15 Mar 17

There is fleet life after Brexit

So, in the words of UK prime minister Theresa May, Brexit means Brexit. Every thinking person in Britain Is intensely interested in the outcome of the momentous decision to leave the European Union. Emotions still run high, and denial remains the essence of any negative, or positive, economic news that is broadcast ad nauseam.

Truth be known, nobody knows just what the impact will be of this momentous decision. Everyone has their own agenda, and those who should know what the ramifications will be frequently place their own particular biased spin on their predictions. Various factions involved in the split declare their own negotiating position with great gusto, but these are probably not genuine positions; but necessary before the commencement of the tough discussions that will take place. Posturing rules the day.

I am neutral as to the decision made by the majority; it is what it is, and we need to try hard to protect those industries that employ us. We need to absorb information, cogitate, and then try very hard to determine what is best for all those concerned.


So, what impact might the UK Light-Vehicle Fleet Industry experience? The import and export of light vehicles is one area that might be affected. There have been comments in the press predicting trade tariffs between mainland Europe and Britain. This seems to be a move that would hurt both Britain and Europe equally. I would imagine that the light-vehicle manufacturers of Italy, Spain, France and Germany might lobby against this possibility, as indeed would the fewer-numbered vehicle manufacturers in Britain. If there would be a success in applying trade tariffs on many popular light vehicles, then the retail price of those vehicles would rise in proportion to the increase, thereby potentially raising the Total Cost of Ownership (TCO).

The TCO of Operating Lease rentals would also rise, but would be commensurate with the same increased costs for the fleet users, were they to take on board the operating risks of the fleet. Other tariff-fed fleet cost increases, for spare parts, replacement panels etc., would again add to the TCO.

Residual values

If fewer vehicles were imported from Europe, and other manufacturers and models were sought from other countries outside of Europe, then we would see fewer Italian, French, Spanish and German cars in the used-car market. This could improve the residual values achieved and thereby reduce the TCO. Of course, it would also increase the TCO of those alternative vehicles bought as alternative replacements. Supply and demand still rules the day.

Would the demand for light fleet vehicles reduce as a result of Brexit? We will certainly see less employees working for those global corporations who decide to relocate their corporations, or certain divisions, to Europe. Whether these relocated staff currently drive a company vehicle or buy their own, there will be fewer vehicles purchased in Britain. Will this be a significant number? Probably not. These reductions are likely to be negated by relocated ex-pats arriving in Britain from trading companies outside of Europe. But, as  mentioned before, we just do not have enough robust information to determine the consequences.

Finance costs

What of our finance costs? Well, it is difficult to see what would change to our Banking Governance on finance interest rates as a direct result of Brexit. Yes, we will all experience bank interest rate fluctuations, but these will occur irrespective of Brexit. Again, we see wildly varying speculations regarding the impact of Brexit on the Bank Base Rate, but it might be the case that any fluctuations are fundamentally derived from our general economic circumstances at this time, and not specifically from Brexit.

Regarding those Operating Lease companies headquartered in mainland Europe, the question is whether there will be any difference to their UK subsidiaries after Brexit. Or whether there will be any decisions that impact upon global and standalone-UK customers who currently obtain their Operating Leased vehicles from foreign lessors. From experience we know those subsidiaries largely operate on their own two feet: albeit following the broad trading practice rules and requirements of their parent company. Those parents currently have subsidiaries established in other non-EU countries, and they appear to be not adversely affected by their lack of EU membership, so why would Brexit be different? Yes, it might be better to be in the EU than out, from a corporate trading point of view. But there is life outside EU membership.

Used-car market

The used-car market in Britain is pretty much self-contained, with little import of used vehicles into Britain, or export of used-vehicle stock to other countries. So, are we to see a glut of used vehicles depressing residual values because of Brexit? No, we are not. Yes, with the super new vehicle sales figures achieved by the UK car dealers last year, we will see a higher stock of used cars in three to four years' time, and we will see residual values reduced because of the surplus: but not because of Brexit.

As mentioned at the start, it is difficult to determine the true eventual impact of Brexit, both in the UK and in the EU. But, whilst there will undoubtedly be some variances in light-vehicle supply and the TCO, it is hard to visualise that these changes would be significant. Like the European fleet industry, the British industry has battled through many challenges over the past forty-five years, and it has come through them well; stronger as a result. It is doubtful that Brexit will affect the British light-vehicle fleet significantly; certainly less significantly than the difficulties that it has endured before.

Authored by: Tony Elliott