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Fleet News has prepared the following report for companies and employees who use their own cars for company business including the obligations on both parties. If you use your own car for business you should read this report.

With the UK government currently discouraging people from using public transport, we’re set to see an increase in the number of cars on British roads.

As employees return to work it’s likely that they’ll choose to jump in their cars instead of on buses and trains.

However, organisations aren’t only responsible for the safety of their staff in the workplace, they also have a duty of care to their employees when driving at work, regardless of whether it’s using a company car, a hire car or their own car.

The Health and Safety at Work Act 1974 is very clear and requires employers to take appropriate steps to safeguard staff and members of the public.

Whilst some organisations are unsure of the guidelines when employees use their own vehicles to perform any job-related tasks – known as grey fleet drivers.

Businesses have the same duty of care to ensure all vehicles used for business purposes are safe and legal to be on the road.

Whether it’s travelling to a meeting or nipping to the bank, the legislation applies across the board.

This means that every employee needs a valid driving licence and that every vehicle needs to be properly taxed, with a valid MOT (if over three years old) and serviced regularly.

Additionally, businesses must also check the employee’s insurance to make sure it includes business use cover.

At the very minimum employees should have Class 1 business insurance that covers their journeys during working hours.

The Health and Safety Executive indicates that more than a quarter of all road traffic incidents may involve somebody who is driving as part of their work, so businesses need to take a proactive approach.

The cost of unsafe driving

Work-related driving that becomes unsafe or illegal can result in substantial legal, reputational and financial repercussions for businesses if driver and vehicle documents have not been checked and recorded.

If a driver, who fails to meet the minimum requirements is involved in an accident while working then the consequences are considerable.

In the event of an incident, an organisations practises come under scrutiny and any investigation which finds a poor or non-existent process of checking drivers is likely to expose a failure in duty of care.

This could result in sizeable fines as well as claims for compensation made by those who suffer injury or damage as a result of employer negligence.

It’s important to keep in mind that fines for conviction under the Corporate Manslaughter and Homicide Act 2007 are based on the size and turnover of the business.

Fines start at £300,000 and there is no maximum limit. In the worst cases, under the Corporate Manslaughter Act, employers, including senior managers and directors could find themselves facing prosecution and even prison sentences.

Regular licence checking should be part of a business’s overall risk assessment.

It’s important that a complete view of an employee’s driving history is carried out periodically through their employment and businesses are encouraged to keep the most up-to-date information available on all their drivers.

Failing to do so, means that businesses have no way of knowing whether employees have previously committed an offence since the last check.

Driving down risk 

It can be cumbersome and time consuming for employers to gather information about their employees’ personal vehicles.

But with a duty of care towards staff and financial penalties on the line, no employer wants to be in the dark about whether or not their grey fleet drivers have valid MOT, tax and insurance.

Having visibility over a vehicle’s road-worthiness and last service enables finance and HR departments to ensure that workplace journeys are carried out safely and legally.

If the driver and vehicle validation process can be combined with business expenses and claiming business mileage then all the better.

As part of our digital expense management solution from Selenity, we use their enhanced duty of care service.

This allows us to carry out automatic checks of driver and vehicle data using data sourced from the Driver and Vehicle Licensing Agency (DVLA) and the Driver Vehicle Standards Agency.

Currently, there isn’t a way for businesses themselves to automatically check insurance documents using the Motor Insurance Database (MID) managed by the Motor Insurers Bureau (MIB) – only police and insurance providers have access.

However, with the outsourced insurance validation service from Selenity, we ensure that all our employee’s claiming mileage upload their insurance documents so that they can be checked within our expenses system.

Not only does this remove the time-consuming process of checking individual drivers documents but as the checks are electronically carried out, we don’t need to store large amounts of physical documentation.

Businesses often fail to establish whether employees have the correct level of insurance cover.

But using digital expense management software with driver compliance functionality built in, means that unless employees have been checked and validated they won’t be able to claim business mileage expenses.

