So what does this mean for Fleets?
The result of the EU referendum has divided opinions throughout the fleet industry, and the question remains: how will Brexit affect it? Here are the facts and the potential scenarios that fleets are facing:
Free trade and import of vehicles and parts
If Britain manages to keep access to the single market after Brexit, the impact on import costs of vehicles and parts is likely to be kept to a minimum, but that deal might take a long time yet to be negotiated.
There is no guarantee that the UK will be able to negotiate the same terms that it currently has for trade deals, and even a small increase in import costs would have a huge impact on an industry that has extremely tight profit margins.
If costs increase for vehicle
manufacturers, those costs will undoubtedly be passed on to fleet customers through fewer discounts, heftier P11d/company car tax costs, and higher interest rates.
Falling pound value
As the value of the pound falls against the US dollar, there are two consequences:
- UK businesses exporting goods to the rest of the world see an increase in trade as it becomes cheaper for foreign buyers to purchase UK goods meaning UK exporters can sell goods at a cheaper price and/or increase their profit margins.
- Importing goods from the rest of the world becomes more expensive as the pound is worth less. This has a direct impact on price inflation as businesses increase their prices to balance the increased costs.
The second point above will have the biggest impact on UK fleets. As vehicle manufacturers import parts and vehicles from other countries, the costs of vehicles will increase and this will be felt by fleets.
One key outcome of Brexit is that additional Customs controls will be put in place at ports. This could mean even more delays for vans and lorries at both sides of the Channel, and a big impact on businesses who make the Channel crossing on a regular basis. There’s also the ongoing deliberation over the Irish border and whether there should be a physical border put in place.
UK-based vehicle manufacturers
In the run-up to the EU referendum and its aftermath, several big name car manufacturers with UK production plants stated that they would reconsider their UK operations due to the likelihood of an increased cost of importing raw materials and components to their British-based factories.
They were also keen for Britain to remain in the EU as it gave them easy access to a much-larger export market whilst being based in the UK. If these manufacturers do choose to relocate outside of the UK, the cost of vehicles could well increase with a lack of British-based supply.
A report published by the Business, Energy and Industrial Strategy (BEIS) select committee in March 2018 said Brexit will be negative for the car-building sector regardless of any final deal and that there was “no credible argument to suggest there are advantages to be gained from Brexit for the UK car industry”.
It added that “damage limitation” was the best possible result, with less favourable outcomes resulting in the loss of thousands of jobs and hundreds of millions of pounds of investment.
Recent EU ruling enforced that insurance premiums could not be calculated based on gender, which saw average insurance premiums rising to cater for the change.
The ruling from the European Court of Justice saw insurance companies increase premiums for women and reduce premiums for men. This policy could well be abandoned when Britain leaves the EU meaning another change in annual insurance costs for fleets.
The impact on petrol and diesel prices is complex - we’ve broken it down into immediate and long-term impacts, mainly because fuel prices will be indirectly affected by knock-on effects of various fallouts after Brexit that we’ve already touched upon in this guide.
Some immediate impacts will most likely fix themselves after the initial period after Brexit passes.
As discussed earlier, the fall in value of the pound negatively impacts all imports from the rest of the world. Because oil is bought in USD, if the GBP gets weaker compared to the dollar, the more expensive it becomes for UK companies to buy oil. That mean motorists face higher prices when buying petrol and diesel.
Supermarkets often use periods of financial uncertainty as an opportunity to slash or hold their prices on diesel and petrol as they bolster their profit margin with grocery sales.