New car sales fall again in sign of weakening consumer & business confidence
The fall in new car sales is another warning sign for the economy. And weakening consumer & business confidence points to more bad news to come.
In another sign of weakening consumer and business confidence, figures published today show new car sales in the UK fell by 9.3% in July compared to last year. The report by car manufacturing body, Society of Motor Manufacturers and Traders (SMMT) said there were only 161,997 new cars registered last month with demand down across business, fleet and private buyers. The figures also show car trends changing with alternatively fuelled vehicles increasing its share in the market as demand for new petrol and diesel cars reduced.
Commenting about the figures, SMMT chief executive said “the fall in consumer and business confidence is having a knock-on effect on demand in the new car market and the government must act quickly to provide concrete plans regarding Brexit”.
Other reports published this week have also suggested consumer and businesses alike are more reluctant to spend with Brexit uncertainty a key factor. In its latest inflation report, the Bank of England cut its forecast for the UK economy this year to 1.7% reflecting weaker-than-expected growth in the first half of the year.
In a section on business confidence, the Bank warned that “Brexit and related uncertainties are likely to dampen investment growth”. It added that as well as businesses being more reluctant to spend, they were also considering either relocating activity or refocusing investment outside the UK”.
To demonstrate just how much Brexit has already impacted the UK, the Bank of England now expects investment in the UK to be 20% lower in 2020 than it forecast before the vote to leave. This is, the Financial Times reports, despite there being a strong external environment with global growth picking up and the Eurozone in recovery. The newspaper further points out that although UK exporters are seeing some benefits from the weak pound, businesses are still not investing as aggressively as you might expect them to. So whilst the UK economy has started to show signs of slowing, things are likely to get worse if investment continues to decline.
The UK car industry has long highlighted the risk of carmakers choosing to move activity and/or opt to invest elsewhere should the UK leave the single market and customs union post-Brexit. Not only is the EU the UK’s biggest export market for cars, many cars built in the UK rely on components having criss-crossed the EU first. If tariff and non-tariff barriers are introduced when the UK leaves, cars will be more expensive to build in the UK and more expensive to buy.
In another Financial Times report, Peter Campbell and Michael Pooler go into detail about how a Brexit deal that doesn’t include tariff and barrier free access could undermine British competitiveness. It’s worth a read if you haven’t already done so.
The article also points out that whilst the recent announcement by BMW to build its first electric Mini at its Cowley plant, the electric components (the battery and drivetrain) will actually be built in Germany. And in analysis by the BBC’s business correspondent Theo Leggett, he points out there is a good economic case for building the new car in the UK. Leggett said that as the model will “in many ways be identical to the cars already being built at the Cowley plant”, less investment is required than if it had been a different or brand new model.