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Car sales fell to their lowest level for more than 40 years last month in the most dramatic sign yet that the country is heading into a recession.
Britain’s biggest industry gave warning of deeper cuts in production to come as consumers, worried about the high cost of fuel and the economic downturn, shy away from big purchases and abandon the showrooms.
Traders reported just 63,225 new cars sold, the worst August figures since 1966, sending a chill through the automotive industry from manufacturers to the secondhand market.
Premium brands, many of which are made in Britain, were among the hardest hit, with Aston Martin suffering a 67 per cent drop to just 19 cars sold. Land Rover saw a 58 per cent fall to 422 cars and Jaguar a 41 per cent slump to 422 cars.
There was further bad news as property prices were shown to have fallen sharply – with more than £25,400 wiped off the value of an average home in the past 12 months. New figures from Halifax revealed the fastest rate of decline since the lender started its house price index in 1983.
Consumers were offered no respite by the Bank of England, however, as interest rates were kept on hold. Despite official confirmation that growth has slowed to a stop, rates were kept at 5 per cent.
The latest slew of bad news came as Gordon Brown struggled to maintain a political fightback that is becoming mired in internal discord. The Prime Minister insisted that he was “cautiously optimisitic” about the economy in what his opponents portrayed as a rebuff to Alistair Darling’s weekend claim that Britain was facing its worst economic conditions for 60 years.
In a speech to the CBI in Glasgow, Mr Brown pledged more help for low and middle-income families. While people understood that no government could on its own “put everything right that is creating hardship”, he said that they did look to ministers to help them through difficult times.
“We will not let them down,” Mr Brown said. “We will do what it takes to bring security to families on modest and middle incomes. And we will ensure that no one who is prepared to work hard and adapt to change will lose out as a result of global forces.”
But measures to help with rising energy bills were in disarray last night after Downing Street admitted that proposals to raise £500 million to fund fuel vouchers were in tatters.
George Osborne, the Shadow Chancellor, said Mr Brown was in denial over the severity of the downturn. “At a time when Britain needs strong and united leadership with a clear sense of direction, we have a Labour government descending into civil war and a Chancellor and a Prime Minister who publicly disagree on the severity of the problems we face,” he said.
The slump in car sales prompted the heads of the main car industry groups to call for urgent government and economic action to restore confidence.
The Society of Motor Manufacturers and Traders wants Mr Brown to set out an emergency economic plan. Paul Everitt, the chief executive, said it was “concerned by the reluctance of boost the economy and restore confidence.” Sue Robinson, the director of the Retail Motor Industry, said: “Continuing economic pressure on households has made consumers wary of making big purchases, so by deciding against an interest rate reduction, the Bank of England has missed an opportunity to kick-start the economy.”
Britain’s automotive industry, which employs 815,000, sells overseas predominantly but faces terrible markets in Europe and the United States as well. Industry experts described the sales figures as dreadful and gave warning that they would impact on carmaking in Britain. Already Toyota and Land Rover have announced production cutbacks because of falls in orders.
Brent Dewar, head of marketing for General Motors in Europe, told The Times that the “headwinds in the UK market are concerning to us”. He said that consumer confidence in the UK and Ireland was a “burgeoning issue” for GM, the world’s biggest carmaker, which operates Vauxhall’s factory at Ellesmere Port, Merseyside.
Garel Rhys, a car industry economist at Cardiff University, said that the figures were “truly dreadful” and forecast that the British market would probably not recover until the second half of 2010.
Ten years ago, August was a strong month for car sales as the new registration plate was issued. This was changed in 1999, however, to two plates issued in March and September.
Roy Kishor, automotive partner at Kroll, the restructuring and advisory consultancy, said that the car industry was facing a perfect storm of “depressed sales, depressed residual values, cheap offers and margin pressure”. He added that some mainstream used car prices had fallen 10 per cent in two months.
The British Car Auctions (BCA) Used Car Market Report found that car volumes and values fell last year even before the most recent plunge in consumer confidence. Sales of used cars dropped by 5 per cent, to seven million, with both dealers and private owners affected.
Estimates for the first half of this year suggest that the average value of a used car bought at auction has fallen by more than £1,000, to £4,765.
Tim Naylor, spokesman for BCA, said: “You do tend to find that, when sales of new cars are down, then there is a smaller supply of cars of a certain age in the used car market. Buyers of used cars could just be deferring their purchase in the short term or could be putting it off indefinitely.”
