Regardless of your personal politics, as the threat of a ‘no-deal’ Brexit looks increasingly possible the need to make contingency plans is being felt in all sectors of the economy. The automotive industry is perhaps one of the most deeply affected by a possible no-deal scenario and various high-profile announcements have already been made by the bigger players: after 107 years, Ford is threatening to review its entire presence in the UK, while Nissan has delayed pay talks and BMW is resigned to a month’s closure of the Cowley MINI plant following the UK’s departure from the EU, all in the interests of maintaining its supply chain.
All manufacturers rely on ‘just-in-time’ and ‘just-in-sequence’ delivery and production, without any delays or obstacles. These parts are in constant transit in trucks, arriving as and when they are needed.
You don’t need Classic Car Buyer to tell you that these are all very big issues indeed and affect a significant part of the country’s manufacturing industry. Indeed, just as some 80 per cent of MGs were exported back in the 1950s, so the MINI plant in Oxford still exports around 80 per cent of its production.
It’s not just the big players affected by the spectre of a no-deal Brexit though, with the Society of Motor Manufacturers and Traders (SMMT) reckoning that it’s the smaller firms in the supply chain that are at higher risk. Its figures suggest that the vast majority of the companies in the automotive supply chain are so-called Small and Medium Enterprises (SMEs), with some 69 per cent employing fewer than 10 people.
Companies of this size have significantly fewer resources to prepare for the burden of new requirements imposed for those trading internationally after a no-deal exit and the increase in bureaucracy that will entail. New requirements will include calculating the value of goods and proving the origin of parts as well as warehousing and paperwork requirements. The possibility of increased tariffs and even short holdups at customs will cause massive logistical problems, disrupting the production process and generating significant costs that could be passed on to the consumer In order to help prepare its members for the worst, the SMMT has set up a Brexit contingency aid package, which offers advice and assistance from five expert companies from the legal and accountancy professions.
Clearly then, those involved in the manufacture of new cars are taking things seriously and the SMMT is to be applauded for taking care of its smaller members, but the classic car industry faces similar hurdles and similarly includes many companies in the supply chain with fewer than 10 staff.
Will a no-deal outcome have a devastating effect on the classic car world? At Rimmer Bros, Andrew Mundy reckons it may not have the consequences we’d assumed. Surprising perhaps, but as he points out, since Rimmers specialises in parts for British cars, it already exports significant quantities to markets outside the EU and as a result is well set up to tackle the administrative side of customs requirements and import duties.
As he points out, the paperwork is all handled electronically these days and as goods are packaged for despatch a barcode is generated for the shipment noting its value and an international consignment code. Even before the shipment gets from Rimmers’ Lincolnshire premises to East Midlands airport, it has been submitted to US Customs and an assessment of the duty payable will have been provided before the plane lands.
As Andrew points out, nobody wants to start photocopying invoices and handwriting customs declarations, so even if a no-deal exit sees us revert to WTO rules, a similar paper-free system will be used to handle exports into Europe.
In the short-term, the uncertainty has also had an unexpected bonus in that a weak Sterling has effectively given Australian and US customers an effective discount.
As for the effect of a no-deal scenario on the import of products, Andy again reckons Rimmers is in a fortunate position: “We’ve looked at our supplier list,” he explains, “and some 80 per cent of our suppliers are in the Midlands. We generally try to locate the original supplier for our parts and all the expertise and manufacturing is located in the UK.”
So it seems that for companies specialising in British classics the tremendous export sales of British cars back in the day now provide a useful experience in trading outside the EU, but surely the picture is different for firms specialising in European cars?
We spoke to VW and Porsche specialist Heritage Parts Centre where PR Manager Andy Gregory painted an unexpectedly similar picture. Like Rimmers, Heritage Parts has a big export customer base thanks to modern courier logistics that means it can supply parts to Australia in three days – which is quicker than ordering from the other side of that vast country.
This means the firm is well versed in the administrative side of export tariffs and duties. It’s also currently seeking accreditation as an Authorised Economic Operator for customs status, a UK Government scheme that recognises firms with a secure role in the international supply chain using robust import and export processes, and allows them to streamline parts of the process.
What then of the import side of things? You might expect a German car parts specialist to be trading pretty much exclusively with European suppliers but of course the global nature of major marques like Volkswagen means that’s an over-simplistic view.
While Andy points out that some 30-40 per cent of its range is sourced in the UK, the firm sources products from the countries where Volkswagen itself has a big manufacturing presence: Brazil, Mexico and South Africa to name but a few.
It’s not all plain sailing though. Andy points out that like many firms it’s the uncertainty which is perhaps a bigger issue. Customers worried about the future may put off making big orders, while business customers in Europe are keen to receive reassurance that their British suppliers will continue to serve them after March 2019.
Meanwhile, the uncertainty continues but it looks as though even if we’re no longer making new cars we should at least still be able to buy parts for the old ones. Whether we will end up paying more for those parts remains to be seen.