Sales of new cars in Britain reached a record high last year, an industry survey showed Thursday, but 2017 was set to experience a growth slowdown on Brexit.

Car sales hit a successive high in 2016, rising 2.3 percent to nearly 2.7 million units thanks to new models and low finance deals, the Society of Motor Manufacturers and Traders (SMMT) said in a statement.

Sales of Ford led the way, with almost 12-percent market share, followed by Vauxhall and Volkswagen.

Britain has Europe's second biggest number of car sales behind Germany. 

"Despite 2016's political and economic uncertainties, the UK's new car market delivered another record performance as car makers offered an incredible range of innovative and high tech models," SMMT chief executive Mike Hawes said in the statement.

Hawes added that 2017 was set to be "more challenging as sterling depreciation raises the price of imported goods", but noted that buyers should continue to be attracted by low interest rates and more new models.

Hawes predicted that British car sales could fall between five and six percent this year, while market strength longer term would rest on Britain avoiding tariff barriers with the EU.

The country's annual inflation is at the highest level in more than two years as a slide in sterling to multi-year lows against the dollar and euro following the Brexit vote in June has lifted the cost of raw materials imported by Britain. 

The country is meanwhile due to trigger its departure negotiations from the European Union in less than three months, resulting in a new trade deal that could take years to agree according to experts.

Britain's government last year made a pledge to Nissan that the car industry would retain access to the European market, resulting in the Japanese manufacturer stating that it would continue to invest in a major plant in Sunderland, northeast England.

The automobile sector is vital for Britain's economy, responsible for more than 800,000 jobs and 12 percent of total exports, although the country still imports more cars than it ships out.

Scott Corfe, analyst at the Centre for Economics and Business Research, agreed that 2017 was set to experience a "softening" of the British car market.

"The key driver of this is that household incomes are set to be squeezed by rising inflation and flat earnings growth," he told AFP.

"Price rises for cars, driven by rising import prices as a result of sterling's depreciation, could deter purchases," he added.

Source: AFP