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Its no wonder the motor ind. is in decline with the insane tax brackets!! If Mr Brown wants to help he should introduce the following tax brackets.
Up to 1400 cc £100 per annum, 1401 to 2500 £200 per annum, 2501 and above £300 per annum.
The benefit being we as consumers would know where we stand.
KEN SANTI, SEDGEFIELD, COUNTY DURHAM
How come every market that Labour interferes in goes into recession. Housing Market (HIPS & Stamp Duty) Car Industry (Fuel Tax Escalator & VED licence tax increase). Gordon Brown is not a financial wizard he was a university lecturer before becoming a politician. He has squandered UK tax revenue
steve tea, manchester, cheshire
I've decided against a new car.
My current car is has just turned 3 and I've just had it serviced and MoT'd. This morning I have received an offer for a new, much bigger, more luxurious car that does the same MPG for less money than I paid three years ago.
Strange days.
Arundel, South Coast, UK
In a car dealership this week I was shown three screens of nationally available nearly new cars of different specs and models. Around 90% un-highlighted were still available, 5%highlighted in red were reserved and two highlighted in mauve were sold. One of those two was for me .
WILLIAM GRIERSON, KIMPTON, UK
Alas, there is only one thing certain in this life, and that's MP's expenses, paid regardless. Why should they worry about the state of the economy.
Thomas, Bristol, UK
Is this not just supplly and demand? We have no demand so prices must keep falling.
Crowther, Silsden,
At the moment it looks as though I will be deciding between paying the mortgage or my tax bill in Jan.
Guess which one I will be paying?
paul, nottingham, UK
England is full of Unsold Cars. I would PX my 4 yr old car for a new one, but I am offered peanuts. In the 70s a 4 year old car would fail the MOT with corrosion, not any more, they make them better, If they want to get sales going offer more in PX or stop making so many so there is a shortage.
Jim Allen, Wigan, Lancs
I can imagine Mr Brown going on to say something alone the lines that the economic difficulties of our country are really only just in the mind of the people and any opinion to he contrary is just the scheming efforts of certain individuals intent on damaging the most excellent Labour government.
Wellman, Westcliff-on-Sea,
Prepare for the austerity years. We're moving back to a cash society that our parents (if you are over 50) and grandparents knew - no more living on borrowings. Houses provide less equity to borrow against so big purchases - cars and holidays - bye bye. Got an allotment yet?
Keith Lawson, Poole, UK
The END of all things as we know it...is nigh.
amie, dumfries, scotland
It is great that new car sales are down - people are addicted to buying new cars rather than keeping them for 10 years. Car production destroys the environment - even cars like the Prius cause massive damage in production. New cars should be taxed much higher to reflect this damage.
jon, london,
Look Gordon, immediately reduce the tax on all fuel, allow smoking in pubs and clubs and cut interest rates, easy.
Bruce, Four Ashes, UK
The are only two certainties in life; Death & Taxes. This government has achieved the unique double of taxing the life out of the economy. Gordon Brown can make as many speeches as he likes, but until he is gone nothing will change.
John Grieves, Ulverston,
The downturn in the economy is hitting all of us, not just the motor industry. I've sounded out small business owners of my acquaintance and found that everyone is doing badly compared to even just 6 months ago. Customers are scared of buying anything other than the basics.
Mike, Epworth, UK
Brown is 'cautiously optimistic'? Doesn't he read the papers? At least Darling has the confidence to deliver the truth and allow the rest of us to draw our own conclusions.
Julian, Twickenham, UK
Save the Union !What in a few months,Hilarious.Bye bye labour.The English voters cant wait to convert youre Gvt into touch.
Eric Reynolds, Glasgow, Scotland
40 years ago, most of the people in my street didn't have a car and we could play football in the street.
Given that oil production is peaking right now, i should imagine that children will soon be playing football in my street again.
The economy has come to a grinding halt.
Sean, London,
I thought the government was trying to promote "green" issues. Making existing cars last as long as possible and not buying ever increasing numbers of new cars ever more frequently, when the "old" ones are still good i.e. the durable car, is surely preferable. Less congestion potential too.
Jim, Herts,
What grates me is these "Business people" who are calling for government intervention. These are the same clowns who will bang on about the benefits of the free market then start crying for help when the market goes down. The government is doing well, keep out, kill inflation and it will be ok soon.
David, Liverpool, Republic of Liverpool
Surely the August car sales have been hit by the change in new registration date from !st Aug to Sept. The pressure to buy in August used to result in the peak sales being in this one month. Any comparison with earlier years is irrelevant. This does not however detract from dismal sales of new cars.
