The newly released SMMT New Car Registrations data is far from what motor dealers and manufacturers wanted to see and could indicate choppier waters ahead for the industry and consumer spending in general in the country.
It will not have escaped many people’s notice that things are changing in the UK, and I believe these changes, along with a malaise once felt by those without disposable incomes, have now spread to those who do. It could point to a sea change in consumer spending habits that will expand beyond the motoring sector.
Earlier this week, I received an email from someone asking for my thoughts on an idea he had for a new business in the hospitality/wellness sector. With some rare spare time on my hands, I was happy to offer my opinion via a phone call.
At the start of our phone call, I made it clear that I am not an expert when it comes to starting businesses in the hospitality sector but having started and established multiple successful businesses during my career, I felt I was in a position to offer an impartial generic viewpoint.
As the conversation progressed, we kept returning to one particular point: I feel that many more British consumers with disposable income are “battening down the hatches.” I explained that recent political overtures and the Western global economic outlook have ‘spooked’ consumers. I explained that businesses across all sectors must be prepared to cut costs, reduce prices, widen their appeal, or face the consequences in the next year or so.
I felt that the timing wasn’t right for investing significant funds in a rural business in the UK that targets high-end consumers.
I told the businessman that if he was set on realising his vision, he should look to position the business at a mid-range level, which would give him more flexibility. His idea for pitching the business at the high-end market would result in him dipping into an ever-shrinking pool of consumers and given the significant numbers of HNWIs now leaving the country, alongside those who are becoming more mindful of their spending, the pool he hoped to tap into could be little more than a puddle.
Although I started this piece by focusing on the hospitality sector, the latest SMMT new car registration data partially confirms my viewpoint that UK consumers are indeed battening down the hatches and will continue to do so in the coming years.
Below, James Hosking, the Managing Director of AA Cars, has provided an excellent insight into what the SMMT data tells us:
“After reaching two years of uninterrupted growth, the new car market’s momentum has finally stalled.
“While fleet and business purchases previously drove sales, offsetting declining private demand, this trend came to an end in August.
“As we enter the final quarter of 2024, the market faces a mixed outlook. While inflation continues to sit around the Bank of England’s 2% target and a further interest rate cut remains possible, the October budget and potential tax rises introduce some uncertainty. The motoring industry’s resilience will be tested as it faces these economic headwinds.
“The industry’s adaptability in the face of these challenges will be key to maintaining its current trajectory, but we could see some market fluctuations in the coming months.”
By nature, I am optimistic and honest; however, I do not like to sugarcoat things. The latest SMMT new car registration data, in my opinion, provides insight into what I see as a deliberate move by Brits to ‘reel in’ their spending. I hope I am wrong for the sake of the UK economy and its businesses.
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