Finance departments who withhold the reimbursement of travel expenses to staff who aren’t correctly covered minimise their risk.

If an accident were to occur then it would be more likely the Health and Safety Executive (HSE) would see a strong case that duty of care has been carried out properly.

Putting the brakes on uncompliant drivers

The effective management of work-related road safety not only helps to reduce risk but also clearly demonstrates a commitment to safeguarding employees. 

By regularly checking the licences of employees, it’s possible to determine whether drivers remain appropriate to make work-related journeys.

In the long run this reduces the chance of facing financial penalties and the risk of being prosecuted under Corporate Manslaughter legislation.

Whether you have ten or a thousand drivers, a business’s duty of care obligations remains the same.

The process is an ongoing one and enlisting the help of a reputable third-party provider can help make validation more accurate and efficient for everyone involved.

Allowing organisations to remain compliant and confident they are correctly covered as well as enabling finance teams to focus on the day-to-day – without fear of unexpected penalties and safe in the knowledge that it’s being taken care of.  By Graham Hill thanks to Fleet News

New cameras are being installed ahead of the expansion of London’s ultra-low emission zone (ULEZ) to the North and South Circular.

Currently, the ULEZ covers the same area as the Congestion Charge Zone, but will cover an area 18 times that size when it goes live from October, 2021. 

Transport for London (TfL) says that the larger zone is vital to ensure that, as London recovers from the coronavirus pandemic, one public health crisis is not replaced with another.

It estimates that the new, expanded ULEZ will reduce harmful nitrogen oxide (NOx) emissions from road transport by around 30% across the city.

Alex Williams, TfL’s director of city planning, said: “Expanding the ultra-low emission zone will play a key role in discouraging people from driving heavily polluting vehicles.

“We have already seen significant falls in the most toxic emissions in central London and now see most vehicles meeting the tough standards in the heart of the capital.”

Williams added that TfL is providing financial support for small businesses and the most vulnerable to help them make the green transition.

The ULEZ operates 24 hours a day, seven days a week, 365 days a year. Motorists who drive in the zone in a vehicle that does not meet the minimum emission standard (petrol vehicles that do not meet Euro 4 standards and diesel vehicles that do not meet Euro 6) have to pay the daily charge.

The daily charge is £12.50 for cars, smaller vans, motorbikes and other lighter vehicles, and £100 for lorries, buses, coaches and other heavier vehicles.

The current zone has seen the number of vehicles meeting the tough emission standards rise from 39% in February 2017, to more than 80% now complying.

It has also contributed to a 44% reduction in roadside nitrogen dioxide within its boundaries, says TfL.

The area covered by the existing Congestion Charge and ULEZ has around 650 cameras but, despite the expanded zone being 18 times the size, new technology means only around 750 additional cameras will need to be installed.

Of the vehicles that drive into the new, expanded ULEZ, TfL expects four out of five cars to be compliant by the time the scheme is introduced in October 2021.

To help support those who may find it difficult to meet the ULEZ standards with their own vehicles, the Mayor has launched a £48 million scrappage scheme for those on low incomes, disabled Londoners, small businesses and charities to switch to cleaner vehicles and greener forms of transport.

To help businesses and charities prepare for the expanded zone, earlier this year the Mayor doubled the amount of money available to £7,000 for those scrapping their older more polluting vans and minibuses and changed the criteria for the size of business eligible, so that more people could benefit.

The car and motorcycle scrappage scheme gives people support to take the dirtiest vehicles off the road and purchase a cleaner alternative, with up to £2,000 available for cars and £1,000 for motorbikes. So far, more than £12m has been given out in grants. By Graham Hill thanks to Fleet News.

Crash for cash remains a “real and growing” threat to all drivers, especially fleets and company car and van drivers, according to experts at AX.

Vehicle fraud is one of the fastest growing categories of insurance fraud in the UK, according to data from industry body, Cifas.

