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UK car sales rose 2.9 per cent in January to the highest level since 2005, amid warnings of a slowdown in the months to come from slacker consumer confidence.

Some 174,564 cars were sold last month, according to data from the Society of Motor Manufacturers and Traders (SMMT), continuing a strong run that propelled 2016 to be a record year for the industry with 2.69m cars sold.

Mike Hawes, chief executive of the SMMT, said:

After record growth in 2016, some cooling is anticipated over the coming months, but provided interest rates remain low and the economy stable, the market is in a good position to withstand its short-term challenges.

The group expects car sales to dip by 5 per cent this year, and Mr Hawes previously suggested the market has “peaked” after several years of strong growth.

However, changes to the way cars are taxed are being introduced in April, which may push consumers planning to buy this year to make their purchases earlier in the year.

The UK has experienced rising sales every year since 2011, and car registrations are often viewed as a leading indicator of consumer confidence, and so the economy.

But the fall in the pound following the Brexit vote has led many manufacturers to raise prices, which will dissuade motorists from spending on new models.

Last month’s uptick strikes a positive note for the sector, after sales in December fell when compared to the previous year.

Growth also remained at the same level as last year, with sales in January 2016 also rising by 2.9 per cent.

The most recent January figures, published on Monday, show that sales of alternatively fuelled cars – such as hybrids or battery vehicles – rose almost 20 per cent, and accounted for 4.2per cent of all sales, a record high for electrified cars.

Diesel registrations fell 4.3 per cent, while petrol sales rose 8.9 per cent.

In total, sales to private motorists rose 5 per cent to 76,729, while sales to fleet owners, such as company car schemes, grew a slower 1.4 per cent to 91,181.

Ian Gilmartin, head of retail & wholesale at Barclays, said that the “really notable” figure was the 5 per cent jump in private sales.

Even during the record breaking months towards the end of 2016, private purchases tended to be slightly down on the year before, with fleet sales driving the strong numbers, so the industry will be delighted with the better figures for sales to individuals this time.

These private sales have been boosted by the incentives on offer, and the next question for sellers to answer will be how sustainable these incentives are in the medium term, especially as cost inflation begins to set in. We can expect more modest sales as 2017 develops, but for now this sustained growth should be applauded.

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