Can car sales help jump start the UK economy?

In a time of austerity, UK car sales have reached their highest level in more than four years. Car sales are a leading indicator of consumer confidence, since consumers commit to a purchase of a high-value item only when reasonably confident about their financial prospects. This rare piece of good news for the UK economy saw car sales increase by 5.3% in 2012 to 2.04 million – the highest level since 2008, according to the Society of Motor Manufacturers and Traders (SMMT), the car industry body.

With fuel prices remaining stubbornly high and the government’s tax increases on fuel-guzzling cars, some motorists are looking to take advantage of the latest technologies that can offer lower running costs and offer enhanced fuel efficiency. This has been supported by the uptake of low-carbon electric cars, which nearly doubled in the first nine months of last year.

Jaguar Land Rover recently announced that it will add 800 production jobs at its Solihull plant; car sales were up 30% in 2012 and China has now overtaken the UK as its largest market. While these figures are a good start to 2013, clearly there are challenges ahead; Honda recently announced that it is planning to cut 800 jobs at its Swindon plant, blaming weak demand across Europe.

Here’s hoping that increasing credit availability and consumer confidence will support car demand and help drive up employment towards a stronger year for the UK economy.