SMMT warns that UK sales may drop 5% in 2011 due to tax hikes, spending cuts

Article by Christian Andrei, on January 14, 2011

In Britain, new-car sales climbed by 1.8% in 2010 compared to the previous year but according to the Society of Motor Manufacturers, sales may drop by 5% in 2011 due to tax hikes and public spending cuts.

The industry group said that new car registrations were up by nearly 36,000 last year to 2.03 million but this figure was the second-lowest annual total of the past decade. Fleet sales increased by over 10%, but private volumes fell following the end of the government's car scrappage scheme last March.

Howard Archer, economist at IHS Global Insight, noted that in the same way that private sales led car sales earlier in 2010 while the car scrappage scheme was ongoing, this is now “by far the greatest softness.” Archer believes that this is indicative of the “serious pressure that households are under."

In December 2010, new car sales were 18% lower than the same month the previous year. This stands for a sixth straight drop which is probably due to the impact of the scrappage scheme on December 2009 figure.

In addition, potential buyers have stayed away from the dealerships because of the icy weather. This is a compelling reason since last month turned out to be Britain's coldest December on record.

The SMMT stated that over 100,000 cars were registered through the scrappage initiative in 2010, making up about 5% of the total market. The SMMT cautioned that 2011 will be difficult and estimated that car sales will fall by 5% over the year.

Topics: uk, sales

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