Fraudulent car collision claims increased 45% year-on-year in 2019, compared to an average increase of 27% across all categories of insurance fraud.

The Insurance Fraud Bureau (IFB) estimates that crash for cash collisions, where fraudsters stage non-fault accidents, cost the industry around £340 million a year.

Vehicle protection and management technology provider AX suggests that drivers should educate and protect themselves and their vehicles in light of the growing problem. 

Director of Investigative Services at AX, Neil Thomas, explained: “Criminals will do anything to milk the motor industry and drivers, evolving their tactics to keep people guessing and avoid detection.

“We can’t completely stamp out their activities, but we can collectively do more to curtail what is a real and growing danger to drivers.

“Recent experience has shown how some criminals have used the Covid-19 pandemic lockdown to plan motor insurance frauds, and they are now intent on cashing in at the expense of innocent motorists.”

With crash for cash schemes among the most prevalent types of insurance fraud, AX says that the different tactics can be used to minimise the risk.

THE DIFFERENT TYPES OF CRASH-FOR-CASH SCHEMES

Experts, including the ABI (Association of British Insurers) and AX, agree there are three main categories of crash for cash schemes: staged collisions, ghost collisions and induced collisions .

Staged collisions

Fraudsters intentionally damage vehicles to give the impression that a real crash has occurred. This could involve taking a sledgehammer to a parked car, or even intentionally crashing two vehicles – whatever it takes to fabricate the evidence.

Ghost collisions

While not strictly a crash for cash scheme, here a fraudster submits a totally fictional claim for a collision that never took place. It is like a staged collision except paper-based, taking advantage of instances where claims are never fully investigated.

Induced collisions

Finally, the most notorious tactic is the induced collision. This is where the fraudster drives in an erratic or manipulative way near innocent motorists, hoping to engineer crashes that appear legitimate.

The most reported technique used to induce collisions is braking hard while driving in front of another car, causing a rear-end collision. However, experts at AX have highlighted other, more sophisticated techniques:

• Flash for crash: where criminals flash their lights at junctions to let other drivers out, only to crash into them on purpose.
• Hide and crash: where criminals hide in a driver’s blind spot before moving in front and slamming on the brakes.
• Crash for ready cash: where the fraudster extorts cash from the driver at the roadside rather than through their insurer.

TIPS TO GUARD AGAINST CRASH FOR CASH SCHEMES

What can drivers and fleets do to protect their vehicles from crash for cash schemes? These are AX’s key recommendations for private motorists as well as fleet managers:

Learn/teach drivers to recognise the warning signs

To reduce the risk of induced collisions, drivers and fleet managers should learn the warning signs of these schemes.

For example, it is often possible to identify cars used in traditional slam-on collisions because they have rear-end damage from previous scams, or because the fraudsters have intentionally disabled their brake lights to increase the chances of a collision. Also watch out for erratic driving and passengers looking back as they could be waiting to tell the driver when to slam the brakes on. 

Investigate Collisions and claims

When a collision happens, drivers should gather evidence safely at the scene. Note key facts and where possible identify potential witnesses

It is vital that fleet managers have this evidence at hand quickly to prove fraudulent behaviour from the third party. For individuals and fleets that suspect they may have been the victim of a crash-for-cash scheme, report this to the police at the time and to their own Cheatline service.

Early identification of fraud can save companies significant amounts of money, stop fraudsters committing repeated scams and help authorities bring the criminals to justice.

Invest in dashcams, vehicle tracking devices and telematics

Finally, the use of technology can be instrumental in helping fraud investigators establish how the collision happened.

Any driver can invest in these technologies, and a fleet manager who suspects they may have been targeted by a staged collision can use telematics data to instantly verify whether the damage happened at the time and location reported by the claimant.

It is important not to assume telematics is a silver bullet, however. While modern vehicle tracking devices collect a vast amount of information, making sense of this data takes time and expertise.

