It has been recently announced that Britain’s car industry has broken records that date back to 1959 after another rise in motors sales that marked the longest ever period of growth for the new car market. The industry saw the number of new cars being registered in the UK increase by 7.7 percent to a figure of 194,032 for May 2014; signifying the strongest figures in the month of May for 10 years.
This continued support for the UK car industry has been put down to a combination of growing consumer confidence, a recovering economy, cheaper finance deals and the millions of pounds paid out to thousands of people over the PPI mis-selling scandal. All of these factors have helped to drive the new car market to enjoy an incredible 27 months of consecutive growth, which breaks a previous record that was set in the late 1980s.
Mike Hawes, the Chief Executive of the Society of Motor Manufacturers and Traders (SMMT), which published the figures said, “The new car market has now grown in every month since March 2012, which is the longest period of growth on record and a reflection of the UK’s ever-improving economic conditions.”
Hawes added that new technologies and advances with fuel economy in cars, coupled with competitive finance deals, had assisted in making a new car more affordable for many motorists. However, he also warned that the rate of growth was likely to slow down in the coming months as demand ultimately stabilises. The SMMT has estimated that there will be a 6 percent rise in new car registrations this year.
May’s increase in sales of 7.7 percent was a smaller increase than April’s annual rise of 8.2 percent and March’s impressive 17.7 percent jump. The SMMT are expecting sales growth to slow further, with Hawes saying , “With SMMT forecasting an overall rise of around 6 percent over the year, the coming months should see some levelling off in growth rates as underlying demand stabilises.”
Car sales were one of the first areas of British consumer demand to recover after the global financial crisis, with cheap financing being a key factor behind this demand. Richard Lowe, Head of Retail and Wholesale at Barclays said, “Looking ahead over the summer months it will be interesting to see if the growth rate drops down a gear. If there is a slowdown, all eyes will be on manufacturers and the actions they take to try to drive the market forward.” It has also been revealed that UK registrations have already passed the one-million mark in 2014, rising 11.6 percent to 1.059 million compared to the same period during 2013.The best selling motor in May was once again the Ford Fiesta supermini, ahead of the Volkswagen Golf and General Motors Vauxhall Corsa. Ford’s mid-sized Focus model dropped to fourth place.
Elsewhere, Britain’s car insurance companies were also celebrating, having made their first collective annual profit for 20 years. This positive news comes amid encouraging signs that a clampdown on the number of fraudulent claims being made every year by unscrupulous motorists is starting to have an effect.
According to consultants at Ernst & Young, the company paid out £98.50 for every £100 received in premiums last year, which is only the second time that the sector has seen a swing in to profit since their studies began back in 1985. The industry now has hopes that they can get back into the black and consolidate there. This optimism received a boost last year when the UK government began introducing reforms to crack down on the country’s rising compensation culture. This turnaround has been set against a current trend for falling average premium rates.
Head of Retail Property and Casualty Actuarial for Europe, the Middle East and Africa at EY, Catherine Barton said, “Soaring rates driven by a rampant claims culture have meant that insurance underwriting has proven to be perpetually unprofitable over the last decade. Returns were heavily supplemented by ancillary profits or add-ons from other sections of the business.” The Association of British Insurers (AIB) have recently released findings that showed how bogus car accidents had helped to push the level of insurance fraud to a record £1.3 billion in 2013, which was an 18 percent rise on the previous year and incredibly more than double the cost of the shop lifting bill that the UK has to deal with.
The measures that have been brought in by the government to tackle the problem of fraudulent motor accidents, otherwise known as ‘crash for cash’ incidents, has included slashing fees for personal-injury lawyers and banning any payments for exchanging the details of the policy holders involved. Recently, Chris Grayling the justice secretary, has given assurances that the government will help to cut the number of questionable whiplash claims being made, by improving the medical assessments that take place. He also announced widespread plans to ban the practice of lawyers encouraging people to make bogus claims with incentives such as money or electrical equipment.
However, a spokesperson from Ernst & Young has warned that it may yet be too early to start celebrating a turning point for motor insurance profits, because of how insurers release reserves that they have held to cover any potential claims that are made. Christine Barton identified that these reserves could still be acting as a support mechanism, whilst questioning whether insurance company’s would end up plunging themselves back into the red once the money ran out, as they did almost a decade ago.