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What Brexit means for the classic car market

Hagerty monitors the global classic car market providing insight to the car community and media alike. John Mayhead, Head of UK Valuations, has recently appeared in a number of interviews across BBC TV and radio discussing the impact Brexit has had on the classic car market and shares his thoughts in Hagerty UK’s latest market report.

At 11 pm on December 31st, 2020 the United Kingdom ended the transition period from membership in the European Union and began trading under terms agreed with the EU just a few days before. The result has been increased red tape and a fair amount of confusion. After years of speculating about the potential impact of Brexit on the UK classic and collector car world, we are now experiencing it first-hand.

Any new system was always going to cause confusion at first, and Britain’s new relationship with the EU comes with a raft of new bureaucracy where almost none previously existed.

“We could plan for a no-deal, as we knew what that would look like’ said Peter Bonham Christie, founder of Straight Eight Logistics, one of the UK’s top historic vehicle transport firms “but we only found out what was in the treaty a week before we had to put it into practice, and now about 90 percent of my working life is spent working with the customs agency.”

Every vehicle movement from the UK now requires an ATA Carnet. An Access/Temporary Access Carnet is like a passport for goods, a bond that guarantees that your items won’t disappear after they enter the country. While an ATA costs just a few hundred pounds, a returnable bond payment of 40 per cent of vehicle value also has to be presented. Even if the value of a car is only £10,000, the bond is £4000; for a £1m vehicle it is £400,000.

Newly introduced costs and paperwork are also affecting British exporters. Julian Majzub of classic-specialist manufacturer Blockley Tyres told Hagerty “The paperwork, aggravation, increase in costs, real delays and inconvenience to customers will impact us. Obviously, we’ll make the best of it, but I’ve now got quite a heavy monkey to carry on my back that my competitors don’t.”

Dealers serving the enthusiast market have not been greatly affected: It’s a quiet time of the year for classic sales, and British buyers tend to favour right-hand drive cars from the home market. For those selling more expensive cars though, things are different.

“Our business is very international,” said leading collector car dealer Max Girado “The new rules are quite draconian, and everyone is getting used to them. With time we will all adapt, but from a business perspective, Brexit has not helped us in any way.”

Dealers of more modern collectable cars have their own specific issue—the addition of a 20 percent value-added tax (VAT) to the import of used cars from Europe that are less than 30 years-old. “This is a real problem,” said Edward Lovett, leading dealer, and founder of Collecting Cars. “A buyer searching for a rarer modern performance model might typically have looked in Europe. Now that comes with a hefty additional cost.”

UK-based auction houses have historically held sales all over Europe and also welcomed EU-consigned cars to British auctions. Now cars (and their sales rostrums, speakers, and other paraphernalia) will have to be temporarily imported, with all the extra paperwork that entails. But, have sales been affected? Mark Perkins, founder and managing director of Historics auction house set an optimistic tone when asked about its Monaco sale scheduled for 23rd April.  “Significant collector car consignments have already been sourced from UK vendors, together with serious consignment interest received at our UK and European offices by non-UK domiciled vendors. Three months before the sale, it’s too early to comment meaningfully on bidder registration but that again will give us some useful insights into UK/International buying patterns.”

Many in the industry claim the rules aren’t clear. Whether UK historic vehicles are still exempt from EU low-emission zone regulations, whether spares can be boxed together under one carnet, and what happens to them if they’re used rather than new; the answers are impossible to find in official literature and will only be discovered later, as the rules are tested. However, the current COVID crisis could be unexpectedly acting in the industry’s favour as lockdown has given breathing space to many as they investigate how it all works.

Some within the industry fear that COVID could be shrouding the true depth of the crisis.  “How much of the downturn we have yet to feel is COVID and how much is Brexit?” asks Julian Majzub. “The British Government say everything is down to COVID, but when the country comes off furlough in June, we’ll see the state of things and where unemployment really is.”

John Mayhead, Head of UK Valuations, concluded “It’s a fair prediction to say that summer 2021 may be a watershed for the UK historic vehicle community. What effect this may have on the average enthusiast is yet to be seen, but most seem determined to work around the problems and get back to normal as soon as possible. The UK has always been a mainstay of the classic car industry and it seems our industry is determined to succeed; whatever barriers are put in front of them.“

The full report, including detailed quotes from industry experts, can be read here.