Return of new car sales to the slow lane fuels fears of a double-dip recession

The UK car market declined in July for the first time in more than a year as fragile consumer confidence, concerns about a double-dip recession, and the end of the car scrappage scheme stymied growth in the industry.

The Society of Motor Manufacturers and Traders (SMMT) said yesterday that new car registrations fell 13.2 per cent in July, to 20,703 cars, compared with last July's figures. The slide comes after a year of rises, and follows a number of recent, disappointing statistics, which suggest that the economic recovery is beginning to stumble.

Paul Everitt, the SMMT's chief executive, said that the while the falls were expected, overall new car sales were up 15.1 per cent in the first seven months of the year: "A drop in private registrations compared to the scrappage-fuelled months of 2009 was expected and has brought the first market decline for 12 months."

He added: "Subdued consumer confidence and a still fragile economic recovery make the outlook for the remainder of 2010 challenging, but a stronger than expected first half means full-year volumes are still forecast to exceed 2009's total."

The drop in new car registrations comes as other industries report softer conditions.

On Wednesday, the Markit/Cips services sector survey showed that the industry grew at the slowest rate for 13 months in July. The findings came a day after its construction survey showed growth at its slowest for four months in July, with employment and confidence in the sector down.

Several companies have said they are already feeling the squeeze. Connaught, the social housing group, has seen its share price fall by more than 70 per cent in the last month after saying that it would be hit particularly hard by proposed cuts.

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