Opinion: Brexit Uncertainty and the UK Car Salvage Market

In this latest column, Jane Pocock, UK MD at Copart, takes a slightly different view on the vexed question of Brexit, and its potential effect on the demand for salvaged cars, or parts.

We’re now just a few weeks away from October 31 – but we are still no closer to knowing exactly what will happen on the day Brexit is supposed to take effect, and it feels like a new spanner is thrown into the works almost every day.

So life has to go on under a cloud of uncertainty that is having a huge impact on all areas of business and industry – insurance, the motor trade and everyone involved in the supply chain being no exception.

The majority of cars driven in the UK are imported from EU countries, as are the parts needed to repair them, so it’s easy to see why the auto industry is worried. The warnings are many and varied: everything from tyres to brake pads will cost more post-Brexit because of rising import costs; there’ll be a major impact on the supply chain; rising costs will be passed on to the customer; car parts will be held up by the creation of a hard border between the UK and the Continent.

classic car insurance and repairs

But I think that Brexit could present as many opportunities as there are threats, if businesses have the capacity, financial stability and global marketplace to identify and seize them.

I can certainly see the benefits for the UK salvage market and the insurers that supply it, with the huge potential to benefit from heightened interest from foreign buyers post-Brexit.

There’s already evidence that the falling value of sterling has attracted increased amounts of EU and foreign buyers for salvage vehicles who can utilise their increased buying power to drive up auction returns.

And I would expect that interest to accelerate should the pound experience further falls in the lead up to 31 October and beyond.

The onset of Brexit has certainly driven an increase in the number of overseas buyers registering with us with an increase of 30% more than the same time last year. As well as a strong presence in the UK with 90% of our buyers registered here, we have customers in 113 countries, including 86 non-EU domiciles. Brexit increases the importance of salvage companies like us being able to access an overseas base, because insurers will benefit from the increased buying power of foreign parts procurers.

And this brings additional advantages to salvage businesses with a large foreign buyer base who can exploit the rise in the number of vehicles UK insurers send to salvage.

Increasing repair costs, driven by price hikes for parts and labour, are behind this growth in the volume of vehicles that insurers choose to sell off for salvage. This obviously brings further opportunities for our industry, but also underlines the need to anticipate the market and invest in storage capacity to handle additional loss volumes.

The demand for used parts will continue to increase, which will in turn boost demand for salvaged vehicles to source parts both in the UK and beyond – but there is a risk that further sterling depreciation and the economic turbulence from a disorderly Brexit could disadvantage salvage companies that rely wholly on UK buyers.

Experience tells us that the demand for parts and used vehicles increases during economic downturns and uncertainty, and that currency fluctuations create opportunities for both EU and non-EU buyers. Looking ahead, buyers, especially in non-EU countries, will hold the key to maximising salvage returns.

This article is sponsored content, produced in association with Copart UK

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