Will prices go up after Brexit? Motorcycling and the EU trade agreement

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At 11pm on 31 January 2020, the UK left the EU. On 1 January 2021, the UK left the EU Single Market and Customs Union, having signed a last-minute trade agreement that many assumed would mean the buying public in Britain would be no worse off. But is that the case? New safety certification and the complexities of independent trade agreements mean it’s not as clear cut as some might have hoped, and it’s resulting in some people waiting longer – and paying more – for their purchases. Long term, what does Brexit mean for motorcycle riders?

 

Will I get additional costs and VAT charged when buying from Europe?
But we have a free trade agreement with the EU, so there shouldn’t be any charges, right?
Will the cost of goods in UK stores go up?
Why will products cost more to test and what is UKCA?
How distribution and courier costs could increase prices
Are motorcycle parts going to get more expensive?
Are motorcycles going to get more expensive?
Can I still get a good deal on a new motorcycle?

 

Will I get additional costs and VAT charged when buying from Europe?

Reports are coming in that customs duties are being paid by some purchasers on various goods bought from European stores, so it’s important to check where you’re purchasing from before hitting the pay button. We’ve heard of one UK rider who bought a textile bike jacket from a European seller for £182, but then faced charges of £81.90 from the courier. £11.50 of that was admin fees, the rest was VAT/duty.

We asked followers of Bennetts on Facebook for their experiences of buying from Europe in 2021, and Grant Broughton told us that he ended up with a £46.80 charge after spending £136 plus £15 shipping on some riding kit from FC-Moto. Lloyd Spencer has racked up £450 in fees on parts for his bike rebuild, but Ian Davies did manage to save a pound; he was hit with £70 duty on a pair of £245 brake discs that would have cost £316 in the UK.

 

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While some online stores have a .co.uk web address, they’re not always transparent with where the goods will be shipped from, so always check the contact details. Some of the most popular sites are louis-moto.co.uk, fc-moto.de, chromeburner.com, motocard.com, xlmoto.co.uk and 24mx.co.uk, with only the FC-Moto site’s address indicating that it’s not a UK-based store.

Even the contact details might show a UK postal address, so if you don’t know for certain that it’s a UK-based retailer with UK stock, try Googling the address – does it look like a distribution warehouse? If in doubt, contact the company and ask where your goods will be shipped from.

We’ve asked the above companies about any costs a UK buyer may face: FC-Moto told us “Since you left the European Union, you don't have to pay any EU VAT. For this reason, there are fees in your country, we have no influence on that.”

Louis-Moto has a banner on its home page that states: “Attention! Our Service: We always pay any applicable customs charges plus the VAT on your order before shipping it to you. So, you can be sure there’ll be no unwelcome surprises.” However, digging into the site you’ll find a statement that “In countries outside the EU, we deliver your mail orders free of VAT. This does not apply to Switzerland. As a citizen of a non-EU country shopping at a Louis store, the price you pay at the checkout includes German VAT.” We’re waiting on clarification.

It all comes down to Incoterms DDP (Delivered Duty Paid) and DAP (Delivered at Place). If you’re buying from a store that operates under DDP, they’ll pay all the import duties and taxes required of the destination (the country where you live). But if they operate under DAP, the customs clearance in the importing country needs to be completed by you, the buyer, at your own cost and risk. That means you’ll be paying the tax, duty and any admin fee levied by the courier for dealing with the paperwork. That’s why a £182 jacket cost the buyer £264.

For now, at least, the best advice when buying abroad is to look for clarification that you will NOT be required to pay any additional taxes or duties. If you’re told you ‘might’ or you ‘may’ have to pay, you should assume that you WILL have to pay; MotoCard’s website states “As of 01/01/2021, due to the withdrawal from the European Union, IVA [Spanish value-added tax] will not be applied to the prices show in the web for orders over £135; nevertheless, upon receiving the order it's possible that you'll have to pay taxes, duties or dispatch charges corresponding to that country.”

You can check duty and VAT rates when importing goods at this government website.

 

But we have a free trade agreement with the EU, so there shouldn’t be any charges, right?

The UK does indeed have a free trade agreement with the EU, but that ONLY covers goods bought from, and manufactured in Europe. For those goods up to a value of £135, VAT should be collected at the point of sale (DDP).

But some of the leading European brands have their products made outside the EU, so while the EU might have a trade agreement with the country of origin, the UK doesn’t shelter under that umbrella anymore, so goods are liable to the tariffs of the manufacturing country.

When it was part of the EU, Britain had access to the trade agreements between various worldwide countries and the European Union. Now, Britain has a trade agreement with the EU, but needs to set up its own agreements with the rest of the world, even if the goods are imported through Europe.

The UK government is working on trade agreements, and some are already in place, but it’s worth keeping in mind that we’re a country of just over 65 million, so the best case scenario will likely be a trade deal with a country that matches that agreed between itself and the EU. If Britain got a better deal, the EU would start jumping up and down, given that even with the UK gone, it’s got the negotiating weight of a population of almost 450 million.

