2025 H2 Outlook

As we move into H2, the economic landscape remains ever-changing, with numerous events on the international stage reminding us that we truly operate in a global village.

Domestically, businesses are coming to terms with the effects of increased business NIC contributions and other rising costs, which have led to an increase in unemployment.

Consumer confidence, which is crucial, has had a challenging six months but has shown improvement more recently.

The net result for car sales is that the new car market has experienced a mix of trends year-to-date. Electric vehicle (EV) sales have continued to rise; in April, sales declined across all categories due to tax changes, but March saw a 12.4% increase in new vehicle registrations, reaching over 357,000 units. It provides an excellent snapshot of the impact of economic changes, specifically taxes.

So, as we look out for the opportunities and face the challenges, here is our latest economic snapshot for the months ahead. We hope it proves helpful.

Consumer Confidence – room for some cautious optimism

According to the long-standing GFK Consumer Confidence Survey published on June 20th, consumer confidence is slowly improving.

The headline consumer confidence Index increased by two points to -18 in June, but we must remember that it was at -17 in our outlook at the start of the year. It points to fragile confidence in the year to date.

The encouragement in the latest report lies in how consumers view the general economy. It rose three points compared to last year and was up five points looking at the next 12 months. 

Focusing on car retailing, both people’s Personal Financial and the Major Purchase Index were flat.

The Broader UK Economy 

Bank of England Governor Andrew Bailey told MPs on the Lords Economic Affairs Committee that the world is ‘too unpredictable’ when forecasting the UK economic outlook on June 24th. It neatly sums up the dilemma facing all economic forecasting in the highly unpredictable global macroeconomic environment.

Andrew Bailey said he viewed domestic issues as more important than global ones when it comes to setting interest rates.

The Confederation of British Industry’s (CBI) latest Economic Forecast also highlights the headwinds that are set to weigh on growth prospects this year and into next. Their surveys suggest that underlying activity remains sluggish due to persistently weak demand and gloomy sentiment.

Higher employment costs following the Autumn Budget are influencing decisions regarding pricing, capital expenditures, and hiring, while higher US tariffs are expected to create headwinds for exports and investment.

That said, they see positive signs of improvement, as real income growth, lower interest rates, and easing inflation, which support household spending.  Their latest UK Economic Forecast projects UK GDP growth in 2025 to be 1.2%.

Some positives: On June 20th, Reuters reported that an influx of taxes paid by businesses put Britain's budget deficit on track to meet official forecasts at the start of the 2025/26 financial year, welcome news for Finance Minister Rachel Reeves as she seeks to repair the public finances.

Headline inflation eased to 3.4% in May 2025, with both core and services inflation showing signs of slowing.

A robust sterling helps cushion the UK economy from the full brunt of higher global energy costs, as imports become relatively cheaper.

More recently, Cox Automotive forecasted that car registrations will end in 2025 at 2,084,477 units, representing 5.7% year-on-year growth.

The UK Economy Grew 0.7% in Q1

New data published by the Office for National Statistics (ONS) revealed that the UK economy grew by 0.7% in the first quarter of 2025, marking its fastest pace in over a year. Growth was driven largely by increased household spending. Monthly growth for March was revised up to 0.4%, while February remained at 0.5% and January showed no growth. The Office for National Statistics

UK Business Investment Rose by 3.9% in Q1

In another release, the Office for National Statistics (ONS) also revealed a 3.9% rise in UK business investment for Q1 2025.

The Used Car Market

Trade values continue to stabilise, and supply challenges are expected to ease in the second half of 2025. The net result is that Cox Automotive expects 2025 to end with 7.64 million transactions completed. The number is nearly the same as last year, but 3.6% higher than the long-term average from 2001 to 2019. However, things could look better by the year-end with wholesale supply predicted to improve.

Examining some of the details, Cox expects supply challenges, particularly among vehicles aged three to five years, which were impacted by the immediate post-pandemic decline in new car sales, to ease in the months ahead. At the same time, trade values will continue to stabilise, with an expectation that traditional seasonal patterns, notably for petrol and diesel vehicles, will prevail.

Looking at used EVs, while the percentage increase in sales has been very strong, the actual scale of the market is modest; however, it is only going to increase, as around a quarter of new cars sold today are EVs.

The appeal of a used EV is increasing. Purchase prices, excluding nearly-new EVs (due to heavy subsidisation of new stock), are often very attractive, and the running cost argument is very favourable for people who can fit a home charger.