Belfast Briefing: Car industry awaits Brexit effect

If you are a secret agent, paid in euros, and looking for a new car, then Belfast’s Aston Martin showrooms might be worth a visit this week.

The 2016 Aston Martin DB9 V12 GT gracefully adorning the showroom has a price tag of £129,995 – it also has a euro price tag, which is adjusted daily.

Four weeks ago, the two-door coupé would have had a very different euro price tag. Thanks to the Brexit decision and the subsequent currency swings, not even the Aston Martin’s hi-tech satellite navigation system, if it were possible, could predict how much it might cost in euro next week.

However, this is just one part of the challenge facing the North’s car industry. According to the UK’s Society of Motor Manufacturers and Traders (SMMT), it is too early to say if the referendum result has had an impact on the new car market. But its chief executive Mike Hawes has already warned that if business and economic confidence is any further dented, then it could result in the “market contracting” in the coming months.

The Charles Hurst group, which owns the Aston Martin dealership North and South, spent £1 million last year creating the showroom for the luxury British brand.

Although its latest set of accounts do not highlight how many Aston Martins the group sold last year, they do show that overall turnover at the motor retailers grew by 12 per cent to more than £505 million last year, with pre-tax profits of over €7 million.

Charles Hurst operates one of the largest car forecourts in Europe from a 20-acre site on Belfast’s Boucher Road and, in total, has 16 car franchises and two motorcycle franchises across a number of locations in the North.

The group – part of Lookers plc which is listed on the London Stock Exchange – employs more than 1,000 people and its latest annual report reflects the North’s continuing love affair with cars, whether it is a Vauxhall Corsa or an Aston Martin.

Its latest set of financial accounts also show that the group’s gross margin decreased slightly to 11.3 per cent, due to the “higher selling value of the vehicles sold” and increased pricing competition in the used car market.

Overall, the group believes its latest results reflect “the underlying recovery in both the new and retail cars markets within Northern Ireland”.

“This, together with the company’s strong performance in 2015 and the previous five years, provide a firm foundation to drive the business forward,” it predicts.

However, the overall market is tough. The latest industry figures from the UK’s Society of Motor Manufacturers and Traders (SMMT) show that new car sales in the North actually fell by nearly 2 per cent in June – compared to figures for the same month in 2015.

In total, 5,938 new cars were sold in Northern Ireland last month compared to 6,057 in June last year.

Not surprisingly, Aston Martin did not make the top selling list – which was claimed instead by the Ford Fiesta and HyundaiTucson.

Whether new car sales continue to fall will depend largely on how the North’s economy performs following the Brexit referendum.

Latest figures from the the NI Statistics and Research Agency (NISRA) shows that the local economy grew by 0.4 per cent in the first quarter of 2016.

But Dr Esmond Birnie, PwC chief economist in Northern Ireland, is warning that, on closer examination, this amounts to annual growth of around 0.7 per cent, as compared to 2 per cent annual growth for the UK as a whole.

Birnie says the North is still 7.3 per cent below the pre-2008 banking crisis peak level of output in the Northern Ireland economy and that the latest figures confirm that the local economy has been slowing down for some time.

“The evidence of a slowdown long predated the EU referendum outcome of 23 June, so the real challenge is to stimulate productivity and output and halt the slide,” Birnie warns.

If Northern Ireland cannot do this, it might just put the brakes on new car sales regardless of the price tag.