Two years ago, car sales in the UK were rising. In 2016 alone, 2.7 million new cars were registered, marking the automotive industry’s 5th year of record sales numbers.

In 2017, car sales saw a decline.

The BBC reports that by September, car sales fell by 9% compared to the same period in 2016.

There were two factors that affected car sales. The first was the ramifications from the Volkswagen emissions scandal in 2015, which led to the government promising to ban the sale of diesel and petrol cars by 2040. The second reason: Brexit.

Tamzen Isacsson, the Communications Director of the Society for Motor Manufacturers and Traders (SMMT), said that Brexit is the toughest challenge the industry is currently facing.

Isacsson believes that consumer confidence is the key to the survival of the car industry.

“If consumer confidence is low, people delay purchases of big-ticket items like cars,” Isacsson told the BBC. “With so much confusion about the impact of Brexit, and where the economy is heading, it’s not surprising they’re holding back. It is imperative for the future health of the new car market that we get some clarity on this.”

Fortunately, if consumer confidence is being used as basis for future car sales, 2018 is shaping up to be a good year for automotive companies. FXCM’s consumer confidence reading for the GBP is relatively high for June, which means that economists are foreseeing an economic expansion within the UK. If the bullishness towards the GBP continues, 2018 may end with an uptrend in car sales. The only event that would hinder its growth is if the Brexit negotiations continue to falter and point to a hard Brexit. This would affect the import of crucial materials and parts, and negatively impact the exporting of new vehicles.

The UK government says that the car industry must be put at the heart of Brexit negotiations or consumers would be hit hard. The UK’s automotive industry employs thousands of locals, as well as the billions in brings in through foreign investment.

The Business, Energy, and Industrial Strategy (BEIS) committee assessed that Brexit brings nothing but negativity for the sector. They feel that the damage brought about by Brexit should be controlled the best way possible.

The committee added that the survival of the car manufacturing industry in the country depends on the government’s ability to secure good relations with the existing regulations and trading system of the EU. A complete severance scenario would be catastrophic for the economy, and will put the current uptrend of consumer confidence on hold.

“The car industry is one of the UK’s great manufacturing successes,” said Labour MP Rachel Reeves. “Innovative and efficient car plants across the country provide thousands of jobs and the automotive sector is a major contributor to our economic growth. There is no credible argument to suggest there are advantages to be gained from Brexit for the UK car industry. Regulatory consistency and friction-free trade benefits car companies, consumers and car workers.”

The UK’s car industry relies greatly on exports, with approximately 80% of cars being sold overseas. Roughly 60% of these exports go to EU countries, which is why the UK must secure a solid exit plan for the exports to go through without heavy tariffs. If the talks do collapse and no deal can be reached, The Society of Motor Manufacturers and Traders (SMMT) estimates that trade barriers between EU countries and the UK automotive industry would result in a £4.5 billion loss in sales.

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