New car sales hit five-year high

SMMT figures show rise for 19th consecutive month as car market 'reflects growing economic confidence'

Car sales jumped in September to record the strongest monthly figures in more than five years as the automotive industry underlined its importance to the UK's economic recovery.

According to the Society of Motor Manufacturers and Traders (SMMT) sales rose 12.1% last month to 403,136 vehicles, following 10.9% annual growth in August and 12.7% growth in July.

The car industry has now registered 19 months of improving sales and become widely regarded as one of the main reasons why the UK avoided a triple dip recession this year. The numbers for September – a key sales month when new registration plates are issued – represent the highest monthly total since March 2008.

Along with mobile phone contract sales and a surge in demand for hotels and restaurants, cars have proved to be the main big-ticket item favoured by consumers, who until recently have shunned new furniture and clothes in favour of new vehicles.

Private new car sales were particularly healthy, which Howard Archer, UK economist at IHS Global Insight, said was "fuelled by sharply improved consumer confidence and record high employment".

He said consumers were also taking up special offers and packages, and shifting to more fuel-efficient cars at a time of high petrol prices.

"The rise in consumer confidence to a 70-month high in September and ongoing improvement in business confidence came at a particularly good time for the car industry given that September is a key month for sales," he said.

UK car sales. Source: SMMT

"Furthermore, there are likely to be a significant number of people who have held off for an extended period from replacing their car, due to difficult times, who have now reached the stage where they really need to act and are more prepared to do so due to the brighter outlook."

The mis-selling of payment protection insurance has also been singled out as a boon for car sales, with some of the £11.5bn in compensation paid out to consumers being spent on new vehicles.

Private car sales climbed 17.9% year-on-year to reach 208,844 in September. Overall, private car sales were up 16.7% year-on-year in the first nine months of 2013.

However, several economists have issued warnings that sales may plateau as the capacity of consumers to borrow to buy new cars begins to wane.

The latest figures show that annual earnings growth was limited to 1% in the three months to July while consumer price inflation stood at 2.7% in August.

On the plus side, real household disposable income rose by 1.5% quarter-on-quarter in the second quarter, mainly as a result of the coalition government's hike in the personal tax threshold, but this followed a dip of 1.7% in the first quarter and disposable incomes were down by 0.7% year-on-year.

Most of Britain's car manufacturing is exported and the Nissan Note, which recently began production at the company's UK base in Sunderland is no exception. Honda, Toyota and BMW's Oxford plant making Mini Coopers are all working at capacity and exporting around eight out of 10 cars they produce.German carmaker Daimler said on Friday that it sold a record number of Mercedes-Benz cars in September. The Stuttgart-based firm said it sold 142,994 vehicles in September, up 15.9% on the same month a year before.

It credited new versions of its E-Class and S-Class sedans, as well as increased sales of its smaller models such as the A, B and CLA classes. Compacts increased sales as a group by 68.3% in the first nine months of the year.

September sales rose 6.7% in the US, the brand's biggest single market, and 21.2% in China. Sales at home in Germany rose only 1.5%, however.

Mercedes-Benz also increased sales 14.2% in Europe, much of it in Britain and areas such as Sweden that have recovered more strongly.

Archer said: "The motor industry will be hoping that the recent improvement in UK economic activity is sustained and extended, and that this leads to further strengthening in consumer and business confidence, and their willingness to splash out on new cars."

Article Source : http://www.guardian.co.uk

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Royal Mail's first-class returns fail to silence critics

On Friday many people could see the value of their stake instantly rocket. While 96% of postal workers are against it, for the government – and City investors – it offers a huge windfall

A half millennium of history will end on Friday when the government goes where even Margaret Thatcher dared not tread and privatises Royal Mail.

In between divorcing and beheading wives, Henry VIII appointed Brian Tuke to the newly created role of "Master of the Posts" in 1516. The job was a forerunner to Postmaster General and the service – which for its first 119 years was reserved for royals to send letters between palaces – became Royal Mail.

The postal service, the world's oldest, has remained in public ownership ever since, despite attempts by both the Tories' Lord Heseltine and Labour's Lord Mandelson to flog it and swell the nation's coffers.

Thatcher, who sold off British Gas, British Airways, British Telecom and dozens of other state-owned institutions in the 1980s, drew the line at Royal Mail, saying famously that she was "not prepared to have the Queen's head privatised".

But on 7am on Friday up to 70% of Royal Mail will be sold to investors and listed on the London Stock Exchange – swelling Treasury coffers by about £2bn, though that will no more than dent the £115.7bn deficit the government ran up on the public finances last year.

