outrage at our coming second and beating them in the medal table!) has meant that this prediction has not yet come to pass.
  2. The weaker Sterling exchange rate: clearly this has occurred and means that it may be less profitable for the EU and other foreign manufacturers to sell vehicles in the UK (especially after existing currency hedges etc have expired). We have seen what has been described as the first wave of rises in new car list prices in the UK especially, from the likes of PSA, Ford, Honda, Nissan, Suzuki etc and pressure on pricing/consumer offers and bonuses seems likely to build. It is also expected to cause a reduction in the manufacturers push of cars into the UK – with all the impact (good and bad) that may bring.
  3. Any trade tariff – such as the 10% tariff under the World Trade Organisation (WTO) Rules - on the sale of cars from Europe into the UK: market commentators appear confident that the European Union will agree a trade deal with the UK on cars, given how attractive Britain is to the European car industry. Clearly any such trade deal would apply to both cars imported from the EU into the UK - as well as for the manufacturers supplying UK cars into the EU.
  4. A weaker UK dealer property market: while the Brexit vote undoubtedly caused a bit of a shockwave – and we had at least one motor property deal put on hold - generally we are still seeing confidence in this market. Market commentators appear to be generally of the view that prime assets are still sitting at pre-Brexit vote levels with less prime / more secondary assets having been impacted but even they are expected to recover within the next six months.
  5. Changes in the legal landscape: market commentators are warning that removing the UK from the BER could hand even more power to the manufacturers in their relationship with dealers.

Early reports from our dealer clients and contacts have been mixed – from “no noticeable impact” and “no change” (so far) by reason of the Brexit vote to those who say they have felt a real cooling down. Clearly there are a raft of factors and only time will tell what the real impact and lasting effects of each of these will do. Our dealer clients and contacts do however appear to share two key themes / philosophies.

  1. Keeping positive – the sentiment summarised by John Smyth, Director at Swansway Group, that “We have to maintain a positive outlook for our staff and customers…otherwise all our [Brexit leave] fears could easily become a self-fulfilling prophesy.”
  2. Focusing on what you can control (rather than worrying about what you cannot!) – so keeping focused on the ‘job in hand’ and executing an effective (and hopefully profitable!) strategy for 2016.

And on the ‘keeping positive’ note, while some of our more downbeat dealer clients are expecting new car sales to really drop off - even in that worst case scenario there is confidence that the business model would cope, with reduced new car sales being offset by increased opportunity for used cars and service and repair work.

So, in conclusion, while there will undoubtedly be challenges ahead for the car dealer here in the UK post-Brexit vote, Birketts hopes that the UK can keep up the current (mainly) positive vibe and give its ever resourceful car dealers an environment where they can continue to find a way to be successful.