For this reason, individuals and fleet managers hoping to stem the tide of fraudulent motor insurance claims and crash-for-cash scams should ensure they also have specialist vehicle crime investigators on their side.  By Graham Hill thanks to Fleet News

The average sticker price of a used car grew by 4.6% to £13,888 in July, marking the fourth consecutive month of price growth, according to data from Auto Trader.

The growth is being driven by the strong performance of used internal combustion engine (ICE) vehicles, especially petrol, which last month saw average prices increase 5.6% (£12,604), marking the highest rate of growth since October 2018.

Diesel recorded a similarly strong performance, with average prices increasing 4.1% (£14,705), the highest rate of growth since September 2014.

Prices for used electric vehicles have dropped by 4.3% however, due to increased supply, while alternatively fuelled vehicles (AFV) fared a little better, contracting at a rate of 1.1% (£22,508), marking five months of declining prices.

Richard Walker, Auto Trader’s director of data and insight, said: “Over the last few months, used car prices have benefited from high demand in the market whilst the supply side has emerged more slowly from lockdown.

Even when auctions reopened, the supply of new stock in the market has been slow to return to pre-Covid-19 levels, whilst demand has remained at record levels.

“Looking ahead, at a time of economic uncertainty and with so many variables at play, we will continue to be data driven rather than publish opinion-based statements about the future.

Whilst consumer demand shows no signs of slowing into August, we have seen that supply constraints are working their way through, so we expect the growth rate we’ve seen in recent month to stabilise somewhat, rather than continue to accelerate each month.”

Taking a more granular view of the market, due to growth in demand outstripping supply, price increases were recorded in every price band of used car. Demand for vehicles aged 10-15 years saw a year-on-year growth of 23% in July, while supply fell by -16%.

This resulted in vehicles aged 10-15 years recording the highest price growth among any age group, surging 10.4% (£4,254). In contrast vehicles up to 12 months naturally had the lowest, at 2.6% (£26,500).

In terms of premium and volume brands, both saw demand outstrip supply last month. As a result, both saw an increase in average prices, with premium recording an average growth of 1.8% (£20,779) and volume 9.8% (£9,143).

Sue Robinson, director of the National Franchised Dealers Association, added: “It is encouraging to see sustained growth in used car prices as it demonstrates that, despite the challenging economic circumstances, the public are placing their trust in cars as a means of safe and secure transport. It is interesting to see the greatest increase in value of diesel cars since September 2014.”  By Graham Hill thanks to Fleet News

Whilst new technology is introduced to make driving more comfortable and less stressful there is a limit as to how far it should go before drivers get lazy and reactions reduce making driving more dangerous.

As a result a majority of fleet managers have questioned the effectiveness of in-vehicle technologies, such as parking sensors, new research suggests.

The survey, by Alliance Insurance, found that almost three-quarters (70%) of fleet managers either agreed or strongly agreed that technologies such as parking sensors de-skill drivers to the detriment of driver safety.

However, with more than 90% of motor accidents the result of human error, according to RoSPA, fleet decision-makers think that the arrival of autonomous vehicles should make the UK’s roads much safer, with more than half (53%) of respondents saying ‘advanced’ vehicle technologies will deliver road safety benefits.

Interestingly, however, more than one third (35%) of fleets also believe that, if autonomous vehicles become more commonplace, the number of insurance claims will increase.

A study released in America in May, by the Insurance Institute of Highway Safety (IIHS), found the perceived safety benefits of autonomous vehicles could be significantly lower than commonly believed.

It claimed self-driving vehicles might prevent only one-third of crashes if automated systems drive too much like people.

Gerry Ross, head of motor at Allianz Insurance, said: “As our roads and the vehicles using them change over the next decade these technological advances need to be used appropriately.

“Fleet managers need to ensure that their drivers understand the capabilities of the vehicles to maximise the benefits the additional safety features bring.

“It’s important that fleet drivers use the available technology to their advantage to supplement their professional skills.”