The complications of country of origin are going to hit some of the big names hard; while Falco boots, for instance, are made entirely in the EU, Dainese and AlpineStars will be struggling with the issues of Asian manufacturing and shipping to European warehousing for distribution in the UK.

 

Will the cost of goods in UK stores go up?

We spoke to Colin Peabody, owner/partner of Performance Parts Ltd in Daventry. Selling some of the biggest names in motorcycle upgrades like Yoshimura, Akrapovič, Gilles and Hyperpro, there’s a lot coming in from around the world, and it’s a positive story: “There’s not really much to say regarding leaving the EU,” he told us. “It’s had almost zero impact on our supply chain or importing goods.

“We already have plenty of experience of clearing goods through customs from outside of the EU as many of our suppliers are in the USA or Japan. So really the clearance and procedure process is the same; it hasn’t caused any issue. The deliveries by road freight still come straight to our door, and the customs clearance is done remotely.

“In many ways it’s actually been a little easier, as our VAT deferment account is now harmonised between EU and non-EU imports rather than separate. The pound has remained stable, so there won’t be any price increases.

“All is fine really, we just need lockdown to end!”

Julian Button is the owner of Branded Biker.co.uk, a long-established and respected store in Lincolnshire that’s part of J&B Motorcycles (a fully-equipped workshop and MoT centre): “2019 and 2020 were challenging due to the changes to the EU standards around PPE, which meant many changes in stock and prices. Then there was Coronavirus, which affected everybody. And in the background there was Brexit.

“For us, Brexit was the least of our problems and in all fairness the transition has not been too bad so far. However, in this quieter of times we already have issues with stock not making it over from the continent in the normal timescales and in some cases we can’t see some stock arriving until the middle of the year.

“There hasn’t been any noticeable increase to prices, but as some European brands that do not manufacture within the EU or UK are being taxed from source, there will inevitably be price rises. These are challenging and difficult times, but summer will soon be here, and the end of lockdown is in sight.”

These two examples show the varied situation – Akrapovič exhausts are made in Europe, so that’s a relatively simple task to import. Yoshimura are made in the USA, so nothing has changed there for Performance Parts. But Julian’s business is seeing more of the impact of European brands that manufacture outside of the EU.

It would be naïve to imagine that Recommended Retail Prices won’t increase; many big brands currently work on a ‘top-up’ sales supply; a store sells a product, then another is shipped immediately from the European warehouse, which has a huge distribution potential so can keep costs down. That just isn’t viable to UK sellers now.

In the future, new ways of importing products will be needed, with potentially the most simple answer being to keep stock in the UK. But who will bear the large cost of that initial purchase? Another option might be bonded customs-controlled warehousing – time will tell how the leading brands will deal with this, but it is going to be a long and complex process.

RRPs aren’t everything though, and the store price is typically dictated by the market. What we know is that the cost to the public of buying direct from Europe will almost certainly increase, so buying from UK stores will help set the price that we’re all willing to pay for goods, and also be of more benefit to our economy.

 

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Most goods we buy will likely carry both the CE and the UKCA marking

 

Why will products cost more to test and what is UKCA?

In 2018, an EU law decreed that all motorcycle kit is classed as Personal Protective Equipment. You can read about it here, but basically it meant that all products sold in the UK and Europe had to be certified, giving them a rating of A, AA or AAA for safety. This introduced significant costs for everyone; some big brands came up with clever ways of testing the construction methods that could be carried across multiple garments, while smaller companies like Hood Jeans had to find a huge amount of money – and change the way they work – in order to continue to produce the very best products.

Leaving the EU hasn’t meant that Brits can now ignore the CE standards – businesses in this country who want to sell to the huge audience in Europe will have to comply, so the British Standards Institute has maintained throughout that it will align with the standards required of products in Europe.

But now there’s the UKCA (UK Conformity Assessed) marking that will be required of all goods placed on the market in Great Britain. And that, of course, comes at a price; at some stage the labelling and user booklets all have to be redesigned and reprinted, as well as updating marketing material and websites, not to mention buying the new conformity certificates. Fortunately, the CE mark will remain valid until January 2022, but until 1 January 2023 a UKCA sticker will suffice. After that date, the mark must appear on the product.

There may be some divergence in the testing standards of the UK and EU in the future (which would be expensive for every brand), but for now at least, everything sold in the UK must have a UKCA marking, and everything sold into Europe must have a CE mark. How much this investment by businesses reflects on the costs to the buyer is yet to be seen, though it is encouraging that most brands managed to avoid passing on the PPE costs to buyers over the past couple of years.

 

How distribution and courier costs could increase prices

One of the major issues of lockdown has been in distribution, and it’s this that could have the biggest impact on the cost of living in the UK.

There’s more complex paperwork to be navigated, though there’s always been paperwork, so it’s more down to change. Besides the issues of country of manufacturer when importing from the EU (and keep in mind that many brands have European distribution hubs), air freight is massively down due to there being so few planes in the air; passenger aircraft didn’t just take your baggage on holiday – they use a lot of the space for commercial goods.

