Purchasing a brand-new car for an individual or as a company car is clearly discretionary spending that need not be undertaken. Across Europe, the sale of new vehicles continues to grow with new vehicle sales in Germany and Spain predicted to increase by 4 and 4.7%, respectively this year. In Italy and France, the growth is more muted at 2.5 and 2.8% with car sales in Western Europe as a whole set to see a 0.5% uptick.
In contrast, the ratings agency Moody’s is predicting that the UK car sales figure will fall by 5.5% this year as a result in a decline in consumer spending. The decline is due to a number of factors including uncertainty over Brexit (this will affect business purchases most); a decline in the value of Sterling against the Euro since the referendum; a reduction in spending power since inflation has outstripped wage growth and uncertainty over the future of diesel cars which have been identified as a major contributor to urban atmospheric pollution and could face a ban or further restrictions in the future. The decline makes the UK car manufacturing sector the worst performing in any major European economy, in terms of sales.
UK car sales hit a record of 2.7 million new registrations in 2016, according to the Society of Motor Manufacturers and Traders (SMMT), the fifth of five years of improving sales. SMMT data shows that new sales fell by 5.7% last year, meaning that new sales will have dropped by more than 10% in a two-year window. It suggests that a similar trend will be seen in 2019. This will leave the UK car manufacturing industry as the only one in Europe experiencing a decline.
The Office for Budget Responsibility is projecting slightly better UK growth this year, up from 1.4% to 1.5% with an inflation projection of 2% by the end of 2018. However, even the more optimistic projection still puts UK growth at the bottom of the G20 nations.