Brexit analysis: UK to bear the brunt
The UK is, unsurprisingly, expected to bear the brunt of the impact of its vote to leave the European Union. We currently expect that the market will remain up in 2016. However, we have reduced the gain to just 1% year on year (y/y) to around 3.045 million units, versus the 3.2% y/y gain we previously anticipated. The declines that were already forecast for 2017 and 2018 are now expected to be greater. Registrations of light vehicles are now forecast to fall by 9.1% y/y to 2.758 million, rather than a 3.5% y/y decline. For 2018, registrations are now expected to hit 2.71 million units versus the 2.94 million units for our pre-referendum forecast.
In addition, our Western European forecast will now fall during the next two years despite further gains during 2016. Although light-vehicle registrations will grow by around 5.0% y/y this year to 15.64 million units, this will be lower than the 15.75 million units expected. Furthermore, registrations in 2017 are expected to dip by 1.2% y/y to 15.45 million units, compared with the expected increase to 15.98 million. During 2018, the total is now expected to remain at 15.45 million units rather than the expected 15.95 million.
Globally, we now expect growth to be lower over the next few years. For 2016, light-vehicle registrations are now forecast to be 89.82 million units, an increase of 2.0% y/y, below the 90.02 million units originally forecast. While a further gain of 1.4% y/y to 91.06 million units is anticipated in 2017, this is around 1.25 million units lower than originally anticipated.
For 2018, we expect global sales of 93.12 million units, versus the previous forecast of 94.5 million units.
Outlook and implications
These early indications are based upon the initial macro forecasts published by IHS on the impact that the leave vote will have. They are still subject to a great deal of unknown factors further ahead.
Our economic expectations regarding the UK market were first published on 24 June 2016. Factors that are expected to have a direct impact on our short-term forecast include lower GDP, with growth in 2017 estimated at
However, as our forecasts show, Western Europe will not escape the impact of the referendum result. IHS believes that the Eurozone's growth outlook has weakened appreciably following the UK's vote. Prior to it, IHS had been relatively upbeat about Eurozone GDP growth prospects, expecting 1.7% growth in 2016, 1.8% in 2017 and 1.6% in 2018. This forecast has now been cut to 1.4% in 2016, 0.9% in 2017 and 1.4% in 2018. In particular, business and consumer confidence is likely to take a prolonged and appreciable hit from heightened economic and political uncertainties as well as financial market turmoil.
Tighter credit conditions and weaker asset markets could also affect businesses and consumers. Meanwhile, Eurozone exports to the UK – an important destination for many Eurozone countries – are likely to suffer from sharply reduced UK growth and a strengthening of the Euro against the pound. However, the European Central Bank (ECB) has indicated that it is prepared to take necessary action to ensure price and financial stability.