The survey results are published in a new report – ‘Fleet Managers, the pressures, challenges and opportunities’ – released today by Allianz Insurance.

It found that 71% of fleet managers say the cost of vehicle repair influences the choice of vehicles in their fleet. Being green is also a key factor with 56% making choices around the composition of their fleet based on protecting the environment.

Fleet managers face a number of pressures and challenges, it suggests, from ensuring the health and safety of their drivers and other road users to addressing environmental concerns and meeting their organisation’s financial targets.

Encouragingly, the research conducted by Allianz found that more than three-quarters (78%) of fleet managers feel they are able to offer their drivers the level of support and training they need to help them drive more safely. However, alongside the one in five (22%) that don’t provide enough support, 70% say they’d like to dedicate more time to explore the support that’s available.

“Insurers and brokers are a great source of risk management information and support,” explained Ross. “As well as providing advice to reduce risk, they can analyse claims data to help fleet managers prioritise where they should take action.

“Given the changes and opportunities ahead, it’s essential that fleet managers, brokers, insurers and vehicle manufacturers work together.”

He added: “By sharing knowledge, experience and insight it will ensure that fleet managers are able to minimise the risks and maximise the benefits for their fleets, their drivers and other road users.”  By Graham Hill thanks to Fleet News

Two thirds (68%) of motorists say they have seen an increase in other drivers being distracted by infotainment systems, sat navs and mobile phones, research from Venson Automotive Solutions suggests.

However, only 13% of the survey respondents admitted to being side-tracked themselves by in-car technology when driving.

The results come in the wake of a Department for Transport (DfT) review of roads policing, which is asking for evidence on how in-car technology could be increasing accidents as well as reducing them.

Simon Staton, client management director at Venson, said: “We may have some of the safest roads in the world, but anything that can be done to reduce the number of casualties on our roads is to be welcomed.

“The advances made in in-car technology have moved on very quickly, and as they become standard in new vehicles, the scope for driver distraction also grows.

“We look forward to the results and recommendations from the DfT review and would encourage businesses and fleet managers to get involved in the consultation process.”

More than a third (38%) of drivers surveyed said that they used hands-free/Bluetooth in-car technology for making phone calls while driving, however when it comes to using their phone as a satnav, nearly a fifth admitted to balancing the phone somewhere to keep an eye on it, such as a cup holder.

Businesses and fleet managers are recommended to impress on drivers the dangers of being distracted by their in-car tech and ensure robust processes are in place to meet their duty of care obligations.

Drivers currently risk six penalty points on their licence and a £200 fine if they use a hand-held phone or satnav when driving.

For motorists who passed their driving test within 2 years of being caught, the consequences are even more severe – they will automatically lose their licence and have to reapply and pay for a new provisional licence – passing both theory and practical parts of the driving test again to get a full licence.

However, the Venson survey shows that people’s appetite for more advanced in-car tech is growing – even if it isn’t in their current vehicle;  67% saying they would use a dashboard satnav if it were available in their car and nearly 50% of people surveyed said that they would like to have an emergency call button in their car in case of being involved in a road accident.

An app which informs the driver about the health of their vehicle’s tyres would also be welcomed by 48% of people and 43% would make use of driver assistance technology such as cruise control, lane departure detection and speed limit exceeded notifications.

In contrast, only one in four (26%) people surveyed said they would like to see entertainment or lifestyle dashboard technology such as apps that play music or offer concierge services.  By Graham Hill thanks to Fleet News

The UK’s largest motorway services provider has announced it’s trialling an 8p-per-litre fuel price cut at some key locations.

The scheme is taking place at five forecourts run by Moto Hospitality on three of their sites: Frankley on the M5 near Birmingham, Lancaster on the M6 and Donington Park on the M1 near Derby.

It will see petrol and diesel prices brought down to levels more competitive against both local fuel stations and supermarkets.

The trial prices will start at 111.9p per litre for unleaded petrol and 117.9p per litre for diesel. For comparison, the latest RAC Fuel Watch figures peg petrol at 113.47p and diesel at 117.17p per litre.

