What Does Brexit Mean For UK Motorists?
June 30, 2016 at 9:39 AM
On June 23rd the voting public across the UK made the decision to leave the European Union.
The final count showed that 51.8% voted to leave and 48.2% voted to stay, however the process of extracting ourselves from the EU will not start until the Government activates the now famous “Article 50”, the delay being caused by David Cameron’s decision to stand down as prime minister.
So what will exiting the EU mean for UK motorists?
Buying New And Second Hand Cars
The concern for many motorists is that the cost of buying their next car will increase relative to current prices. Fortunately, according to Philip Nothard, CAP HPI consumer and retail editor, the used car market, which is currently thriving in the UK, is largely expected to be unaffected.
However, it could be a different story for new cars. The cost of new cars here in the UK is directly affected by 2 things:
1. Tariff-free access to European markets.
Best Case: Negotiations with the EU go smoothly and no trading tariffs are imposed on the UK, new car prices remain unaffected.
Worst Case: Negotiations with the EU prove difficult given that EU leaders will not want to set the precedent of an easy withdrawal for other countries that could reconsider their status, such as Denmark. The EU decides to impose trading tariffs on UK car manufacturers. This makes the UK unattractive to OEMs (Original Equipment Manufacturers – suppliers of parts to vehicle manufacturers) and considering 63% of car parts are sourced abroad this leads to a rise in car prices.
“Palmer said that the British government must now work hard to ensure tariff-free access to European and other global markets."
2. The Weakening Of The Pound
Best Case: The pound recovers completely and car prices remain the same.
Worst Case: The pound remains weakened and car manufacturers are forced to adjust pricing to compensate for loses due to the increased cost of buying in car parts from abroad. Unfortunately, Groupe PSA (Peugeot, Citroën) recently told Reuters that it is now reviewing UK pricing following a currency market reaction to the decision (to leave the EU).
A spokesman for the manufacturer said: "Our teams are looking at different scenarios for price adjustments to our brands' models to respond swiftly to the markets' reaction.”
On 23rd June a tonne of petrol coming into the UK cost around $500. With the pound then worth $1.44, the cost of petrol translated into 26.2p a litre. In the days following, the outcome of the referendum weakened the pound by 10 cents to $1.34, increasing the cost of petrol to 28.2p a litre today – 2p a litre more expensive.
However, this change to fuel prices is only likely to affect motorists in the short term as the pound will eventually stabilise again. The only question is how long will it take?
At the moment, all UK insurance firms make sure that you are covered with the minimum level of car insurance cover required across Europe regardless the policy you are on. However, if the UK decides to reduce its own minimum level of cover, then we may have to pay a premium to insure our cars to drive across Europe.
There’s a second aspect to insurance in that non-UK insurers are unsure what laws will apply in the UK and if they will be allowed to continue to operate here. We don’t want them to leave as this would decrease competition and push prices up.
Although we’re leaving the EU it’s not the case that we can simply have our own emissions rules. The bottom line is UK makers will still have to meet EU rules to sell in Europe and we’ll need to accept cars complying with EU rules to drive here.
No manufacturer is going to make one kind of car for the UK market and another for the EU, it’s simply not good business so emission regulations are highly likely to stay the same.
Current rules dictate that you can drive in the EU with your British driving licence for up to 1 year so if you’re off on holiday for a few weeks then there’s no problem.
When we leave the EU there’s unlikely to be any change to this agreement, after all, bilateral agreements like this already exist for a host of countries outside the EU.
Here in the UK we are already at the forefront of road safety and it’s safe to say that we’ll continue to battle to reduce the number of fatalities on our roads for decades to come.
Our safely record is in part due to Euro NCAP safety tests and ratings and despite its name this will not change once we leave. There’s nothing in the constitution that limits Euro NCAP to members of the EU so there’s no reason to change the status quo.
Another factor to back this up is, for trade to continue unimpeded, UK and EU safety regulations need to remain aligned.
Leaving the EU is likely to have an impact on motorists in some areas but not all. The cost of insurance may go up, as might new car prices and the price of fuel has already increased slightly but will probably stabilise as the pound stabilises in world currency markets.
Car safety, driving abroad and emissions are not likely to be affected at all.
Do I Need To Do Anything?
The short answer is no, nothing is going to change until October at the earliest and even then it will take approximately 2 years before we completely leave the EU. So my advice is take it easy for now and keep an eye on the news!
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