The Society of Motor Manufacturers and Traders is forecasting a rise in sales of less than 5 per cent this year compared with last year's 11.6 per cent increase in registrations to just under 1.78 million.
A spokesman said the forecast was based partly on concern about the effect of delayed tax rises on the company car market and the disposable income of private buyers.
Although last year's rise in sales from 1.59 million in 1992 represents a healthy increase, Ernie Thompson, the SMMT's chief executive, pointed out that the market was still 20 per cent down on its peak of 2.3 million in 1989.
December sales were down by 7.7 per cent to 73,730 - the first year-on-year drop in registrations since April. However, industry officials put the decline down to unusually high sales in December 1992, when manufacturers were selling off stocks of non-catalyst cars cheaply and British Aerospace renewed its fleet of Rover cars.
Mr Thompson also forecast that competition for customers would be intense this year, with Continental markets still depressed and European manufacturers stepping up efforts to increase their UK sales.
The European market suffered its sharpest contraction for 20 years in 1993 with 2 million fewer cars sold - a drop of 15 per cent.
Jaguar's worldwide sales leapt by more than a fifth last year compared with 1992 to reach 27,338, thanks mainly to a 47 per cent increase in demand in the vital US market.Reuse content