If the scheme proves successful by getting more drivers to fill up by the motorway, rather than search out cheaper fuel at off-highway locations, Moto will roll it out across all 47 of its UK forecourts. The firm is also calling on the Government to cut VAT on petrol and diesel, allowing retailers to pass the savings on to drivers.

Ken McMeikan, chief executive of Moto, said: “Times are tough and we know from our customer insight that motorists want to see lower fuel prices to help them make their money go as far as possible. We are hoping that, subject to a successful trial, we will be able to roll out these fuel price cuts to all of our Moto operated petrol stations.

“We are doing our part, but we hope the Government can provide some much needed help to motorists, too. I have written to Rishi Sunak, urging him to make an immediate cut to VAT on fuel in line with his recent VAT cut from 20 per cent to 5 per cent for the hospitality industry.

“We welcomed that decision and immediately passed the full VAT cut on to our customers, which has gone down extremely well as people seek support during these tough economic times. “A cut in VAT on fuel would instantly put more money into people’s pockets at precisely the time they need to be travelling again for work, visiting loved ones and during the expected increase in staycations.” By Graham Hill thanks to Auto Express

New route optimisation technology for fleets operating in urban areas, based on the behaviour of ants, has been developed by university researchers.

Computer scientists, at the College of Engineering and Physical Sciences at Aston University in Birmingham, say it could help fleets halve their emissions, while helping towns and cities meet clean air targets.

The researchers based their computer modelling algorithm on the way ants forage for food to schedule tasks to vehicles in a fleet and optimise their routes.

Developed under the Think Beyond Data initiative, part-funded by the European Regional Development Fund (ERDF), the research team used a technique known as ‘meta-heuristic technology’.

The method mimics how colonies of ants solve problems and improves upon their existing behaviours. For example, each ant keeps a record of the best solution it has individually found and passes on this knowledge to other ants. This ‘best practice’ then permeates through-out the colony, updating its store of know-how in a way comparable to computer algorithms.

The researchers further developed the technique by creating even ‘smarter’ ant algorithms by reducing the amount of decisions they make such that they can solve city-scale fleet routing problems. 

Dr Darren Chitty, lead researcher at Aston University, explained: “Algorithms based on the foraging behaviour of ants have long been used to solve vehicle routing problems, but now we have found how to scale these up to city-size fleets operating over several weeks in much less time than before.

“It means much larger fleet optimisation problems can be tackled within reasonable timescales using software a user can put on their laptop.”

The route optimisation technology was tested on several Birmingham companies that operate fleets of vehicles to help them minimise their road usage.

Tests with the maintenance company comprised of up to 45 vehicles and 437 customer jobs over a six-week period.

They observed savings of more than 50% over the company’s original time spent on the road. This enabled the maintenance company to make equivalent savings in their fuel costs, boost profit margins, while cutting vehicle emissions in half, said researchers.

Dr Chitty said: “We feel that while Clean Air Zones will improve air quality for some residents, there could be better ways to tackle the health and environmental problems caused by emissions. Instead of taxing commercial vehicles to enter these zones, our research can act as an incentive to companies as they will not only reduce emissions but also save money.

“If all companies in a city operated with this technology, then emissions from these vehicles – which are some of the most polluting – could be significantly reduced, improving air quality for all concerned.”

Many fleets already employ telematics and tracking software to optimise route planning and improve driver behaviour, but these results suggest the scope for cost savings and improved environmental performance.

For example, the scientists were able to reduce CO2 emissions by 4.25 kg per van per day and reduce more harmful emissions such as nitrous oxide by 98-grams per van per day from a fleet of vehicles tested in Birmingham.

The improved schedules were able to service all the required customer demand but with fewer vehicles. This came as a direct result of better routing, saving time for the fleet, but also taking some vehicles off the road altogether, reducing traffic and congestion, said the researchers.

