By Rupert Pontin, director at Cazana

Brexit has been a significant influence on the UK economy since the beginning of the year and the confusion and negative influence has been felt market wide with little support and guidance coming from the present government to quell concerns and bolster confidence that there is a credible planned route forward.

With a further extension now in place until January 31 the country finds itself little further forward than in was in January this year although there is slightly better confidence now it has been established that leaving without a deal is almost certainly off the table.

The revised Brexit deal offered by the current prime minister may yet be the final agreement accepted by the country which will make trading much easier than it would if the industry has to work to adapt to the temporary World Trade Organisation tariffs that would need to be adopted in the case of a hard exit.

Realignment of vehicle pricing and tariffs should no longer be needed to cope with the tariffs and this will make life easier for so many sectors of the industry that would have faced significant system updates and uncomfortable delays in vehicle pricing availability, and as such disruption to an already fragile new car sales position.

Whilst many individuals would like a second referendum and the opportunity to remain in the EU, this looks increasingly unlikely although if the general election on December 12 results in a change in government the landscape may look different after the event.

However, looking at the positives, not only will the industry have a level of stability in the

coming weeks but preliminary re-pricing exercises that have already been completed can be

kept as a fall-back position should the country ultimately head to a hard Brexit.

Should this happen the used car market would be likely to benefit from an increase in demand for used cars which is a positive given that late plate values have been under pressure in recent weeks with petrol powered cars specifically affected.

Retail price drops of up to 14% over the last 12 months and 9% since August 2019, as demonstrated in the chart below, have been an uncomfortable acknowledgement of over-supply in part caused by Brexit.

Data powered by Cazana

This chart clearly defines the problem already at hand and though the coming weeks will be challenging the industry is tenacious and will find a way to keep registrations and more importantly sales moving forward.

More creative finance propositions are one possibility, although the finance sector is facing its own issues with the FCA set to cap interest rate setting meaning that this profit area essential to today’s dealer group bottom line, will find its way to the retail price of the car offering no saving to the retail buyer.

That said a better regulated finance sector is perhaps a good thing.

The Brexit debacle changes daily and for the sake of the industry as a whole, the OEM’s that produce cars in this country and those that import them, a Brexit deal looks like the best opportunity for the country to learn to prosper once more whilst also learning to work with new trading nations.

More articles on: