Brexit is happening, and wherever you stand on the EU debate, big changes are on the way. Britain’s split from the Union will have an impact across every sector, not least the car industry, which has already been rocked by job cuts and rising operational costs.
Quick Links
- How Much Will You Pay at the Petrol Pumps After Brexit?
- Will the Cost of Buying a New Car Rise After Brexit?
- Will the Price of Car Parts Increase After Brexit?
- How Might Brexit Affect Green Driving Initiatives and the Sale of Cleaner Cars?
- Will Car Insurance Premiums Rise After Brexit?
But what does Brexit mean for you as a driver? Will you see your car insurance premium rise or fall, and just how much can you expect to pay at the pumps? Here, we shine a speculative light on how much it will cost to run your car after Brexit, taking into account fuel prices, insurance premiums and the cost of parts.
How Much Will You Pay at the Petrol Pumps After Brexit?
Since the referendum result was announced back in 2016, speculation has been rife about how the UK’s split from the EU will affect fuel prices – with lots of experts and media outlets predicting inflated costs. But is there any truth in these rumours? And how will petrol and diesel prices really be affected by Brexit?
Here, Jason offers his expert take on fuel prices in a post-Brexit world: “One of the biggest factors affecting the price of fuel at the pumps is the cost of oil per barrel. The world’s leading oil-producing countries are outside the EU, so they are unlikely to be impacted by Brexit. Economic growth is a big driver of both the supply and demand of oil, which has a knock-on effect on the oil price, for example oil prices increased due to economic slow-down in China. The UK leaving the EU is not significant enough to affect the price of oil, although it could have an impact if the UK left on WTO terms as this could trigger a recession across Europe, which would affect the price of oil globally.
“Another factor is the value of sterling against the dollar. Since Brexit was confirmed, the value of the pound has dropped versus the dollar by roughly 15%, this has had a direct effect on the price of fuel at the pumps by increasing the cost of buying petroleum for UK petrol retailers.
“The supply of fuel has been discussed by many in the media leading to fuel shortages or increases in prices, but Brexit is only likely to have a few weeks’ minor impact. The reason for this is that only 8% of fuel is from the EU, the remaining 92% is directly to the UK from tankers and pipelines. Fuel shortages will only happen because drivers panic buy, it won’t be due to fuel supplies running out. The petrol retail industry will compensate for any reduction in supply from the EU by getting more from outside the EU, but it may take a few weeks to adjust to the change.
“In terms of fuel prices in the future, if we assume Brexit is completed then the pound will increase in value and the supply of fuel will be resolved. This suggests that fuel prices will fall for a period, but other factors could have the opposite effect of increasing prices again, such as calls to add more tax on fuel due to climate change, global geopolitical instability and economic slow-downs.”
Will the Cost of Buying a New Car Rise After Brexit?
The UK is unquestionably a nation of new car buyers, with the number of new cars registered in Great Britain rising by around 1.2% year-on-year. But with reports that a no-deal Brexit could have a ‘seismic’ impact on the European car industry, how worried should motorists be about the cost of buying a new car in the future?
“Motorists should be worried if they intend to buy new cars from European carmakers and there is not a free trade deal in place with the EU,” says Jason, adding “the cost of buying EU cars could go up by 11% due to tariffs from non-European countries trading on WTO terms.
“So that’s the potential downside of buying a new car on WTO terms, but in terms of looking at the benefit side, the UK Government could unilaterally allow all car importers from around the world to sell their cars into the UK with no tariffs. That could flood the UK with extremely affordable new cars from places such as the USA and Asian markets. The price of spare parts from outside the EU could also be much cheaper to import into the UK and so the cost of repairing your car may be a bit lower too.
“Some of the best new electric and hybrid cars are being made outside the EU, so prices will fall and will become more affordable to UK buyers. Another potential benefit for UK carmakers is that by selling cars to the rest of world from outside the EU means that prices on UK cars will be lower and more affordable, so there could be a boost to the British car industry on car sales, but it is worth noting that the EU is currently the UK car industry’s number one export market and unless there is a free trade deal there will be tariffs so they will become less affordable in their primary sales market.”
