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Brexit blamed as UK car sales suffer biggest fall since financial crisis – as it happened


Brexit uncertainty and the diesel emissions scandal has hurt demand for new cars, warns industry body

Some big, late, breaking news: the head of the World Bank, Jim Yong Kim, has resigned unexpectedly.

Kim will stand down by 1 February – an abrupt departure, before the before the expiry of his term in 2022.

The Washington-based organisation is one of the largest donors to developing world countries and while many of its policies have proved controversial. It has been behind huge infrastructure projects across Asia, Africa and south America.

Kim’s decision to quit for the private sector was described by sources close to the bank as a “personal decision”.

Related: Jim Yong Kim resigns as president of the World Bank

Some US news: growth across America’s service sector has slowed, but still remains impressively perky.

The institute for Supply Management’s non-manufacturing index has just come in at 57.6 for December, down from 60.7 in November.

ISM non-manufacturing index hits 57.6 in December, lower than 59.0 est.https://t.co/FMQBKqukwQ

Time for a quick recap

UK car sales have fallen at the fastest rate since the world was plunging into the great recession a decade ago.

Related: Diesel decline and Brexit uncertainty push down UK car sales

Over in New York, Wall Street has opened a little higher.

The Dow Jones industrial average has gained 17 points, or 0.07%, to 23450 points – having surged by over 700 points on Friday.

U.S. stocks open slightly higher https://t.co/wQ6JCpWJhy pic.twitter.com/ZSpWSTTGDj

The long-awaited US slowdown is finally appearing in the data and markets are convinced the Fed’s hiking cycle is over. But with all the doom and gloom in the markets, it is easy to get carried away and fall into the ‘recession’ and ‘rate cutting’ camp. With the recent acceleration seen in real wages, markets may be over-reacting both with respect to near-term growth prospects and the Fed’s reaction function.

Brompton Bicycles, famous for their commuter-friendly folding models, are also stockpiling for Brexit.

The foldable bike maker, which increased sales by 11% to £36.1m in the year to March 2018, has rented a warehouse near Heathrow to store an extra month’s worth of supplies in case imports of key items are held up by problems at ports if no deal is reached with the EU in the coming months.

“Taking storage [has cost us] £50,000 but the implications of running out [of parts] could be £50,000 in a few days,” said Will Butler-Adams, the chief executive of the bike maker.

Related: Brompton stockpiles £1m of bike parts in case of hard Brexit

It’s shaping up to be a quiet start to trading on Wall Street, which will be welcome after the recent volatility.

US Opening Calls:#DOW 23440 +0.04%#SPX 2530 -0.08%#NASDAQ 6412 -0.14%#IGOpeningCall

Labour MP Madeleine Moon argues that the slide in UK car sales last year shows the government must rule out leaving the EU without an agreement.

Moon (part of the anti-Brexit Best for Britain campaign)

“It’s irresponsible to leave these businesses in the lurch by threatening to crash out of the EU with only 12 weeks to go before 29 March. Over the last two years, the automotive industry has been consistently unequivocal about the risks of no deal and the harm it could do to people’s livelihoods and company profits. The Prime Minister has simply ignored these warnings.

“Theresa May should have ended the uncertainty months ago by immediately ruling out a no deal scenario to reassure businesses and the public.”

Related: Brexit: EU to reassure May with pledge for trade deal by 2021

Luxury UK carmaker Aston Martin has revealed that it has triggered some of its Brexit contingency plans.

Chief Executive Andy Palmer said the luxury automaker, which was in October considering plans to fly components and move more in through other ports, had no choice but to authorise such contingencies at a board meeting in December.

“I don’t think we’ve been in a position in the last two years where we’ve been further apart from understanding where we’re going to end up,” Palmer told Reuters.

Back in the markets, the optimism that pushed shares higher on Friday afternoon appears to have faded.

Most European indices are now in the red as traders’ minds turn to lunch:

The market’s tentative grin turned into a grimace as Monday went on, investors unable to keep down the Asian optimism served up at breakfast.

