A screech of brakes on the new car gravel is a worrying sign

Comment Martin Flanagan

The September new car sales figures could have been worse for the industry. Not a lot, though. New car registrations last month – usually one of the busiest months due to the twiceyearly licence plate change – spiralled down 9.3 per cent.

Both consumers and businesses pulled in their horns. Consumers have seen the cost of living rise this year as inflation has outrun wage rises, and the UK economic mood music suggests there is probably an interest rate rise on the way. Corporates have hit the brakes on investment in the run-up to and since the Brexit vote.

Sofa group DFS posted a sharp fall in annual profits yesterday, and Topps Tiles put out a stark trading update the day before. Both cited challenging market conditions.

Well, if consumers are stretched enough financially to put purchases on hold amounting to between a few hundred pounds and, say, a couple of thousand, what chance they feel comfortable enough to take on the commitment of a new car that costs many thousands?

The worry for the car industry and its now somewhat chastened trade body, the Society of Motor Manufacturers and Traders (SMMT), is that the disappointing news is not a glancing setback to be stoically accepted.

No, the sector’s problems have a chronic feel. September was the sixth successive fall in new cars sales. That equates to two full trading quarters of sales, official confirmation that the new car market is in recession. It was also the first September decline since 2011. Sales of diesel cars have been hit especially hard, down nearly 22 per cent, because of pollution concerns and government and municipal air quality plans.

But clearly the weakness in car sales is more multi-faceted than that. With a “it never rains, but it pours” synchronicity, the sector’s woes are not exactly helped by regulatory concerns about car finance deals and unsecured credit generally.

And, like waiting for the second shoe to drop, how long before this contagion of falling consumer confidence in the new car market makes its way to the secondhand car market as well?

If it does, then it really will be a worrying unofficial indicator of Britain’s economic state as Brexit rumbles along as a backdrop to everything.