Lending giant Barclays has delivered a fresh blow to UK car dealers by classifying the struggling sector a “high risk”.
The internal categorisation will likely see funding to the sector face greater scrutiny from Barclays credit functions signing off new deals.
On Tuesday, the Society for Motor Manufacturers and Traders (SMMT) warned an eighth successive month of declining new car sales had now become a “major concern”.
Some 163,541 new cars were bought during the month, an 11.2 per cent fall on the same period last year.
Shares in Britain’s biggest car dealer Pendragon plummeted in October after warning on profits. The firm said finances had been hit by falling demand for new cars and a related price correction in the used car market. On Monday, the Evans Halshaw and Stratstone owner revealed plans to raise £100m by flogging its US business.
The SMMT has cited falling consumer confidence in the wake of the Brexit vote coupled with a government crackdown on diesel cars as the primary reasons for falling demand.
Meanwhile, experts have warned the Bank of England’s recent interest rate rise could compound matters.
Duff & Phelps restructuring director Michael Bills said the rate hike “will impact on a number of consumer reliant sectors, no more so than an industry fuelled by the availability of credit”.
He added: "Dealerships are faced with a business structure predicated on a predominance of fixed costs with labour as the main variable.
Where dealers have traded outside usual parameters in order to reach bonus volumes, they are potentially now sat on what look like over-priced used vehicles stock, that will be challenging to liquidate and turn into cash.
Barclays declined to comment.
Read more: SMMT: UK car sales are now a "major concern"