Trisha, Cornwall, uk
i love cars but why would anyone buy a new car to sit in a traffic jam, pay road tax, fill the tank with petrol 65% tax, congestion charge, a police force intent on criminalising you endless speed limits and cameras to pry more money from you. I am surprised they sell any cars
steve byrne, christchurch, UK
Housing Crisis = Stamp Duty Holiday.. So given this news surely a Car Tax Holiday is on the cards ! Surely no gimmicks or quick fixes Gordon - You're going down Ha HA HA !
Nick, Bedford, UK
It's hardly surprising that the "premium" brands are hardest hit when you consider the petrol-guzzling monstrosities they produce. With the cost of petrol predicted to do steadily increase in years to come, who wants to have one of these albatrosses parked in the garage?
Tim, Eastbourne, UK
Until this week, Brown was saying ad nauseam that Britain was better placed than other countries to ride out the global downturn. In the wake of this week's OECD report (which made him look like a fool), he's changed to 'better placed to ride out this downturn than we were in the 70's and 80's'.
JL, London,
The car trade in trouble; my heart bleeds.
Time for ban on all cars that can't average 60mpg, anything faster than 80mph, heavier than 1500kg, longer han 4m, less than 4 seats, 4wd except for genuine farmers, horse boxes, caravans of any type. Set a time limit, no combustion engines beyond 2015.
Fred, Yorkshire,
All the posh cars in my town are now in the car park at Aldi. I think that says alot about where we are. The sensible few have always mix and matched pennypinching with splashing out, and I think this is where the mainstream is headed for a while at least.
Simon, Linlithgow, Scotland
We pay far too much for cars in the UK, though the costs are always justified by the dealers and manufacturers.... The big expensive cars will now only be affordable to those who have the cash, and NOT to credit... They'll be to busy paying off their debts!
Look forward to buying a cheap car.
Gary, Reading,
Damian from Hertford, a response to your comment.
This really does matter to the 815, 000 people employed by the motor industry.
Rachel, Manchester,
Next phase of the economic weakening will be when credit on cars collapses! Should be interesting seeing all those car loans going through the courts to be secured on property!
Michael, UK,
The answer is to provide cheap credit to buy the things people make and to stop credit leaking into bubble housing by a tax .As the inflationary element in the price of a house is the land underneath, that is what you tax. This is of the nature,in Economic parlance ,of the blinkin' ,bleedin' obvious
DBC Reed, Northampton, UK
I found it 'ABSOLUTELY HYSTERICAL' how Gordon Brown still maintains that everything is O.K. despite evidence showing QUITE CLEARLY that we are heading for one of the worst recessions in sixty years!
However, the 'Captain' is always the last to 'Abandon Ship' as they say!
J. Abbott, Sandwell, England
Damian, Hertford, Uk
Who buys 'new cars every month'?
We do need new(er) cars periodically! The alternative is for old cars to stay on the roads TOO LONG, many of which belch out awful fumes for the rest of us to breath in!
Believe it or not, some people do need cars to get to work!
J. Abbott, Sandwell, England
It must be realised that Gordon Brown and the rest of the Scottish Mafia in the government only have to cross the border into Scotland and they are no longer subject to English law rather are now covered by Scottish Law, which is quite different to English Law.
Charles Horne, Chichester,
It is no surprise that new car sales are the second casualty. I am a devout petrolhead but living in London, I go everywhere by motorbike and am not prepared to invest in a car. The lack of credit is one issue, the lack of ability to use the thing is another. I hope the government is delighted.
Steven, London,
There is no point spending much on cars now with speed cameras everywhere. There is no 'open road' any more, so no point going for power or speed. Get one that goes from A to B as cheaply as possible and can handle speed bumps without smashing your brain against your skull.
Ian, Sheffield,
What we need to do right now is to construct nuclear plants all over Europe , we will see how the petrol prices go down.
oscar, valencia, spain
What on earth did they expect, tax up, petrol up, insurance up, road pricing, speed cameras everywhere, I used to buy a new car every 3 years. Not now. My car is 5 years old and I intend to keep it another 5 at least. I also don't spend several hundred pounds on servicing now either.