The FTSE, which already wasn’t in a great mood soon after the bell, fell into a funk as lunchtime approached. With AstraZeneca, Standard Chartered, Reckitt Benckiser, BAT and Centrica in various states of red, and BP and Shell ignoring Brent Crude’s 2.3% bounce, the UK index tumbled more than 40 points, slumping back under 6800 in the process.

Related: US and China resume trade talks with both eager for compromise

Brexit means Britain’s car industry faces “extremely challenging times”, warns Richard Gane, director and automotive specialist at management consultancy, Vendigital.

Gane explains:

In an uncertain trading climate, where costs are increasing and demand is nosediving, they are expected to keep investing in technologies and skills to enhance the viability of all-electric and autonomous driving.

The supply chain is taking the brunt of the immediate pressure in terms of stockpiling inventory and the next few months are going to critical. A cliff-edge scenario could force manufacturers to implement more temporary closures or production holidays and it could take up to six months to burn off excess stock in a market facing declining demand.”

Sales of UK vans slumped by 8.8% last month, new figures from the Society of Motor Manufacturers and Traders show.

“This sector is a key indicator of business confidence in the UK, and operators need stability to renew their fleets. December’s performance was worrying, as was the overall drop in fleet purchases.

Business confidence depends on government providing the right conditions, which first and foremost means taking a ‘No Deal’ Brexit off the table. We have a strong and competitive commercial vehicle market in the UK, one that can flourish in the right economic climate.”

Economist Howard Archer of the EY Item Club fears that UK car sales will be weak this year too:

Despite the recent improvement, consumer purchasing power is still relatively limited compared to past norms while confidence is currently fragile with particular caution over making major purchases. Indeed, GfK reported that consumer confidence in December was at the lowest level since July 2013. Meanwhile, with the savings ratio being very low, consumers may at the very least be keen to avoid further dissaving. The August rise in interest rates may have reinforced consumer caution. Furthermore, lenders have cut back on the availability of unsecured consumer credit.

Car manufacturers have been particularly vociferous over the impact that a “no deal” Brexit could have in disrupting their supply chains.

Policymakers need to do more to support the car industry, especially with Brexit looming, argues Ian Gilmartin, Head of Retail & Wholesale at Barclays Corporate Banking.

“We’ve known for several months that the overall new car figure for 2018 would be significantly down on the 2017 result, so today’s confirmation won’t come as a surprise but should serve as a timely reminder to policymakers of the urgent need to support our car industry at its time of need.

With no clarity on how the UK’s departure from the EU will play out, it’s no wonder that consumers are reluctant to splash out on big-ticket items such as a new car.

Seán Kemple, director of sales at Close Brothers Motor Finance, pins the blame for falling car sales on Brexit (along with the global economic slowdown, and confusion over fuel types following the diesel debacle).

The last couple of months has seen £100bn wiped off the value of the world’s biggest listed carmakers last year and car production slumping in the third quarter of 2018.

“Brexit is absolutely having an impact on consumer confidence, and we can see that in these car sales. The priority for now is to hope that the Government’s withdrawal agreement delivers some clarity upon which we can start to move forward. However, we still have confusion in the market place from fuel types to finance options, which will continue to exist once Brexit is out the way.

Ian Plummer, Auto Trader Director, reckons the car industry could get a boost in 2019 if the UK achieves a smooth Brexit (that’s a big if, of course).

Plummer explains:

Brexit anxieties also cast a long shadow last year and will continue to do so beyond the UK’s withdrawal of the EU. A ‘no deal’ will likely impact new car sales as poor exchange rates and potential tariffs could force brands to pass on the cost to consumers.

However, a smooth Brexit resulting in stable exchange rates and trade agreements, would signal to manufacturers that the UK remains a positive growth market with good profit opportunities, ensuring both a healthy pipeline of new stock and some great deals for consumers.

The slide in car sales was widespread, with individuals, companies and fleet managers all cutting back.

The SMMT says:

The biggest losses were felt in the fleet sector (down -7.3%), while private motorists and smaller business operators registered -6.4% and -5.6% fewer new cars respectively.

While diesel sales slumped, sales of electric cars jumped by 20% last year – but still remain a small part of the market.

