The headline release from the UK yesterday was car sales for September. In August, the reading was a whopping 23.1% which was largely down to savvy individuals who took advantage of some bargains in what is one of the year’s smallest months. With that in mind, a drop was expected this time around. However, a crash by more than a fifth was not expected. Figures released by the Society of Motor Manufacturers and Traders showed that 338,834 new vehicles were registered in September, which is a fall of 87,000. That’s the worst slump for ten years.
Still, it will provide some comfort that there are tangible reasons for the steep decline. There are new emissions tests which necessitate a longer and more difficult examination of new cars. Because every model sold by car manufacturers now has to be tested, there are bottlenecks at testing centres. Until a car has been tested, it can’t be sold, so it appears as if manufacturers and sales centres tried to sell as many as possible before the new test came in.
The EY Item Club – a leading UK economic forecasting group – did weigh in on the figures, saying that Brexit worries and weak consumer confidence could be having an impact. The release came on a day when Nissan warned against a hard Brexit. The Japanese carmaker said that if the UK fails to secure a deal with the EU, there will be serious disruptions to its manufacturing operations in Sunderland. Nissan employs almost 8,000 people in the UK, with another 30,000 working for UK companies that supply Nissan.
Despite these concerns, the pound managed to strengthen against the euro and dollar. It climbed above the $1.30 mark and hit a two-month high against the euro after Reuters reported that a European Union source told them the bloc welcomed a new Brexit proposal from Britain.
Here, it is worth drawing your attention to a couple of possible scenarios in the coming weeks. The next European Union summit takes place on 18 October and, with European Council President Donald Tusk saying that the summit will be a ‘moment of truth’ for Brexit negotiations, there could be some significant sterling movements after the summit. If a Brexit breakthrough occurs, then it is reasonable to think the pound will rally. Conversely, things might go so terribly that the extra Brexit summit provisionally scheduled for 17-18 November could be cancelled. If that were to happen, the pound could plunge.
But, as with all of these sorts of things, nobody knows what is going to happen. After all this time, there are still a wide range of possible outcomes and sterling movements over the next few weeks hang in the balance. If you’re soon sending money overseas, we urge you not to leave it to chance. Speak to your Personal Trader about a forward contract – they can lock in the same exchange rate for you for up to a year, so you know what you’re paying even though the markets will keep moving. Simply give them a call on 020 7898 0541.