The UK's upcoming exit from the European Union is expected to hit the region's new-car market in 2018.
Most EU countries are expected to see increases in demand, as rising employment, higher wages and greater consumer confidence support vehicle purchases. However uncertainty over the UK's future relationship with the EU as well as inflation fueled by a weaker pound could lead to an 8 percent decline in Britain's new-car sales to about 2.35 million, according to PwC estimates. Analysts at LMC Automotive are more optimistic, forecasting a 5 percent decline to 2.41 million.
A UK decline could reduce overall growth in Europe because of the size of the British market, which is No. 2 in the region by new-car sales after Germany.
"The UK is turning south so much that it could eat up all the growth elsewhere" in Europe, said Christoph Stuermer, PwC Autofacts global lead analyst.
PwC Autofacts expects European sales in 2018 to rise 0.5 percent to 15.75 million. LMC foresees a rise of 1.3 percent to 15.89 million.
Those numbers have auto executives concerned. "The European market still has some growth potential, but the uncertainties of Brexit, with the UK being the second-largest market, has a spillover effect," said Ian Robertson, who is transitioning from being BMW brand's sales boss to the automaker's special representative in the UK. "The UK is very unpredictable right now," he said.
Nissan Europe sales boss Philippe Saillard also warned about the market's volatility. "We are already seeing that private demand in Great Britain is collapsing so we have to be careful which sales channels we choose," he said.
Exporters are already preparing for a worst-case scenario in the UK at the recommendation of business associations such as the Federation of German Industries. There is a deep divide between Brexit supporters who favor surrendering some sovereignty in exchange for EU market access and hardliners in the ruling Conservative Party.