UK car sales drop as manufacturers warn Brexit is hurting the industry

New sales figures released as Jaguar Land Rover issues warning over future investment

Motor firms have announced hundreds of job cuts in the UK since the start of this year (Reuters)

UK car sales fell by 3.5 per cent in June, as demand for diesel vehicles dropped more than 28 per cent, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT).

The decline in diesel sales more than offset a 45 per cent increase in the number of alternatively fuelled vehicles being registered, as well as a 12.3 per cent uptick in petrol.

Mike Hawes, SMMT chief executive, said: “Despite a rocky first six months for the new car market, it’s great to see demand for alternatively fuelled vehicles continue to rise. Given these cars still represent only one in 20 registrations, however, they cannot yet have the impact in driving down overall emissions that conventional vehicles, including diesels, continue to deliver.

“Recent government statements acknowledging the importance of petrol and diesel are encouraging. However, we now need a strategy that supports industry investment into next generation technologies and puts motorists back in the driving seat, encouraged to buy the car that best suits their needs - whatever its fuel type.”

Samuel Tombs, chief economist at Pantheon Macroeconomics, said the fall in sales would drag on GDP growth.

He also said that while changes to rules around diesel vehicles in April “might have persuaded a few consumers to bring forward purchases”, the drop over the second quarter “likely reflects the still-low level of consumers’ confidence and rising finance costs”.

Meanwhile, Ian Gilmartin, head of retail & wholesale at Barclays Corporate Banking, said the drop in sales was “no surprise considering the plethora of challenges being faced by sellers”.

He added: “The industry has rightly been more vocal in recent weeks, with the lack of clarity around what the playing field will look like for the motor market post-Brexit growing. Patience is running out for both manufacturers and retailers, with all parts of the industry hoping to see some material progress to allow them to plan for the future.

“As today’s data shows it’s not just a trade issue, with wider questions over diesel policy posing another headache for operators as diesel purchases fell by almost a third in June. The sector has to focus on delivering more environmentally efficient vehicles, but diesel cars have a part to play in this and consumers need reassurance that a diesel purchase is still a sensible move.”

The numbers come as Jaguar Land Rover issued a warning that it urgently needs greater certainty on Brexit if it is to continue investing in the UK motor industry.

“A bad Brexit deal would cost Jaguar Land Rover more than £1.2bn profit each year,” said JLR chief executive Ralf Speth.

“As a result, we would have to drastically adjust our spending profile. We have spent around £50bn in the UK in the past five years, with plans for a further £80bn more in the next five.

"This would be in jeopardy should we be faced with the wrong outcome.”

In April, the car maker announced it was cutting 1,000 UK jobs due to Brexit uncertainty and confusion around diesel policy.

The SMMT revealed last month that investment in the UK motor industry had halved in the first half of 2018, due to uncertainty about the future post-Brexit.

Mr Hawes said: “There is growing frustration in global boardrooms at the slow pace of negotiations. The current position, with conflicting messages and red lines goes directly against the interests of the UK automotive sector which has thrived on single market and customs union membership.”