Will the Price of Car Parts Increase After Brexit?
No motorist likes to be stung by unexpected repair bills, but it’s one of those unavoidable expenses you have to live with as a driver. But could Brexit affect the price we pay to keep our cars on the road, and if so by how much?
A huge majority of the cars we drive in the UK are imported from European countries — as are the parts and accessories we use to repair them. Things like tyres, oil filters and brake pads which need replacing periodically are likely to cost more after Brexit due to rising import costs. The car industry is particularly worried about the effect Brexit will have on the supply chain of parts and components, with the additional cost of sourcing parts being passed on to the customer.
Commenting on this issue, Jason says: “For existing European car owners, the cost of servicing, repairs and spare parts will increase on a WTO basis and there could be delays getting those parts if they don’t have the correct customs paperwork in place.
“For carmakers in the UK, there could be some real problems with the time it takes to build motor vehicles. Just in time processes mean that any delay to parts from the EU needed at the border could have a big impact on productivity. This is one of the driving factors around why a lot of UK carmakers are moving plants into Europe to protect against the risk of slowed productivity due to import duty and parts delays.
“Imports of non-EU car parts are unlikely to be affected by Brexit and it’s likely that there will be a significant increase in non-EU car supply, so there is not likely to be a shortage of cars in the UK, but there could be a shortage of EU car parts, especially if some EU carmakers decide it’s not worth selling in the UK market due to import hassles, tariffs and increased non-EU competition.”
How Might Brexit Affect Green Driving Initiatives and the Sale of Cleaner Cars?
Currently, the UK is subject to EU legislation surrounding environmental standards, and these extend to emissions targets for cars and vehicles. In the wake of a no-deal Brexit, some are concerned that Britain may abandon its green driving initiatives, causing a slump in the sale of cleaner cars and a spike in emissions on UK roads.
On this point, Jason says: “I think that green driving initiatives will be boosted as a result of leaving the EU. The reason why I say this is that the Government has already committed to removing all new fossil fuel cars for sale by 2040 and they are looking to decrease that down to 2035. The UK was the first to commit to these targets and has always led the way in Europe with environmental changes and standards, as evidenced by the fact that now well over 50% of all electricity in the UK is from renewable sources. Only countries like Norway and Sweden are better in this respect.
“The cost of importing electric and hybrid cars from the leading car makers is outside the EU, so prices will fall, making buying the best electric and hybrid cars more attractive to drivers. The petrol retail industry itself is embracing the change to electric by investing in more superfast 150Kw charge points at forecourts and there is a series of new EV-only retailers launching forecourts soon too. This is also being assisted by the Government putting in funding to drive the change of infrastructure in the national grid and other ways to encourage electric and hybrid car use through scrappage and favourable tax incentives.”
Will Car Insurance Premiums Rise After Brexit?
We hate to be the bearers of bad news, but car insurance is getting more expensive. According to the Confused.com car insurance price index, premiums are rising by an average of 5% every year, with motorists paying £37 more to cover their car in 2019 than they did last year. But does this increase have anything to do with Brexit? And how is our break-up with the EU likely to affect insurance prices?
Jason doesn’t believe that Brexit will have a direct and immediate effect on the price we pay for car insurance, but does highlight an interesting point about how a change in the law might affect premiums for some drivers.
He says: “Car insurance premiums are unlikely to change as a result of Brexit. This is because the fundamentals of the insurance marketplace remain the same no matter what happens to the UK. There may be some impact as a result of insurance companies not needing to follow certain regulations from the EU. One of those is that male and female drivers must be treated the same from a policy underwriting perspective.
“This means that women drivers, who are much safer than male drivers, must pay more on their insurance premiums due to this rule at the same rate as men. The UK Government may decide to remove this regulation so that female drivers get lower insurance premiums versus male drivers.”
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