Brexit – still something to think about

Brexit – still something to think about

So that’s it! The UK has left the EU. However, there is still plenty to think about and more to be negotiated, as Neil Pattemore explains…

Not for the first time, ‘the pundits’ and the media in general, got the forecast for the result of the General Election in December last year somewhat off target!

So now that Brexit is continuing at a pace and with the political part now enacted, this means that we are officially no longer part of the EU and the trading relationship has to be agreed. Although this is hoped to have been settled by the end of this year, a request for an extension for the negotiations is still possible before the end of June. It is far from clear exactly what any ‘deal’ will contain, when it will be agreed, and ultimately, implemented. One thing is clear, there is a wish from both the UK and the EU Member States to agree something that will not negatively impact either side, but equally, Angela Merkel summarised the ‘elephant in the room’ by stating that Europe now has a major competitor just off its shores.

During this transition period, it has been stated that ‘everything stays the same’. However, what will this really mean for the UK aftermarket? The UK will remain a member of the Single Market and of the Customs Union and Trade and sectoral agreements between the EU and non-EU (3rd) countries continue to apply to the UK, so EU law continues to be directly applicable in the UK. However, in one important respect, not quite everything stays the same.

In the transition period, the UK will have no representation in Brussels and no participation in its deliberations (except for some limited exceptions under the Withdrawal Agreement). The UK will have no EU Commissioner and no MEPs, as well as no input into EU legislative processes. So, will this be business as usual or a harbinger for doom and gloom?

It’s now all about trade

During the transition period, the EU and the UK will negotiate their future trading relationship. That is, the nature of their relationship after the end of the transition period, across a wide range of topics. In the meantime, it means that we will remain under the same legislation as we had previously for the automotive sector, but there may be further problems on the horizon. However, it seems unlikely that the European legislation for the automotive sector will change in the near future, even after the final date of our full departure from the EU, even in the case of a ‘hard Brexit’ without any negotiated trading agreement.

Therefore, it is simply a case of continuing to use European vehicle type approval legislation, thus ensuring that vehicles produced in the UK can still be sold in the EU. This vehicle type approval legislation includes the requirements for access to the technical information needed for independent workshops to diagnose, repair and maintain vehicles – the ‘RMI, bumper to bumper’ information and non-discrimination between main dealer and independent workshops.

However, it is being overlooked that these RMI requirements only apply in the EU and therefore, as the UK is no longer be part of the EU, the vehicle manufacturers will no longer be mandated to provide this information.

Additionally, the Block Exemption Regulation (BER) runs parallel to the Euro 5 type approval legislation and provides the basis for independent workshops to have access to the same tools, equipment and data that are available to main dealers. However, BER is different in some ways. It is based on EU competition law and this could change, as the UK has a more open ‘let market forces rule’ approach. It will be up to the UK Government to ensure that these important pieces of legislation remain the basis for the UK automotive sector, including the requirements contained within them for the aftermarket.

Therefore, as Osborne Clarke, specialist lawyers in the automotive sector, recently reported, “…of most interest to businesses will be the negotiations on – deep breath – data protection; the movement of goods (including customs, tariffs and regulatory aspects); services generally (including market access and non-discrimination, and regulatory aspects); financial services; digital; capital movements; intellectual property; public procurement; movement of people; transport; energy… and, of course, fisheries.”

The expectation is that the negotiations will need to be wrapped up at some point in autumn 2020, to allow time for ratification by EU Member States. So, the next few months will be critically important.

Start planning ahead

In the meantime, it would be wise to start some forward planning. There are several potentially significant challenges that the Brexit negotiations need to tackle to ensure the continued availability of spare parts, equipment and technical data from European suppliers – who support a substantial part of the UK aftermarket’s ability to diagnose and repair vehicles.

So, what should you start to consider? Access to parts is critically important, so talk to your suppliers and find out how they are planning to ensure continuity of supply. Then consider who you will partner with to protect the availability of the parts you will need. This means picking your suppliers with care, forming service level agreements with them – don’t just continue to ‘shop around’, but make agreements with those who will support you, rather than just give you the lowest price. Availability will become more important than price.

There is also a wide range of type-approved parts, such as windscreens, headlights, tyres and brake system components (e.g. pads, disks, shoes and drums) and it is not clear if it is a simple case of these continuing to be recognised in the UK once we leave the EU. It would place a serious pressure on suppliers to get them approved in the UK if this were to be the case.

A less obvious problem could be the access to technical data. The EU legislation may block access from the UK to the data of the parts suppliers, diagnostic tool manufacturers, or data publishers held on servers that are in the EU.

The only ‘good news’ is in the short term that much of this will not become a problem until the deadline for a deal has passed, but even then it is still not clear if it will be straightforward.

The last hurdle

The final Brexit step will be how the ratification of a negotiated deal is done. It is not clear whether it is possible for the deal to simply be ratified by each EU national government, or whether it will also have to be approved at national or European Parliament level under some states ‘constitutional arrangements’ – it will also need to be determined by the nature and contents of the future relationship agreement(s). As they say, this is as ‘clear as mud’, which is probably not a good basis upon which to plan your future business activities, so take some steps to protect your supply chain and plan ahead to ensure that you can benefit from the uncertainty.

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