Decision to leave EU ‘will blow fleet budgets out of the water’

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The United Kingdom’s decision to quit the European Union will push up costs for operators of commercial vehicles, an expert has warned.

Although obligations on the Certificate of Professional Competence (CPC), as well as rules on tachographs and drivers’ hours, are unlikely to change as a result of the Brexit vote, Colin Tourick, Grant Thornton professor of automotive management at the University of Buckingham business school, said the pound’s dramatic fall since the referendum, if sustained, will make fuel and vehicles more expensive.

Almost 17.5 million people (51.9%) voted for the UK to leave the EU on June 23 and within hours of the result being  officially declared, Prime Minister David Cameron had announced his resignation. London stock markets plunged more than 8% in the opening minutes of trade and the FTSE 100 index fell more than 500 points, before rallying days later.

In the period since most annual business budgets were agreed last autumn, sterling has dropped 10% against the euro and 9% against the US dollar. Further political uncertainty is predicted to take its toll on the markets.

Tourick told Commercial Fleet: “The long-term impacts of Brexit are unknown and as yet unknowable, but there are clearly going to be bumps in the road.

“In the short term, fleet budgets are likely to be blown out of the water. Fuel costs and new vehicle costs will rise, because sterling will fall.”

As the UK imports so many goods, Tourick believes general inflation will rise, affecting prices for servicing, maintenance and parts.

However, despite the dramatic fall in the pound in the  aftermath of the vote to leave the EU, there was not as big an effect on wholesale fuel prices as might have been expected, according to the RAC.

Fuel spokesman Simon Williams explained: “While the exchange rate is a very important factor in determining the price we pay for fuel at the pumps, the associated fall in the price of crude oil due to fears of weaker global demand has softened the effect on wholesale fuel prices. Had the barrel price stayed constant, the falling pound would have caused wholesale prices to rise sharply.”

In early June, the price of crude oil rose to $50 – a figure not seen since October last year, and at the time of the referendum was just under $49. However, on the following Monday, the barrel price dropped to $45.88. This 6% reduction softened the impact on wholesale fuel of the 11% fall in the strength of the pound against the dollar.

“We may well see forecourt prices go up by a penny or two from the current average prices for both petrol and diesel of 112p a litre,” said Williams. “But we should remember that a year ago, a litre of unleaded was 5p more expensive and diesel was 9p dearer.”

EU rules will still apply

As the markets come to terms with the implications of the Brexit vote and commercial fleet operators get to grips with costs, those expecting laws regulating the transport sector to be swept away following Brexit should also think again. Many of the rules that govern transport in the EU are in fact derived from long-standing regulatory structures that predate our membership.

“The best example of this is the operator’s licence and traffic commissioners,” said James Backhouse, director at legal firm Backhouse Jones.

While leaving the EU does involve setting aside all the EU legislation that currently applies, much of this has been made law in the UK by separate legislation in parliament.

“That legislation will not be set aside automatically once the exit period is concluded,” explained Backhouse. “Also the negations may involve us agreeing to continue the application of some of the EU legislations that we would otherwise lose by virtue of Brexit.”

Included among the UK legislation that will not be lost on Brexit are the Goods Vehicles (Licensing of Operators) Act 1995 and the Public Passenger Vehicles Act 1981.

“There may be subtle changes to financial standing and repute, but, in principle, the legislation will remain unchanged in the medium term and probably much longer,” said  Backhouse. 

“We are, though, unlikely to see the scope of goods vehicle licensing excluded to sub-3,500kg vehicles as was recently mooted by the EU.”

Driver CPC obligations are also unlikely to change, because, although the regulations were created by the EU, the UK is a signatory of the European Agreement Concerning the Work of Crews of Vehicles Engaged in International Road Transport (AETR), which contains driver CPC obligations.

Backhouse said: “The UK is expected to remain a signatory of AETR as a condition of ongoing trade with the EU. This will be in line with a number of other non-EU counties.”

As the rules on tachographs and drivers’ hours are governed by EU regulations, it appears at first glance that these will no longer apply when we leave the EU.

However, as with the driver CPC, the AETR incorporates these rules and therefore they are likely to continue to apply to both goods and passenger vehicle operations.

Backhouse said: “When the UK leaves the EU, the right to cabotage using goods and passenger vehicles will be removed, unless negotiations with the EU preserve them. This is a great example of why companies that carry out journeys across the EU should be watching the negotiations carefully.

“Operators are encouraged to initiate a dialogue with UK Government negotiators, perhaps through their trade association, to ensure that the Government is aware of the sectors’ big issues, such as cabotage and PSV (public service vehicle) EU operations.”

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