PM Theresa May announces UK will aim for hard Brexit, as industry braces for tax rise

January 18, 2017

UK Prime Minister (PM) Theresa May has confirmed that Britain will leave the EU single market, and will seek a bespoke customs agreement with the EU for maximum free market access.  

Theresa May undertook her speech outlining that the UK was to leave the EU, including the single market, at Lancaster House – the same venue Margaret Thatcher used in 1988 to promote the benefits of the single market.  

She said that she wanted ‘a customs agreement with the EU’ but without being bound by the common commercial policy and common external tariffs, which prevent Britain from negotiating its free trade deals with other countries. EU members cannot negotiate their own free trade deals – these are done at the EU level, and apply across all member states.  

The news is likely to be unwelcome for much of the automotive industry, which currently enjoys the free movement of goods and people to and from the UK to the continent. The news comes as a further blow as UK drivers brace for a tax rise, with seven out of 10 drivers set to pay more tax under new VED (Vehicle Excise Duty) rules.  

A new survey has found that only 6% of consumers are fully aware of the forthcoming road tax changes, which will be introduced from next April, and 86% knew nothing. Quirks in the new VED system will also mean some of the most polluting vehicles will actually save money, while cleaner vehicles will pay more.  

More than £400 will be added to the long-term running costs of Britain’s most popular and eco-friendly vehicles, including hybrids with Toyota Prius buyers paying an extra £405 over four years, and the UK’s best-selling car, the Ford Fiesta 1.0 EcoBoost 100PS, which will cost £540 more to tax over four years. In contrast, the Mitsubishi Shogun 3.2 DI-DC automatic will save £265 over four years, despite producing an enormous 245g/km of CO2.  

This is clearly an unwelcome measure, particularly as it will hit the TCO of environmentally-friendly vehicles such as hybrids that the government should be promoting. These flaws in the system are a product of a lack of scrutiny due to the stealth implementation of the tax increase, as shown by the poor public awareness of the rise. This is a pure revenue-raising measure for the government, which will net £1.4 billion, and another symptom of the worsening outlook for the UK deficit levels after the Brexit vote.  

Following May’s speech, the pound saw its biggest rally since 2008, reflecting greater certainty for businesses now that the overarching Brexit plan is known. 

May said that, while the negotiations will not be extended beyond two years, implementation will be phased to avoid a ‘cliff-edge’ for businesses. She said this will give businesses time to plan and prepare, with some phases of implementation taking longer than others.  

However, May reiterated that she would not provide a ‘running commentary’ over the details of negotiations, warning that those that want this ‘are not acting in the national interest.' She said that every media storm over leaks or speculation was unhelpful and weakened the UK’s hand in negotiating with Brussels – and that this was why Brussels was keeping its own cards close to its chest.  

Ironically, her speech largely brought the strands of information from the last few months to a logical conclusion that had been widely speculated.  

She said that the UK would have to leave the single market as remaining in it would require the UK to accept freedom of movement from the EU. May said regarding the EU’s insistence that single market access requires free movement: ‘We respect that decision.’

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March 31, 2017

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