2025: The Outlook

2025 will start with the Labour government now with its feet firmly under the desk, its economic plan much clearer, and a new US administration in place. This means better certainty for businesses and consumers, which is always welcome.  

As always, the year ahead will bring both challenges and opportunities. Looking at challenges, the current issues that can be anticipated include: 

• The continuing impact of the ZEV mandate
• Linked at least in part to the above, the dynamic used car value position 
• The effect of increased business NIC contributions on business costs 
• The potential for inflation to rise as the year unfolds, which could slow interest rate reduction 
• The evolving financial regulatory/compliance landscape 

While recognising these, I prefer to focus on the potential good news ahead.  

Consumer Confidence – it’s been rising 

According to the long-standing GFK Consumer Confidence Survey published on December 13th, consumer confidence is slowly improving.  

The Overall Index Score increased by one point to -17 in December compared to November’s report, which was broadly positive. 

General Economic Situation - The measure for the general economic situation of the country during the last 12 months was the same as last month at -39, five points higher than in December 2023. 
 
Personal Financial Situation - The index measuring changes in personal finances during the last year was up two points at -7; this was seven points better than December 2023. The forecast for personal finances over the next 12 months was up two points at +1, which was three points higher than the same time last year and is a notable positive 

Major Purchase Index – This index was also unchanged at -16, but it is seven points higher than this month last year. 

The Broader UK Economy  

The Bank of England's cut in interest rates to 4.75% from 5% at the start of November was accompanied by a warning that interest rates could take longer to fall further as it forecast that inflation would creep higher after the announcements made in the Autumn Budget combined with rising utility costs. 

The latest economic forecast from the International Monetary Fund, published in mid-October, estimated U.K. GDP growth at 1.5% in 2025. In terms of economic activity, the year is forecast to start well according to worldwide consultants RSM, which noted recently: The outlook for 2025 is significantly brighter. We anticipate a sharp uptick in growth, driven by a sugar rush of government spending and a revival in consumer spending as households begin to spend their increased incomes rather than save more.”  

The Government Focus on Growth in Financial Services 

As part of the Industrial Strategy, the government is developing the first ever Financial Services Growth and Competitiveness Strategy, to be published in the Spring. The strategy will take “a clear-eyed approach, focusing on growing and enhancing the competitiveness of the financial services sector.” Aligned with this, the government has advised financial regulators, including the FCA, to “ensure a greater focus on growth.” 

Car Sales Outlook 

Car registrations are forecast to rise a further 1.8% to 1.977 million units next year, according to the SMMT. Battery Electric Vehicle (BEV) market share is expected to climb to 23.4%, with volumes up 27.6%.  

A significant part of 2025’s new car sales success could depend upon government action to support BEV sales and in adjusting the current Zero Emission Vehicle (ZEV) Mandate, and there is room for some encouragement, at least in the latter. 

The government has initiated a consultation about the ZEV mandate. While the 2030 phase-out for ICE vehicles will remain, the consultation should provide a little optimism for OEMs and retailers that the pace of the ZEV (28% of sales in 2025) may modify or, perhaps more realistically, the fining regime in place for missing targets may be adjusted. 

For used cars, Cox Automotive’s latest Insight Quarterly (IQ) report estimates there will be 7,458,356 used car transactions next year, up 0.3% from 2024 levels, so broadly flat. However, supply is likely to be constrained, and there could be opportunities to enhance margins. 

To close, I want to highlight two reasons that give me optimism for 2025: increasing consumer confidence and a government that has placed growth at the top of its agenda, which they will want to start demonstrating. 

My very best wishes for the year ahead. 

    -    Mike Edwards, Chief Sales and Marketing Officer