Goods are now much more likely to be shipped by sea or land, and that’s affected the cost of containers. Space is at a premium, so while a 40ft container from China might have cost around £1,100 in November 2020, The Guardian reported that some companies have been quoted as much as £9,000, while the South China Morning Post reported that container rates are up 208% compared to 2019.

 

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Sea freight rates have seen a significant rise since the end of 2020. Source: South China Morning Post

 

Couriers are charging more for some services now, and while this could be seen as cashing it, it’s important to keep in mind that while a delivery van is sitting at a port because of delays, that time still has to be paid for. We all expect things to be shipped around the world for next to nothing, but we’ve got to that stage due to incredible time management and economies of scale. Putting it simply, if a courier can only deliver half the parcels it usually does, its prices are going to have to double.

 

Are motorcycle parts going to get more expensive?

We spoke to a representative of a major bike manufacturer who preferred not to be named; “We haven’t put any parts prices up, but we are having to keep an eye on costs, not least due to the carrier prices.

“The trade agreement wasn’t finalised until Christmas Eve, so like most brands, we had no way of getting on top of things until work resumed on 4 January. That inevitably led to some chaos with delays and incorrect paperwork for many, though we were fairly well prepared.

“The paperwork can affect even the most efficient companies though; if we bring a truck in that’s only carrying goods for us, we’re in complete control. But that’s expensive, so like many others, we’re often reliant on a courier who might have only a quarter of their load for us. Then we’re at the mercy of the other businesses with deliveries on board, and if they’ve not sorted their paperwork properly, everyone gets held up.”

Carriers are passing their costs onto businesses, but having said that, the pound has rallied recently, and while it continues to be volatile, Sterling’s strength could help to offset some of the additional expense when it comes to us, the buyers. Also, while we’re seeing some shocking stories of port delays, these account for a fraction of the goods coming into – and going out of – the UK every day.

 

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Covid-19, Brexit, Euro-5 and currency fluctuations will all have an influence of the price of new bikes

 

Are motorcycles going to get more expensive?

Many motorcycle brands held off from announcing their UK prices until after UK/EU trade deal was announced. Setting prices is an incredibly difficult task as companies aim to predict the coming months in order to end up in profit by the end of it. For some, the economies of a global market can help, so while one country might see a loss, another might see a boom that leaves the overall business up. Indonesia was a perfect example recently as huge growth buoyed the sales of many of the biggest manufacturers.

But Covid-19 knocked that region right back and global sales have slumped by around 20%. Yet the UK has bucked the trend, not least because its sales haven’t been affected in the same way as those of developing countries using smaller powered two wheelers as a budget form of transport. Sales of motorcycles and scooters in Britain were down just 2.6% year to date December 2020, which gives real hope to the industry.

Mopeds had a 14.6% increase and scooters 10.2%, in no small part thanks to more people looking for a cheap forms of socially-distanced transport, and more hospitality businesses turning to deliveries. Motorcycles have been harder hit, but any increase in powered two-wheeler sales will help the industry recover as vaccines take effect and business start to rebuild, leading to a recovery in the jobs market.

But price rises are inevitable.

Motorcycling has seen a perfect storm in the run up to 2021; Covid, Brexit, currency fluctuations and Euro 5 have all taken their toll. Manufacturers have had to work hard to keep the performance of their bikes at or near the levels that Euro 4 allowed, but that’s meant expensive R&D, as well as new, more complex parts (yes, bigger exhausts).

While the motorcycle industry is fortunately not dealing with perishable goods – so delays aren’t as critical – the increased cost of distribution does need taking into consideration, as well as any uncertainties in the cost of parts coming from around the world. As is the case with kit, while trade agreements will be put in place, we’re yet to know the cost of future tariffs. Still, with riding not high on the agenda for many at this time of the year, it’s perhaps the best time for the industry to work frantically on a solution.

 

Can I still get a good deal on a new motorcycle?

Had the UK left the EU without a trade agreement, things could have been very bad indeed. We’re not facing the tariffs or quotas for European goods that we could have, and worldwide trade agreements are being put in place as we speak.

It’s hard to put a positive spin on things as some price rises are inevitable, but the end of lockdown is in sight and the positivity that will come with that, along with hopes of a strong pound, could limit the impact to some extent.

Motorcycles and scooters offer an incredibly enjoyable way to get around, be that through socially-distanced commuting on a cheap-to-run scooter, or exploring our incredibly diverse countryside. And while it’s an age-old cliché, there really has never been a better time to buy; the UK’s motorcycle dealers have existing stock – pre-Euro 5 and pre-Brexit – ready to buy, and most are operating efficient video sessions for your new bike and trade-in. They’ll even deliver to your home, wipe the bike down once it’s off the van, and allow you to sign any paperwork there.

If there are any positives to come from 2020, it’s that we’ll hopefully see people spending more money with UK stores, and that you can buy a motorcycle without leaving your sofa (though we can’t wait to get back into dealers for a browse). Prices are pretty stable for now, so if you’ve saved money on a holiday and flights, how about treating yourself to a new bike?

If you’re looking to save some money, remember that Bennetts Rewards members save 15% at Performance Parts and with a whole host of other UK sellers…

 

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