UK car prices jump as import costs soar

The cost of importing used cars in the UK has risen sharply in the year to April, pointing to higher inflation in the economy, according to a report. Prices of cars are up by…

UK car prices jump as import costs soar

The cost of importing used cars in the UK has risen sharply in the year to April, pointing to higher inflation in the economy, according to a report.

Prices of cars are up by 9.6% on a year ago according to new research from IHS Markit.

The costs are rising faster than producer prices, which have picked up 2.6% since April last year.

The ongoing plunge in sterling since June last year has affected every sector, but most notably inflation.

‘Difficult to imagine’

The fall in the value of the pound has helped fuel inflation in more than 20 different goods and services.

The upward movement in the prices of used cars could suggest that prices of imported goods are also rising, as supplies tighten.

Wholesale car prices have risen sharply since the end of October 2016, when sterling began its collapse.

Volumes for used cars in the UK have also been declining since June 2016, even though the share of used cars sold on the used market rose during this period.

UK new car sales dipped by 7.8% in the first six months of this year, while figures from the Society of Motor Manufacturers and Traders show a 7.6% fall in used car sales over the same period.

Raphael Glynn, manufacturing and supply director at IHS Markit said: “Inflationary pressures on manufactures are rising strongly, setting the economy up for increased pressure on retail prices.”

“This is particularly the case in the cars and parts space, which is a narrow sector in itself and which mainly represents a buoyant home market. It is difficult to imagine a scenario where component pricing rises are not eventually passed on to manufacturers and ultimately to consumers.”

Industry experts say the damage from sterling’s fall will last for several years.

Neil Carberry, commercial director at Volkswagen, said: “We expect our prices to remain under pressure over the coming months as our supplier costs rise, and this is especially the case for commodities such as steel and aluminium.

“Although diesel remains under pressure, we anticipate that competitors will have to match or beat Volkswagen’s new model prices.”

Unison’s head of retail and supply Paul Brown said: “There is a real danger that big businesses are using the opportunity to hiked their prices while many people are struggling to afford food and fuel.”

British Retail Consortium director general Helen Dickinson said: “The crash in sterling has already had a real impact on prices.”

“Duty cuts are supporting the cost of living, but they have come at the expense of an expected large increase in retail inflation, which is likely to outweigh the benefit of the duty cuts.”

Leave a Comment