The government is pressing ahead with the sale despite fierce opposition from the public, politicians of all hues and Royal Mail's 150,000 postmen and women, who are planning days of debilitating strike action in protest.

Vince Cable and Michael Fallon, the business secretary and business minister in charge of the sale, say that in these straitened economic times Royal Mail can no longer be owned by the state as it has to compete with schools and hospitals for much-need investment. Royal Mail needs to borrow hundreds of millions of pounds to prepare for a future delivering parcels ordered online from the likes of Amazon and Asos, rather than cards and letters that are dying out in favour of emails and messages on Facebook or Twitter. Letter traffic has dropped by a quarter over the past five years to just 58m items a day.

"It cannot be right for Royal Mail to come cap-in-hand to ministers each time it wants to invest and innovate," Cable said. "The public will always want government to invest in schools and hospitals ahead of Royal Mail."

Fallon has said that if Royal Mail were to remain in state hands "every £1 it borrows is another £1 on the national debt. That means growing the national debt. No responsible party could propose that in the current environment, or for that matter in any environment, when Royal Mail – run on a fully commercial basis – has the capacity to be cash-generative, profitable and perfectly able to raise the capital it needs from the private sector."

After years of heavy losses – £320m in 2010 and £258m in 2011 – Royal Mail is now steadily increasing its profits. In the latest accounts available, for the six months to September 2012, it made operating profits of £144m compared with £12m a year earlier, while sales remained roughly flat at £4.4bn.

Royal Mail has also been given greater freedom to increase the price of stamps – over the past five years the price of a first-class stamp has risen from 41p to 60p – and is allowed to make a "reasonable commercial return" (a margin of 5-10%) on its universal service obligation to deliver to every address in the country six days a week, which the government promises will be maintained for the foreseeable future, no matter who owns the company.

Royal Mail has also been freed of its £12bn pension fund deficit by transferring the scheme from the company to the state, at a cost of £1.3bn in the first year alone.

City experts reckon these changes outweigh the threat of strike action and any political and public backlash and will make Royal Mail very attractive both to big banks and investment firms as well as the public, who are able to buy its shares as long as they can stump up a minimum of £750.

Gert Zonneveld, managing director of stockbroker Panmure Gordon, said he expects the flotation to be a "raging success", with investors trying to buy up to 10 times as many shares as are available, But most of the demand, he said, is down to the "exceptionally attractive" value the government has placed on the shares. It has said they will be priced between 260p and 330p, giving the company a maximum market value of £3.3bn.

Zonneveld reckons the government's range represents an "exceptionally good entry level for investors", and said the shares should have been priced at up to 450p.

"I'm so convinced they [the government] got it wrong," Zonneveld said. "I think they're more than £1bn too low [in their valuation of the company]."

By comparing Royal Mail's profits and revenues to that of other listed postal services in other countries, Zonneveld thinks the company should be valued between £3.7bn and £4.5bn.

Under his valuation, Royal Mail would join the FTSE 100 list of Britain's biggest companies, which means tracker funds would be forced to buy the stock, sending demand – and the price – even higher. "I think this is going to be massively oversubscribed," he said. "Institutional investors who want £10m will increase their order to £50m because they know their orders will be scaled back."

He predicts that the share price could rise by 30% on the first day of trading on Friday. It means the government could lose out on about an extra £500m if it had priced the shares at 450p. The government has said it will not increase the price range above 330p no matter how high the demand for the shares.

The expected jump in the share price could go some way to placating Royal Mail's 150,000 employees, who are in the midst of voting for nationwide strike action, the first since 2009, which cannot take place until 23 October.

The government is giving employees 10% of the shares for free. If the shares at the top end of the government's 330p estimate,each employee will own shares worth £2,200 on Friday morning. If they perform as Zonneveld predicts they could be worth £2,860 by Friday afternoon.

But even the prospect of nearly £3,000 is not enough to win over most postmen and women. The Communication Workers Union, which represents 115,000 Royal Mail staff, says that 96% of employees are adamant in their opposition to the sell-off.

"I don't want the money," Theodore Mbungu, 56, said as he trudged about his north London round last week. "I want my job to stay the same. When it's private we will be paid less and have to work harder. What other job is there where you talk to people every day and they are happy and smiling and excited to see you?

"In what other job can you do your work and then go straight home, even though you're still being paid? I love being a postman. It's the best job in this country, but I know once the men in the City get their hands on it, it will never be the same again."

Article Source : http://www.guardian.co.uk
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