With Britain’s departure from the European Union scheduled for March 2019, this is perhaps the main issue currently weighing on the minds of the UK’s fleet managers. The exact economic implications, and the nature of any post-Brexit economic and political settlement, are as yet unclear. Nevertheless, it is important for fleet operators to prepare themselves for the possible repercussions which Brexit might have on the sector.
A Fleet News survey conducted soon after the 2016 EU referendum found that nearly two-thirds of fleets expected costs to rise in the wake of Brexit. One area particularly likely to be affected is fleet maintenance. But fleets needn’t be fatalistic – and the better they prepare themselves for such eventualities now, the better off they’ll be. Here are some potential implications Brexit might have on fleet maintenance.
General inflation could rise, driving fleet maintenance costs higher. The decline in the pound since the EU referendum vote has been well documented. This has pushed up the cost of imports – including, for example, parts and components – as the pound is worth considerably less against the euro and other major currencies than it was prior to the Brexit vote. It remains to be seen whether this inflationary spike will continue once Britain has left the EU, but there is a good chance that it will.
The imposition of trade barriers could also push up fleet maintenance costs. It again remains unclear whether trade tariffs on imports will be reintroduced after Brexit, but should UK and EU negotiators fail to reach a deal there is a strong likelihood that some sort of tariff regime will be imposed. According to research carried out by the Society of Motor Manufacturers and Traders (SMMT), fleet maintenance, service and repair bills could rise by as much as 10 per cent in the event of a no-deal scenario. It’s worth noting, furthermore, that fleets are ever more reliant on high-tech parts and devices. While some of these components are manufactured domestically, others have to be imported from overseas. However, we as yet have no idea what tariffs would be imposed, and on which goods, should this scenario occur.
We can expect higher inflation and tariffs, if they follow from Brexit, to push up the costs of vehicles themselves as well as parts, repairs and servicing. This is clearly a key overhead for fleets and could well eat substantially into their budgets. The aforementioned SMMT report warned that around £1,500 could be added to the cost of every new car sold in the UK after Brexit; there is therefore a real prospect that we could also see substantial price increases for vans and HGVs.
Furthermore, there’s also the question of potential labour shortages. Much has been made of the shortage of drivers in the fleet industry, with this shortfall having been to a large extent made up by recruitment from other EU countries. When Britain leaves the EU, it is expected that freedom of movement between the UK and the rest of the bloc will end. This will make it harder not just for fleets to recruit foreign drivers, but it may also affect related industries as well. If mechanics and other fleet maintenance workers are harder to come by after Brexit, this may mean that firms have to pay more to recruit and retain them – which in turn could mean that repair and servicing costs go up.
Of course, we’re still talking about hypotheticals and it seems we won’t have a clear idea about what Brexit might mean for the fleet industry in general until it actually happens. It’s also true that we should avoid being excessively gloomy; the potential challenges facing the fleet sector appear substantial, but that’s not to say they can’t be overcome with sufficient foresight and strategic planning. Nevertheless, fleets should familiarise themselves with the potential implications Brexit could have for them, so that they’re equipped for any realistic eventualities after March 2019.