They are now looking to roll out the technology further by testing the system with different types of vehicle fleets such as larger vans or HGVs, as well as larger fleets of vehicles.

The team will continue to approach other companies to use as a testbed for the technology as the project is funded for another two years.  By Graham Hill thanks to Fleet News

Highways England will increase the basic speed at which motorists can drive through roadworks to 60mph.

After extensive research and trials, the organisation has confirmed that where it is safe for road users and roadworkers, and where shown on road signs, vehicles can be driven at up to 60mph.

That is 10mph faster than the current 50mph limit.

The move comes in response to feedback from road users who said they were frustrated at not being able to go quicker. The trials showed that as well as saving time, more people were sticking to the higher speed limit bringing safety benefits.

Jim O’Sullivan, Highways England chief executive, said: “All of our research shows that road users benefit from 60mph limits in roadworks. They have shorter journey times and feel safe.

“Road users understand that roadworks are necessary, but they are frustrated by them. So testing 60mph has been about challenging the norm while ensuring the safety of our people working out there and those using our roads.

“We have a huge programme of work planned, so being able to use 60mph where safe will continue to improve everybody’s experience of our roads.”

Highways England recently completed delivery of the Government’s first road investment programme. It was found to have delivered most of its commitments and to have made good progress over the first road period, but the programme set out for major improvements was too optimistic, according to latest Office of Rail and Road (ORR) report.

The ORR had made observations on the delivery risk of the programme which saw re-planning from 112 schemes that were due to have started construction in the first road period to 73, agreed with the Department for Transport (DfT). By Graham Hill thanks to Fleet News.

The Government is being warned a ‘no deal’ Brexit could impact vehicle costs and prove fatal to the wider UK automotive sector.

A recent Society of Motor Manufacturers and Traders (SMMT) survey showed one-in-three automotive employees was still on furlough, with up to one-in-six jobs at risk.

The impact of the coronavirus crisis is being felt across the sector, but jobs could also be threatened by the prospect of a ‘bare bones’ or no-deal Brexit, says the UK automotive trade body.

If the EU and UK do not agree a deal by the end of the year, the UK will leave the EU’s single market and the customs union without any agreement on future access from January 1, 2021.

The SMMT wants a full, zero-tariff deal in place by the end of the transition period to give businesses on both sides the chance to prepare.

Chief executive Mike Hawes said: “Before Covid-19, we expected to produce 1.3 million vehicles this year; the pandemic means we’re already looking at scarcely 900,000.

“A ‘no deal’ Brexit would wreak further long-term damage on the sector. Tariffs would add cost, custom duties and complexity, which would disrupt supply.”

The SMMT suggests a ‘no deal’ scenario could see UK vehicle volumes falling below 850,000 by 2025 – the lowest level since 1953. This would mean a £40 billion cut in revenues, on top of the £33.5bn cost of Covid-19 production losses over the period for UK automotive.

“The industry cannot withstand the shock of a hard Brexit,” explained Hawes.

“Covid-19 has consumed every inch of capability and capacity. There is not the resource, the time nor the clarity to prepare.”

Almost all countries in the world are part of the World Trade Organisation (WTO) which regulates international trade. Should the UK leave the EU without a deal, its trade with the EU will be governed by WTO rules.

When joining the WTO, each country negotiates the maximum tariffs it can set on various types of goods. The tariff charged by the EU on imported cars is 10%.

Leaving without a deal would mean UK-built cars facing a 10% tariff cost and vice versa, says the SMMT’s annual UK Automotive Trade Report.

Tariffs would result in a price increase of almost £3,000 on the average UK exported car to the EU, a £2,000 price increase on UK vans exported to the EU and a price increase of £1,800 on cars and vans imported from the EU, if fully passed on to UK consumers.

The report adds that additional customs duties, costs and complexity would significantly disrupt sourcing of parts and components from the EU.

Executive director, business transformation at Ford of Britain, Graham Hoare, said the manufacturer had implemented measures to ensure product is available for fleets.

