Up to 1,000 vehicle repair companies could collapse within 2 weeks of a no-deal Brexit

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Thousands of vehicle repair companies could collapse within a few weeks of a no-deal Brexit.
Leaving the European Union without a deal would have "dire" consequences for the industry, with up to 1,000 UK companies closing within two weeks, and thousands more closing within the first month, according to leaked notes taken at a recent meeting of industry leaders.
The notes, seen by Business Insider, warn that "many repairers would have run out of cash and face closure" and others would need "to raise cash or sell assets to survive" just weeks into a no-deal scenario.
The United Kingdom is facing the prospect of no-deal with Brexit talks at an impasse.
Vehicle repair industry leaders accused the UK government of leaving businesses in the dark.
Labour said: "It is unforgivable that it continues to play chicken with people’s jobs and livelihoods."

LONDON — Up to 1,000 companies in the UK vehicle repair industry could collapse within two weeks of a no-deal Brexit, with many more forced to close within a month, according to leaked minutes from a meeting of leading industry figures seen by Business Insider.

The UK vehicle crash repair industry — which is comprised of around 3,000 companies and employs an estimated 35,000 people nationwide — relies heavily on car parts imported through "just in time" supply chains.

Repairers need to complete jobs quickly — not just to keep their cashflow going, but also to ensure they have enough courtesy cars for customers. Repairers effectively work to a one repair in, one completed repair out system.

If new border checks emerge as a result of Brexit, an outcome all but guaranteed in a no-deal scenario, it’ll be harder for vehicle crash repair companies to get hold of the parts they need to complete repairs on time.

The minutes from the meeting reveal that any slowdown of car parts entering the UK at the border would force thousands of companies to cancel repairs, leaving them without cash to stay afloat.

The meeting of 17 industry figures last month concluded there would be "dire" consequences for thousands of privately-run companies, and their tens of thousands of employees, within just a few weeks if the UK leaves the European Union without a deal.

"If the import delays were prolonged – 3 to 4 weeks for example without parts availability, the consequences to our car body repairers could be dire," the minutes state.

By week three, "many repairers would have run out of cash and face closure," and by week four "even repairers with strong balance sheets would be in trouble" while some would have "to raise cash or sell assets to survive."

Business Insider/Adam Payne

The meeting was told that some companies "would see an immediate impact on their revenue income" within one week of no-deal, and "repairers with very tight cash reserves may already be in trouble," according to the minutes.

There was a "reality check moment within the [meeting] room" when attendees realised the scale of potential damage to the industry, according to meeting chair Chris Weeks, Director of the National Body Repair Association.

In some cases, dealerships from where repairers get car parts have up to three days worth of stock, and some vehicles can be repaired without using parts from abroad. However, these exceptions account for around just 3% of repairs.

For the vast majority of vehicle repairs, parts are used which dealerships have imported from outside the UK.

Steve Field, Managing Director of Page Automotive Accident Repair Group, told the meeting last month that up to 1,000 UK car repair companies "could be on the brink of closing" just two weeks after a no-deal Brexit.

He later told BI: "If we cannot receive parts, we cannot repair cars. If we can’t repair cars, we can’t maintain our cash flow. If we don’t have cash coming in, we can’t meet expenses going out of the business.

"We have two to three per cent return on sales, that’s our profitability. We don’t have any cash lying around."

If we can’t repair cars, we can’t maintain our cash flow. If we don’t have cash coming in, we can’t meet expenses going out of the business.

Field, who employs over 200 people at his own vehicle crash repair company, said the industry has "been severely underinvested in for many, many years" and doesn’t "have the reserves as an industry to sustain our business over a long period of time should there be any issues."

He added: "There are no cash reserves. There is not one public limited company in the repair network. It’s all privately owned businesses of varying sizes. Most run using overdrafts."

Industry leader Kate Goodwin warned that "a lot of smaller businesses could go bankrupt in a no deal scenario that led to any protracted delays in supply chain – and this is weeks not months."

Goodwin, who is in charge the repair programme and supply chain at The Innovation Group, told BI following the meeting that "repairers don’t get paid until a repair is completed, margins are tight."

She added: "Even a minor disruption to this process will very quickly have a drastic impact on their ability to repair their customers’ vehicles and ultimately on the financial health of the repairer."

The UK will leave the EU without a deal this month unless MPs vote to accept the Withdrawal Agreement on Tuesday, or instead instruct the prime minister to ask the EU for an extension to the Article 50 period.

May refuses to rule out leaving the EU without a deal and implored MPs to back her deal in a speech on Friday.

Rebecca Long-Bailey MP, Labour’s shadow Business Secretary, told BI: After the complete mess the government has made of Brexit negotiations, it is unforgivable that it continues to play chicken with people’s jobs and livelihoods.

"The government is risking profound damage to the economy by running down the clock and risking a No Deal exit. It simply beggars belief that industries are being left hanging by government."

Ministers accused of abandoning the industry

CHRISTOPHER FURLONG/AFP/Getty Images)The UK government is accused of failing to provide advice which is specific to vehicle crash repair industry.

"There has been no specific consideration for this industry whatsoever. It employs tens of thousands of people and services the needs of millions. Is to nobody’s benefit that it fails," Goodwin told BI.

Field said had "seen nothing from the government coming towards our industry and no information flowing in" and added "there’s been nothing that will help us or give us advice."

A government spokesperson told BI: "It remains our priority to deliver a deal that will protect UK jobs and prosperity and provide certainty for businesses as we leave the EU.

"The Government is accelerating no deal preparations to ensure the country is ready for every eventuality, and as part of this we have launched a business readiness website to complement the 106 technical notices we published last year."

The vehicle repair industry is concerned that the general public is not aware of how leaving the EU without a Withdrawal Agreement could leave repairers unable to function, leaving a backlog of cars waiting to be fixed.

"As well as affecting the repair industry, it affects anyone who has an accident. The industry that is responsible for repairing your vehicles simply can’t function without a reliable supply of parts and paint," Goodwin told BI.

Field said: "The repairer will suffer but it’ll be a very difficult one for the general public to swallow."

The UK vehicle accident repair industry generates an estimated £4.75 billion a year.

Tom Brake MP, the Liberal Democrats’ Brexit spokesperson, told BI: "There have already been thousands of British jobs lost in the automobile industry, notably with Honda, Nissan and Jaguar all cutting jobs in the UK.

"These revelations are sadly unsurprising. Brexit is bad for British business."

He added: "Nobody voted to watch the crash repair industry collapse. The only way out of this chaos is to give the public a final say with a people’s vote with the option to stay in the EU."

Conservative MP and ex-minister Guto Bebb said: "the warning lights for a no-deal Brexit have been there for a while, and it is causing unnecessary anguish and uncertainty for those working in trade and industry."

Bebb, who supports of the Best For Britain campaign for a new referendum, added: "It is quite clear that project reality is now dawning. That the UK Government might even consider a policy that would jeopardise British businesses, jobs and by extension the nation’s tax-base should be unthinkable."

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Source: Business Insider – apayne@businessinsider.com (Adam Payne)