The recovery to car sales in Western Europe continued in June, with sales across the region at 1.4m units, some 5.7% up on the same month last year.

Data released by LMC Automotive also showed that the seasonally adjusted annualised rate (SAAR) of sales stood at 13.9m units a year. Car sales for the first half of the year were up by 8.4% to 7.5m units.

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In June the Big Five car markets were up YoY with the exception of the UK, which saw a contraction for the first time since October 2015 – but has been running at record levels. The Italian and Spanish markets continued to lead the way last month, with the German market also performing well with growth picking up to 8.3%.

In the UK, new car registrations saw a contraction (-0.8%) for the first time since October 2015. LMC said that with the country’s EU referendum resulting in a Leave vote, economic headwinds look set to dampen UK demand in the second half of the year, and beyond.

The Spanish car market continued to grow at a pace similar to recent months (+11.2%), whilst in Italy, the rate of growth slowed a little, with car sales up around 12%. The French car market, meanwhile, saw marginal growth, up by 0.8%.

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Regarding the UK’s vote in June to leave the EU, LMC said it assumes the economic and vehicle market impact will be centred on the UK itself, with only minor repercussions on the broader region. In particular, LMC said there are three key factors that look set to dampen UK car demand (versus the previous forecast, in which it was assumed the Remain campaign would edge a win): a weaker pound, slower GDP growth, and a hit to confidence.

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LMC warned that the depreciation of sterling will lead to higher prices of imported vehicles. On that basis it says it has lowered its forecast for car sales in the UK to 2.61 mn units in 2016, from 2.71 mn units previously. By 2018, LMC envisages the impact of Brexit will be a drop of some 320,000 units in 2018 versus the previous forecast — taking the market to around 2.25m units.

In its base case forecast, LMC says it does not assume the UK vote will fuel a generalised EU economic downturn. However, heightened uncertainty about the future political (especially with more countries likely to bring into question their own EU membership) and economic landscape in Europe could have a meaningful impact on business confidence and market sentiment. A more negative scenario for Europe as a whole is, therefore, plausible, LMC warns.

LMC forecasts that the West European car market will grow to 13.91 m units in 2016, 5.5% ahead of last year.