He explained: “We’ve brought a lot of cars into the UK and have maintained that availability. That’s really important so we don’t have disruption to our supply chains as the change happens.”

But he warned: “A Free Trade Agreement is necessary for the viability of our business. If you think about all the other changes we’re embarking upon… another burden just makes the activities we’re performing in the UK a little less viable.”

JUST-IN TIME

Frictionless trade within the EU has been critical for enabling the UK car industry to develop supply chains that cross EU borders several times.

A separate report, produced by The UK in a Changing Europe on Manufacturing and Brexit, highlights how supply chains have to operate with supreme efficiency, and parts have to be delivered ‘just-in-time’ throughout the day.

As an example, 350 trucks arrive from the EU every day at Honda’s plant in Swindon, bringing in about two million parts. Components arrive from five-24 hours after ordering. The plant is scheduled to close a year from now.

Meanwhile, a typical driveline system produced by GKN, the British-based supplier, incorporates specialist forged parts from the UK, Spain, Italy, France and Germany.

These are assembled at GKN Driveline’s factory in Birmingham and supplied to automotive assemblers in the UK and EU.

The components, assembled drivelines and the final assembled car could cross the English Channel several times, says the report.

It is a similar story for BMW, which assembles engines at its Hams Hall engine-assembly plant near Birmingham.

Engine blocks come from France and are processed at the plant. They may go to Germany for further work before being assembled.

The engine may go into a Mini assembled in Oxford or the Netherlands, or into a BMW assembled in Germany.

“The final car could be sold anywhere in Europe or globally,” the report says. “This close integration and the need for minimal trade friction becomes even more important as most UK car producers operate on very low profit margins (around £450 on a £15,000 car).”

BREXIT TALKS

After a meeting between Prime Minister Boris Johnson and the EU Commission president Ursula von der Leyen last month, both agreed new momentum was needed in negotiations.

Official talks resumed at the start of this month, but ended with the EU’s chief negotiator, Michel Barnier, saying that “regardless of the outcome” there would be “inevitable changes” from January 1, 2021. The next round of negotiations began last week, with no apparent progress made.

The commission has also told member states and businesses to revisit plans for a ‘no deal’ Brexit.

In a press briefing, prior to the SMMT’s annual International Automotive Summit, Hawes insisted: “We must secure a comprehensive Free Trade Agreement that maintains tariff- and quota-free trade. With such a deal, a strong recovery is possible.”

The UK in a Changing Europe report says the potential danger is that carmakers may simply decide that production in the UK is no longer profitable and shift their assembly plants to the EU.

Many manufacturers with plants in the UK also have plants in the EU to which they could move production. Moreover, many of these plants have spare capacity.

“Such relocations usually happen when new vehicle models are introduced, and the decisions about sites are normally taken at least two years in advance of planned production starts,” it says.

‘MULTIPLE CHALLENGES’

Key companies in the UK automotive sector, that account for the bulk of UK automotive production – Nissan, Jaguar Land Rover (JLR), and Groupe PSA (Vauxhall’s owner) – have all planned new models in the next couple of years.

“There is a real danger they will decide to produce them in the EU, not the UK,” says the report. “This would have a knock-on effect on other industries in the UK.”

UK steel, for example, despite not being subject to tariffs itself, would suffer because the car industry would contract, reducing demand for steel.

“Manufacturing matters,” said Professor David Bailey, senior fellow of UK in a Changing Europe.

“Much of the sector has already taken a hit through the Covid-19 pandemic and Brexit risks further disruption for manufacturers which they are keen to minimise.

“A no-trade deal is seen as the worst-case scenario for sectors like automotive given the impact of tariffs. But even a minimal Free Trade Agreement could bring

disruption for manufacturers, for example via its impact on supply chains and in terms of regulatory divergence. Whatever the form of Brexit at the end of the transition period, manufacturing faces multiple challenges.”  By Graham Hill thanks to Fleet News