“We were lied to by the UK government implying that we had an FTA but actually giving us a no-deal.”
Never mind its obsession with removing our freedom of movement, the Government has driven us into Brexit: a classic car crash! Like so many other areas of economic activity in the UK, particularly SMEs (Small and Medium Enterprises), the classic car and motorcycle industries are suffering. All over the UK there are small companies employing highly skilled and specialised workers restoring, repairing and servicing ‘classic cars’ and ‘classic motorcycles’, manufacturing new spare parts, or cannibalising vehicles which are beyond economic repair and selling ‘used’ parts to keep others going. They operate in units on industrial estates, in back-street workshops, or even in sheds among farm buildings. Often hidden away, they generate many millions of pounds, and their reach is literally world-wide, involving both importing and exporting of parts or whole vehicles.
So, what are classic cars and bikes? We are not talking about veteran or vintage vehicles; ‘modern classic’ cars are typically, according to a dictionary definition, ‘cars more than 25 years old’. These ‘collectors’ cars’ are specialist or now relatively rare cars which are sought after by enthusiasts who enjoy driving them, and/or keeping them as investments. They are not necessarily high-performance vehicles; indeed some are quite mundane models. From time to time ‘barn finds’ emerge: vehicles which have been stored away and maybe forgotten about are rediscovered. Sometimes a whole collection of classics emerges from a shroud of dust and cobwebs.
The market values of the best classics have long since bounced off the bottom of their depreciation curves and, as fewer of a particular model survive, they acquire ‘desirability’ and added value. Many owners buy them before they become true ‘classics’, anticipating a rise in their value; these are known as ‘future classics’. At the high end of the market, where classic cars are often seen as a major investment like a work of art, experts have highlighted the increased red tape and additional costs caused by Brexit. As reported on the This is Money website, auction houses and collectable motor dealers have experienced major problems and hurdles in the last month alone.
Brexit brings the imposition of red tape, big VAT bills and other additional costs to this very international trade. Cars being traded across the UK border now need a ‘passport’, the ATA Carnet. This is a bond that guarantees that your items won’t disappear after they enter the country; it costs a few hundred pounds, but in addition a returnable bond payment of 40 per cent of vehicle value also has to be presented. This is Money gives as examples: “If the value of a car is £10,000, the bond is £4,000; for a £1million vehicle it is £400,000.”
To prove what an international phenomenon the classic vehicle business is, the ‘one-make’ or ‘one-model’ Facebook groups I watch have members not only in the UK, but in many EU countries, Japan, Malaysia, Australia and New Zealand, South Africa and the US. Such groups share experiences and information, and members can seek help and advice over specific problems with their cars, and may source the spare parts they need from the other side of the globe.
Thus, there is a network of small specialist businesses to provide the servicing, repairs, restoration and parts supply. Like so many other small businesses, many are suffering from the effects of Brexit, especially those dealing with European makes, which rely on importing or exporting whole vehicles or parts. What follows is the result of a questionnaire sent to several classic vehicle businesses.
Paul Jayson, The Motorcycle Broker, imports classic motorcycles, spare parts, and specialised paints; like some classic car businesses, he imports vehicles to order from EU countries. This import trade is now greatly compromised by the added costs and taxes imposed by Brexit. However, Gary Fisher of Totally Alfa, who remanufactures specialist parts, has seen an opportunity: he used to import ‘new old stock’ car parts from EU countries. Owing to increased costs, he plans instead to expand the range of parts he manufactures, and may export them, possibly undercutting European prices. Another of our contributors lives in France and trades on eBay: for him, business with the EU and the rest of the world is unaffected, but he simply no longer trades with the UK, to avoid the complications of extra costs and mountains of red-tape.
As regards exports, Paul Jayson can no longer viably export to the EU the parts and components his business manufactures; when exporting restored motorcycles to the EU, new tariffs and VAT costs result in price increases of 30 per cent, which has put an end to this trade by rendering the products far too expensive and uncompetitive. The bureaucratic work necessary to cope with the new documentation takes too long, and paying additional staff to deal with it adds huge costs; transport delays add to the problems.
The major issue here is the matter of whether these businesses can remain competitive. Markets abroad are very price-sensitive: added costs, additional paperwork and transport delays “make this present set-up unworkable” for Paul Jayson. Gary Fisher, reports: “The increased cost of parts has been the biggest problem as this has to be passed onto customers, which is never a good thing.” Ironically, for Gary there was a huge increase in orders from Europe just before the end of the year, so he had to get them into the system before the 31st December deadline.
The parts and accessories eBay dealer we interviewed in France has given up on selling in the UK, as to continue would involve registering for UK VAT, charging, paying and accounting for UK VAT, though not VAT in France. Meanwhile the VAT rate for sellers in other parts of the world exporting to the UK is… zero. In his view, introducing this requirement is “the most staggering impertinence!” His customers refuse to pay increased prices resulting from border requirements and costs: the increased costs would “result in an instant collapse in sales”. To get round this problem, Paul Jayson, our motorcycle broker, has already set up another company in Belgium, to manufacture and sell his products in the EU: “they will be imported to the UK, where the customers will have to pay more and are willing to do so, the market here being less price-sensitive.”
