It has been reported of late that UK car sales have risen in 2013 to their highest level since 2007. The Society of Motor Manufacturers and Traders has stated that 2.265 million units were sold last year, up from 2.045 in 2012, with December sales alone growing by 24 percent over the same month last year.
This upward trend is being greeted with much hand shaking, mutual back slapping and many satisfied nods of approval including some from Prime Minister David Cameron, who cited the news as an example of “…how we are growing UK economy.” On the back of the British Chamber of Commerce’s quarterly business survey figures indicating a 0.9 percent growth over the last quarter, everyone seems to be agreed that things are looking up.
Certainly it looks like good news for UK car production, even if we ignore the fact that of the five top selling models, only number four – the Vauxhall Astra – is actually made in Britain, who’s big name companies are muttering to themselves how they are having to work at capacity and would happily expand their operations in Britain, but for a shortage in skilled workers.
And it is certain that Mr Cameron is all smiles that the UK has overtaken France and is now gunning for Germany’s spot as Europe’s biggest new car market. SMMT’s chief executive, Mike Hawes says that “… the UK has consistently outperformed the rest of Europe with 22 consecutive months of growth,” with Spain being the only other market to show any improvement.
Looking beyond the glee and merriment though, concerns could be raised. This upturn in car buying has been spurred on by growing consumer confidence and finance incentives, including PCP schemes and low interest rates. Another reason for the rising sales, significant enough to be mentioned by the SMMT, is the billions paid out by banks to customers who have been miss-sold PPI, average pay-outs being “… enough to put a deposit down on a car.”
It appears then that our economy is improving thanks to consumers feeling flush because banks behaved illegally, borrowing money to buy a car they cannot actually afford with a view to trading it in in three years’ time for a new one, hoping the rates do not rise in the interim or they will either be stuck a more expensive loan for even longer or defaulting, while the second hand market is flooded with three year old models that no one has any more windfalls with which to purchase.
With the country itself borrowing £100 billion a year to function whilst paying £50 billion a year in interest and even though government borrowing is down almost a third, we still have to endure further cuts to public spending because of ill-advised borrowing. Mr Cameron should be asking if consumer ill-advised borrowing is really a cause for celebration.