UK new car sales fall 40% in January lockdown, and construction output dips – business live

The UK construction sector has also made a weak start to the year, with output declining unexpectedly in January for the first time in seven months.

Data firm IHS Markit reports that its construction PMI, which measures activity across the sector, dropped to 49.2 last month — a sharp decline on December’s 54.6.

This is the first time since May 2020 that the PMI has dropped below 50, which shows a contraction.

Construction firms reported that new order growth slowed, led by a slide in commercial property work, while housebuilding growth ebbed.

Building sites were allowed to keep operating during the current lockdown, but some report ‘greater hesitancy’ among customers.

Markit says:

Construction companies often noted that the third national lockdown and concerns about the near-term economic outlook had led to greater hesitancy among clients, especially for new commercial projects.

Building firms also reported that it is taking longer to receive raw materials and imported products, due to the disruption at UK ports. Around 45% of the firms surveyed said it was taking longer to receive supplies, with only 1% reporting an improvement.

Costs are rising sharply too, driven by rising prices for plaster, steel and timber.

Tim Moore, Economics Director at IHS Markit, explains:

“The construction sector ended a seven-month run of expansion in January as a renewed slide in commercial work dragged down overall output volumes. House building was the only major construction segment to register growth, but momentum slowed considerably in comparison to the second half of last year.

Construction companies continued to report major delays with receiving imported products and materials from suppliers, with congestion at UK ports contributing to the sharpest lengthening of delivery times since May 2020. Adding to the squeeze on the construction sector, rising steel and timber costs led to the fastest rate of input price inflation for just over two-and-a-half years.

The latest survey highlighted that construction companies have become more cautious about the business outlook. Output rebounded quickly after stoppages on site at the start of the pandemic, but hesitancy among clients in January and worries about near-term economic conditions resulted in a dip in growth expectations for the first time in six months.”

The SMMT also warns that the drop in car sales will hurt UK manufacturers:

With lockdown restrictions in place until March – the most important month of the year for the sector, accounting for one in five new car registrations on average – the industry will face a challenging year as showroom closures depress consumer demand, which has a knock-on effect on manufacturing output.

The group argues that showrooms should reopen that the “earliest opportunity” once it’s safe, with Mike Hawes, SMMT chief executive, saying:

“Following a £20.4 billion loss of revenue last year, the auto industry faces a difficult start to 2021. The necessary lockdown will challenge society, the economy and our industry’s ability to move quickly towards our ambitious environmental goals.

Lifting the shutters will secure jobs, stimulate the essential demand that supports our manufacturing, and will enable us to forge ahead on the Road to Zero. Every day that showrooms can safely open will matter, especially with the critical month of March looming.”

It’s official, UK car dealers have made their worst start to a new year since 1970.

Industry body SMMT reports that just 90,249 new cars were registered last month – the weakest figures for any January in just over 50 years. That’s down from almost 150,000 a year ago, just before the pandemic hit Europe.

UK car showrooms were forced to close under the current lockdown, while many commuters are stuck at home, meaning sharply weaker demand.

That’s despite dealers using despite click and collect services, and home deliveries, to allow customers to buy cars during the current restrictions on non-essential businesses.

The slump was felt across the market, with sales of private cars falling 38.5% and fleet purchases down 39.7%

Petrol sales halved, while diesel was down over 60% — with more customers opting for electric vehicles instead.

The SMMT says:

Declines were also recorded in both petrol and diesel cars registrations, which fell by -62.1% and -50.6% respectively. On a positive, however, battery electric vehicle (BEV) uptake grew by 2,206 units (54.4%) to take 6.9% of the market, as the number of available models almost doubled from 22 in January 2019 to 40 this year.

Combined, BEVs and plug-in hybrid vehicles (PHEVs) accounted for 13.7% of registrations.

SMMT
(@SMMT)

New car registrations fall -39.5% as showroom closures stifle demandhttps://t.co/BmctjLS5Dp pic.twitter.com/6QHJLWxmE6

February 4, 2021

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Britain’s car industry has made a spluttering start to 2021, as the latest Covid-19 lockdown hit the economy.

New car registrations slumped around 40% year-on-year in January, figures due later this morning are expected to show.

With much of the country under lockdown, and many workers facing a further stretch of home-working, demand for vehicles was its lowest in decades. That’s despite dealers trying to drum up demand through online sales, click-and-collect services and deliveries.

Reuters explains:

British new car registrations fell by around 40% year-on-year in January, according to preliminary industry data released on Thursday, after nearly all of the United Kingdom spent most of the month in lockdown.

Sales were at their lowest level for a January in decades, according to industry body the Society of Motor Manufacturers and Traders (SMMT).

The official figures are due at 9am.

Costas Pitas
(@CPitas)

UK new car sales slump around 40% in lockdown January @Reuters ⁦@ReutersUK⁩ https://t.co/rQfhW0u4qa

February 4, 2021

2020 was the worst year for UK car sales since the early 1990s, and today’s figures will highlight the ongoing economic damage being caused by the pandemic.

The figures come as the UK government faces mounting pressure to plug gaps in its emergency coronavirus wage subsidy schemes at the March budget to support millions of self-employed people and other workers excluded from furlough.

My colleague Richard Partington explains:

MPs and campaign groups said the chancellor, Rishi Sunak, had repeatedly ducked opportunities to fix gaps in furlough and the self-employed income support scheme (SEISS) for almost a year since the Covid-19 pandemic began.

Caroline Lucas, the Green party co-chair of the all-party parliamentary group Gaps in Support, said it was “completely unacceptable” that more than 3 million people had been completely left out.

“While it was understandable at the beginning of the pandemic, when the Treasury had to act fast, that some new support schemes didn’t work as well as they should, it’s a scandal that over 10 months later, so many are still falling through the gaps,” she told the Guardian.

Optimism that successful vaccine rollouts will stem the Covid-19 pandemic are supporting the markets again today, with the FTSE 100 index rising by 25 higher points or 0.4% to 6532 points,

Later today we’ll hear from the Bank of England, as it sets interest rates and publishes its latest economic analysis and inflation projections.

The agenda

• 9am GMT: UK car sales figures for January
• 9.30am GMT: UK construction PMI survey for January
• 12pm GMT: Bank of England interest rate decision
• 1.30pm GMT: US weekly jobless figures
• 3pm GMT: US factory orders