There is a considerable sense of grievance at the fact that it was the UK government who made this deal: Paul Jayson thinks the government should pay all the extra costs and give British businesses the grants they used to get from the EU to open new markets. A further issue is that there seems to be some inconsistency as to whether carriers collect import duty, and the rates are different for parts and for complete products, all of which adds to the confusion. “Clearly, the details were not worked out when the ‘deal’ was signed.”
It means most EU companies are now refusing to trade with anyone from the UK unless they have a mainland EU company. Paul Jayson’s company has to employ additional staff on an ad-hoc basis to cope with the extra paperwork, which means increased prices on everything; they are paying more for everything they buy, meaning that costs have increased on everything they sell. “The lack of notice meant nobody could prepare for this because nobody knew what this ‘deal’ would be. You cannot prepare for something when you don’t know exactly what you’re preparing for. We are disgusted that everyone was lied to by the UK government implying that we had an FTA but actually giving us a no-deal.”
To sum up the situations of our three main contributors:
The Motorcycle Broker: “The post Brexit situation means we will only use the UK to trade within the UK, and we will use a mainland EU company to trade with the rest of the world. We wanted to invest more in the UK, but the UK government and Brexit has made it impossible so we can only dis-invest in the UK.”
Totally Alfa: “Because we are a niche supplier, supplying many parts that cannot be found anywhere else, I am hoping that once things settle down we will continue to grow.”
Our eBay trader in car parts and accessories: “In terms of selling in the UK, Brexit has wiped it out completely. However, luckily there is the rest of the world, and so I can ignore the UK completely – as I suspect most foreign sellers will.”
All this doesn’t just affect classic car trade between the UK and the EU: the owner of a Chevrolet Camaro recently ordered a set of spare keys from the US. They were posted on 20 November, but were lost in transit. To order the same again (£32 for two) now incurs £9.69 in extra import charges that previously didn’t exist. A benefit of Brexit? Hardly: yet another consequence of it.
Our final contributor is a classic car enthusiast and collector: Bernard Lien has owned a variety of classic cars over many years, and has recently had a lot of work done on two of them, involving parts for both. He reports that it has become a vicious circle in the sense that UK suppliers of classic car parts are running out of stock because of the post-Brexit difficulties such as slow logistics and additional taxes having to be paid. Increasingly, one has to source parts in the EU instead, typically from Germany or Italy. Some EU suppliers are rejecting requests from the UK, and others are charging far more to recoup the shippers’ extra charges (typically twice as much as before). In some cases, the carriers are being charged the VAT, and they in turn have to obtain it from the customer to pass it on (often charging the customer an ‘advancement fee’). Most suppliers still charge the customer – erroneously – for their own country’s VAT and other taxes too, so as a result the customer ends up paying taxes twice. For example, a part from Italy will incur 22 per cent Italian tax plus 20 per cent UK VAT – a total of 42 per cent tax – plus extra shipping charges; the result is that cost doubles for that one item. Of course, transport time has increased too, typically from 3 days to 2 weeks.
Buying from and selling classic cars to the EU is also more problematic and costly: now taxes will be involved (at least 5 per cent HMRC tax for ‘historic vehicle imports’) and as much as 30 per cent if your car is no longer considered a historic vehicle, but instead as an investment. HMRC are also apparently considering charging capital gains tax when a vehicle is sold on.
With regard to the paperwork involved in importing or exporting classic vehicles: a classic car specialist transporter has explained that taking a car temporarily into the EU (typically for a race or a show) has become extremely difficult owing to the complexity of the documentation. It is also risky in that the car could be impounded if paperwork is deemed incorrect. Many of the people affected have simply given up on the idea.
This is also a major detriment to the free flow of British motor racing teams to and within the EU: “UK teams and riders face new regulations for working in Europe, including carnets, limited stays and possible work visas and permits”, as reported in Motorsport Magazine. The costs and paperwork involved in taking the huge team lorries to the EU, when every item of equipment they carry has to be processed accordingly is bad enough; even worse are the regulations for the drivers, riders and support staff, as regards obtaining and paying for the necessary visas. Then there is the 90-day limit for non-EU citizens… These are the same costs and difficulties that are affecting musicians and other performers. Hardly surprising then that many racing teams are considering re-locating to EU countries.
What about potential Brexit advantages for British racers and teams wanting to race in Europe? “There are none – only clear disadvantages,” concludes Paul Denning, manager of the UK-based Yamaha racing team. “It’s shockingly challenging – a huge amount of negative energy and finance for nothing.”
This chaotic situation is not what was promised; the government gave bland assurances to create confidence in itself as the driver of Brexit. But instead, lack of proper planning and preparation has led to poor performance; in the case of the classic car and motorcycle industry, and UK-based motor racing teams, this is proving to be a Brexit classic car crash.