BREXIT could mean armageddon to the UK car fleet industry – with predictions of an 8% car sales drop early next year and higher prices if a trade deal isn’t agreed before the UK’s EU exit in 2019.
That’s what Morgan Stanley investment bank chief UK economist Jacob Nell predicted in a speech at the Institute of Car Fleet Management (ICFM) Conference at MINI Plant Oxford.
Mr Nell believes that with the UK voting to leave the European Union (EU), it has set off what is expected to be a period of political and economic uncertainty, which will lead to a weaker currency, higher inflation, and lower growth.
However, more positively, he believes this will equal a slowdown and not a recession.
The Government, he expects, will continue to prop up the economy in order to avoid precautionary saving, a key contributor in the last recession, and part of this could be a mortgage rate cut of 0.1% by February 2017.
He also hinted that some fiscal stimulus measures could be revealed in this month’s Chancellor’s autumn statement, on November 23.
However when it comes to car and commercial vehicle sales, in the short-term Jacob believes the glory days of a continual and consistent upward UK sales growth experienced over the past two years is over. In fact, he predicts an 8% drop in the first quarter of 2017.
But what does Brexit mean for the fleet industry in the long-term?
Nell’s biggest worry is the triggering of Article 50, which will be the beginning of our EU exit. Despite the pending legal vote by MPs, which he expects will be in early in 2017, the timeline means we will leave the EU by March 2019. But will that be enough time to get a trade deal in place?
He said: “Exiting the EU without a trade deal in place could be a big problem for the fleet industry, because border trade tariffs and weaker sterling will equal higher list prices of cars.”
Although UK-produced cars he admitted could do better, the higher import prices for vehicles produced outside the UK, could put further pressure on sales, with fleet managers opting to hold on to their cars longer, adding further to that predicted slowdown in car sales.