Monday 24 June 2019 12:45 am

UK car industry sees worst month for six years in May, Natwest says

The UK’s car industry suffered its worst month for business conditions in six-and-a-half years in May, according to a new survey by Natwest, as Brexit and a global slowdown continued to hurt the sector.

Read more: Pound falls as UK economy shrinks 0.4 per cent in April

British car makers last month saw the steepest drop in new orders from abroad since April 2009, said Natwest, who produced the survey with data firm IHS Markit.

The weak reading comes after official statistics showed car manufacturing fell by 24 per cent in April. Firms had carried out planned shutdowns around the original Brexit departure date of 29 March.

Natwest said the effects of the shutdowns continued to be felt in May. The unwinding of stockpiling ready for the March Brexit date also weakened demand, survey respondents said.

Global headwinds held back the UK’s car industry in May, too. “US-China trade frictions and the prospect of new tariffs has rippled through international supply chains,” Natwest said.

International factors such as new diesel regulations, the transition to electric vehicle production and subdued consumer demand in key markets such as China also took their toll.

The headline UK automobiles purchasing managers’ index (PMI) – a gauge of the health of the industry – was 43.5 in May, down from 48.9 in April. It was below the 50 no-change threshold for the second month in a row.

Natwest said excluding the “noise” of planned production shutdowns, its survey indicated the worst period of underlying demand since late 2012.

The bank said one problem for the industry was that people did not want to commit to buying an electric vehicle because they thought the technology would quickly change and make it out of date.

Nevertheless, registrations of electric and alternative fuel vehicles increased by 13.8 per cent in the year to May, reaching a six per cent market share.

Richard Hill, head of automotive and manufacturing at Natwest, said: “The challenge for the UK automotive sector is to chart a course through the intense industry headwinds that are so clearly evident in the report findings.”

“The coming global shift towards electric powertrains is opening up huge rewards for value creation across the supply chain,” he said.

Read more: CBI: UK manufacturing growth nears three-year low

“It is my firm belief that the UK is well placed to thrive in an environment of technology-driven automotive trends, but we must act fast and think collaboratively.”