UK car sales hit record high in 2016 - preliminary data

LONDON, Jan 5 (Reuters) - British new car sales hit a record of 2.7 million units in 2016 despite fears that the Brexit vote could hit demand, although there are signs that registrations will fall this year, preliminary industry data showed on Thursday.

Full-year sales beat the previous record of 2.63 million set in 2015 and overcame expectations from some analysts that the June 23 referendum result would lead to a slump in 2016.

However, demand in December fell by over 1 percent, only the third year-on-year drop in nearly five years, the Society of Motor Manufacturers and Traders (SMMT) said, pushed down by the first fall in fleet car demand for nearly a year.

Consumer spending has been the main motor of economic growth since the Brexit vote, although car sales to individual consumers have fallen in every month since April, compensated until December by business demand, which lifted overall figures.

The SMMT, which is due to publish full data at 0900 GMT, said it expected registrations to fall by 5 percent this year as it becomes harder to keep beating record sales and that the fall in the pound caused by Brexit vote could also affect demand.

“The strong pound in terms of imports (has) enabled manufacturers to offer some very compelling incentives,” SMMT CEO Mike Hawes said.

“With the weakening of the pound, that margin has diminished so the really attractive offers won’t be as readily available and that is more likely to flow through to the purchase pattern,” he said.

Over 85 percent of cars sold in Britain, Europe’s second biggest car market, are imported with dealers using cheap finance deals, interest-free offerings, added extras and free insurance as a way to tempt consumers.

But in recent months, several car manufacturers have raised their prices in Britain to offset the fall in the value of the pound against the dollar and the euro.

Hawes said he expected a “lumpy” performance in 2017 but that sales in March, generally the biggest sales month of the year as new licence plates are introduced, will not be affected by the formal start of EU divorce talks due in the same month.

“There will be a lot of attention and noise around that. Does that translate into consumer purchasing patterns? Probably not immediately,” he said. (Reporting by Costas Pitas, editing by David Evans)