Ok, so the date has been named, 23rd of June, will it be the UK’s Independence Day? Alternatively, will it be the day we decide to ignore hundreds of years of wars, arguments, disagreements and invasions and declare ourselves European?
The Prime Minister’s new deal for Britain has been heralded as a sword with which to cut the red-tape of European inclusion. ‘Out’ Campaigners would have it that it is nothing more than the modern-day equivalent of Neville Chamberlain returning from Munich in 1938, declaring “Peace for our Time”!
So what for the Country? More importantly what are the ramifications of ‘Brexit’ for the UK Automotive Industry?
While our integration began in 1992 with the signing of the Maastricht Treaty, our uneasy relationship with Europe and trading within it goes back to just after the Second World War.
So where are we now? There has recently been a noteworthy investment in the UK by some leading manufacturers. However, the fact remains that the volume of cars produced [in the UK] in 2014 compared to that of 1992 [Maastrich] is only up by 3.5%, 1.599 million compared to 1.54 million, so while investment has offered growth it could be considered minimal.
However, the UK remains an attractive place for foreign investment, perhaps because of EU membership and access to a single marketplace; possibly because of successive government’s tax incentives. In FYE 13/14; 49% of all vehicles produced in the UK were sold across this single marketplace unhindered by financial barriers.
However, it’s not all about making cars. The majority of the companies that make up the Automotive Industry, around 2,350; sell, maintain and repair cars or are involved in the supply chain to these businesses, so what of them and Brexit?
Legislation
Recently the BIS, the Department for Business, Innovation and Skills stated that the cost of EU legislation to UK businesses is £9.4 billion. With the Automotive Industry making up around 4% of the UK economy this could run into hundreds of millions of pounds.
Leaving the EU completely would return control of UK legislation to the UK, especially in areas like employment, health and safety and tax, staying in (even under Cameron’s ‘new deal’) is tricky to call.
All UK law must be compatible with EU law, and as this is a negotiation between 28 National Standards mostly, there is always a compromise reached. All legislation is born out of a need; to stop something happening or to ensure something does. The truth is that most UK legislation gets widened in scope and the language watered down to get it passed, and the initial intent is lost. This only worsens when 28 other Nations get involved, and a compromise needs to be agreed. As such, Brexit would provide the UK legislative with the opportunity to tighten up UK law to pay closer attention to the original need[s] of the law.
This could, and should, include, selling of cars, providing finance, contracts of sale and employment and corporate/commercial laws. No-one knows to what extent, and currently these are theories, but ones that should be considered.
Regulations
Brexit or no Brexit, much of EU Regulation cannot be avoided. For example, product-based regulations would remain, especially with products, produced, bought or sold in the UK and EU. The UK would still need to comply, member or not, to be able to trade. However, the costs involved in adhering to the UK regulations that would replace EU regulations surrounding employment, health and safety and tax, would most probably remain the same.
There have been estimates made that the Working Time Directive costs UK businesses £2.6 billion (source CBI, Our Global Future, 2013). From this, we estimate £104 million to the Automotive industry, for things like rest breaks and holidays. These will likely be replaced by something similar if Brexit occurs.
We must also remember that on some regulations, the UK stands alone, especially in the Automotive Industry, and Brexit would not remove these costs. For example, the UK places additional Eco regulations on cars produced for the UK market than minimum standards agreed under EU Regulations.
EU regulation creates a broader marketplace, where we all have to abide by the same minimums. However, it’s not all about making cars. The majority are not involved in making vehicles. Instead, the selling, maintaining and supplying vehicles that are idiosyncratic to the UK (Right Hand Drive). It is evident that some of the regulations are unneeded, to continue the same marketplace dominance.
Employment
Employment Law (in its current state) is a minefield without warning or map. The opportunity to re-assess this without EU legislation would present the UK with a chance to regain control over employment. Although the positive impact on the UK labour force that EU Directive 2004/38/EC (Free Movement of Workers) has provided needs little explanation.
We have seen that the impact on certain areas of the UK Automotive Workforce by EU workers has not only been positive but key to the success of certain businesses.
Indeed the UK has a history here, in deriving benefit from the different skills brought in, the 1980s saw Japanese techniques brought to the UK with Nissan, Toyota and Honda. With a skills shortage in the UK marketplace, especially in technical positions, where would this industry be without the ability to draw from ‘European cousins’? After all, having the best people working for you adds to your competitiveness regardless of origin.
In an SMMT member survey in 2014, 47% of members said that not having access to a skilled workforce from the EU would have a negative impact on their business….food for thought?
However, the fact remains that EU Employment Laws, concerning the subtler points of ‘Employment’ - Discrimination, Parental Rights, TUPE and Gender treatment have all played a role in the running of an Automotive Business in the UK.
Moreover, would probably remain in some guise in UK Law that replaces EU law, if Brexit were to occur.
Final thoughts
The costs of EU regulation to UK businesses is incredible. If the UK were to exit the EU, it is more than likely that replacement regulation would retain the same elements and probably the same associated costs.
Should the position of the UK automotive industry be based on the manufacturing side, then the decision is clear. Continued EU Membership is a massive help, but looking at the long-term prosperity, of dealers, garages and suppliers, who knows.
It’s entirely up to you what you think. Although as a discussion, we’d like to know if you believe Brexit will be good or bad for the Automotive Business you either work for or run?