Norman, Newcastle upon Tyne, UK
Gordo says "We will do what it takes to bring security to families on modest and middle incomes", which translates as - We're really Old Labour, we know little of the real world, we'll tax you til the pips squeak and give it to those employed to enforce our policies, and give what's left to the idle
Brian Holt, Daventry,
What would be the point in spending a lot of money on a new car? Taxed to the eyeballs, depreciation, congestion payments, road charging, pump prices always going up!
SO, Oxfordshire, England,
What happened to "No more boom and bust?." Role on the election.
Rich, Leeds, UK
The 'problems' in the housing market can only be temporary. Housing is in short supply and getting shorter as more and more immigrants enter the country. The moment mortgages become more freely available (as they will) we will see another 'boom'. Now is a wonderful time to buy.
Tony Jones, Grantham, Lincs
Interest rates reductions will make no difference. The10 year binge on cheap credit, encouraged by Brown as the feel good factor allowed him to rob our pensions and throw billions away on the public sector. Now the inevitable hangover will be mega. Global forces? Pah! excuses for his incompetence.
John, Lincoln,
I drive a car that will attract the highest road fund license next year. It's second hand value has fallen. It is three years old, I was going to change it. I will run it until it is six years old. No benefit to environement this new tax. I'll just run it for longer. No joined up thinking alas!
Graham Morris, Newark, uk
No doubt the car industry will be lobbying our politicians for 'our taxes'. .... Where does the corrupt parliament stop? politicians of all ilks are busy destroying yours and you childrens country! for personal aggrandisement.... How stupid are you for letting them do so.......
R McAuley, Antrim, United Kingdom
New cars were being purchased on credit via equity withdrawal. The house boom is over, credit has all but disappeared so inevitably there will be fewer purchases.
If individuals without any economic expertise saw this coming why didn't the government?
sophie smith, london, uk
Yet more evidence that the economy has gone to hell in a handcart. Meanwhile Messrs Alaistair Laurel and Gordon Hardy have gotten themselves into another fine mess.
Michael Lewis, St Albans, UK
It's not suprising that sales of cars are the first casualty. They sit outside your home depreciating at a rate that can loose half your annual earnngs straight down the drain.
If you already have a car, drive it until it stops working. That won't do much for the economy, but it might help you.
David Nammory, Liverpool,
Get that idiot Brown out of No 10 and on the dole. All the indications look like Britain is heading for or is already in recession.
Andrew, Melbourne, Oz
And meanwhile, Mervyn King and his cohorts on the MPC fiddle while Rome burns.
Giving them independent control of interest rates doesn't look such a brilliant idea now, does it Gordon ?
Especially when their narrow brief is solely to hold down inflation, which makes the MPC a One Trick Pony.
Trevor, Ipswich, Suffolk
Probably best to remember that between 1967 and 1998, new number plates were issued in August (now it is March and September), which made it the peak month for car sales before getting too carried away with these stats...
Russell, Warwick, UK
Would you buy a second hand car from Gordon Brown?
Mark, Yorkshire,
I assume that if the Prime Minister is "cautiously optimistic", he has drawn his self assurance from the CPI inflation index and not
*The data outlined above
*Massive food price hikes
*His failure to stem speculation that energy bills would be reduced for those most in need?
WILLIAM GRIERSON, KIMPTON, UK
If the government instructed the public service to buy only British built cars then I believe that would alleviate the problem quite a bit.It may be viewed as anti competitive, but consider the observation that in other major economies they seem to purchase indigenously manufactured vehicles.
john tanner, bristol,
This is good news. The SMMT bandwagon, and their cronies - govt. need a kick in the pants. Lack of investment and innovation has killed the industry. I recall in the '70's someone at BL told me how they'd get in a, e.g. BMW, and copy its features. And don't mention prices...
M. O., London,
you would if you worked in a car factory like i do and thousands of others.
d.collins, liverpoll,
Gordy's optimistic? You would be when the tax payer you ride like a rented mule is paying for your gas, electric, incompetance. . . .
James, Glasgow,
by the statement "he said that they did look to ministers to help them through difficult times" did he mean he wants the religous ministers to pray for us as everything he touches turns to custard!
james, southampton/Auckland, england & New Zealand
In England we had been used to things going up and up. Be it careers in jobs (except for blacks),sales, profits, property prices, therefore overconfidence and crippling credit. If the present crisis leads to a fundamental change in attitudes we could have learnt something, if not God help Blighty!!
LAKSHMAN PARDHANANI, Goa, INDIA
Who really thinks that this is important? its not as if we need/have to buy new cars every month. In any case it will turn around OK in the mid term you will see.
Damian, Hertford, UK