British new car sales recorded their biggest drop since 2009 last year, falling 5.7% due to uncertainty over potential new diesel charges and weakening consumer confidence since Brexit.
Demand for new diesel cars plunged 17.1%, and with some buyers switching to petrol motors, average CO2 emissions for new cars rose for the first time in two decades, said the UK’s Society of Motor Manufacturers and Traders.
Total registrations ended 2017 at 2.54 million, with drops among both business and private consumers, and are set to fall up to 7% this year, the society forecast.
The UK said last year it would hike the levy on new diesel cars that do not meet the latest emissions standards after months of uncertainty over a potential diesel scrappage scheme and confusion over UK government plans to ban the sale of new petrol and diesel vehicles from 2040.
Car sales in the UK have previously been a leading indicator for the performance of the economy and last year’s drop is the biggest since demand nosedived in 2009 after the financial crisis, but comes after record highs in 2015 and 2016. December sales fell 14.4% and society chief executive Mike Hawes said further drops were likely in the coming months.
“The two main reasons are business-led and consumer confidence and the confusion around diesel which has caused hold-off,” he said of last year’s fall.
British-based car makers are also concerned their cars could face tariffs of up to 10% and be hit by customs delays if the UK government fails to strike the right Brexit deal.
There are investment decisions which are pending as companies await clarification on the terms of a transitional deal which will bridge the UK’s exit from the EU in March 2019 into a new relationship with the bloc, said Hawes. “Some of those decisions are overdue, they need clarity urgently and certainly the turn of the first quarter is what they have been saying to me,” he said.
The British economy had better news with figures showing productivity growing at its fastest rate in more than six years. Productivity perked up in the three months to the end of September, growing at its fastest rate in more than six years, in contrast to its historically weak performance over the previous decade.
Productivity in the UK has stagnated since the global financial crisis even more than in most other advanced economies, and has played a key role in squeezing Britons’ living standards.
Over the past 10 years productivity growth was the weakest since modern records began and appears to be the slowest since the early 1820s, when the UK was emerging from the Napoleonic wars, the UK Office for National Statistics said.