More than 141,000 alternatively-fuelled vehicles were sold, up from almost 117,000 in 2017. That’s a 6% share of total sales.

Given the reduction in government incentives, the pace of growth of plug-in cars is now falling significantly behind the EU average.

It’s official: UK car sales have fallen by the biggest amount since the days of the financial crisis.

The Society of Motor Manufacturers and Traders has just reported that new registrations slumped by 6.8% last year, as anticipated earlier this morning, to 2,367,147 units.

“A second year of substantial decline is a major concern, as falling consumer confidence, confusing fiscal and policy messages and shortages due to regulatory changes have combined to create a highly turbulent market.

The industry is facing ever-tougher environmental targets against a backdrop of political and economic uncertainty that is weakening demand so these figures should act as a wake-up call for policy makers. Supportive, not punitive measures are needed to grow sales, because replacing older cars with new technologies, whether diesel, petrol, hybrid or plug-in, is good for the environment, the consumer, the industry and the exchequer.”

We also have worrying economic news from Germany.

German factory orders dropped by 1% month-on-month in November, the first monthly decline in four months.

German factory orders decline more than economists predicted, the first drop in four months https://t.co/Vdv52tkFh3 pic.twitter.com/12Jp6s1cT6

Britons aren’t buying as many new cars…but they are buying more food from Aldi.

The German discount supermarket chain has just recorded its busiest ever week, as shoppers splashed out on its premium offerings for Christmas.

Aldi sold nearly £1bn of goods in the UK during December thanks to rising demand for its premium ranges, the discounter said on Monday.

The German supermarket giant’s British arm, the country’s fifth-largest grocery chain, said the week beginning 17 December was the busiest in its history, with sales up 10% on last year.

Related: Aldi UK reports record Christmas week amid rising premium sales

The Financial Times agrees that the diesel emissions scandal has a serious impact on Uk car sales last year:

Mike Hawes, chief executive of the SMMT, said the drop was due to a combination of new emissions tests leading to supply bottlenecks, diesel drivers holding on to their cars for longer and low consumer confidence.

“Brexit is an issue,” he said, but he added that it would be “unfair to attribute [the decline] wholly to Brexit.” He said Dieselgate — the scandal that revealed widespread cheating in emissions testing by manufacturers — was probably the most significant factor as it was the only category in which sales dropped.

The SMMT said that its members had spent some time examining what might happen under a disruptive no-deal Brexit, but many car imports are through specialist centres such as Immingham rather than the traditional cross-channel routes. There seems to be little sign, as yet, of consumers buying cars in advance of possible shortages, but the SMMT said that a first-quarter sales boost in 2019 was possible. It added that its members had not been stockpiling new vehicles.

On the other hand, UK manufacturing operations have very little scope for warehousing new parts and any disruption to the 1,100 trucks a day coming to deliver parts to assembly lines across Britain would mean line stoppages, a rapid escalation in costs and a threat to future production and investment.

The SMMT, like other business bodies, is calling for MPs to back Theresa May’s Brexit agreement and avoid a no-deal scenario.

It says that crashing out of the EU without an agreement risked destroying the car manufacturing industry, which employs more than 850,000 people in the UK.

The drop in car sales can be firmly pinned on the 2015 diesel emissions scandal, which exposed how Volkswagen has used ‘cheat software’ to hide how much pollution its cars were pumping out.

UK car sales have now fallen for two years running. The 7%-ish drop in 2018 follows a 5.7% drop in 2017.

The head of the SMMT, Mike Hawes, fears that car sales could fall sharply again if the UK crashes out of the EU without a deal.

Hawes says is vital that a hard Brexit is avoided, saying:

“It’s still hard to see any upside to Brexit.

“Everyone recognises that Brexit is an existential threat to the UK automotive industry and we hope a practical solution will prevail.”

UK new car sales record biggest fall since financial crisis – https://t.co/1Rqcrcu2ov @Reuters @Smmt @MikeHawesSMMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

#FTSE100 called +10pts at 6847 pic.twitter.com/0Crm46YNZQ

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