While 2016 was a good year for fleets despite challenging conditions, the immediate outlook for 2017 is set to be more turbulent.

UK GDP is expected to fall back to 1.2% and consumer spending growth is forecast to drop by 2% while inflation is forecast to rise.

So says Alan Henson, head of sales and customer services, at automotive and fleet data provider KeeResources as he points to falling new car sales, challenging economic conditions and forthcoming changes to taxation, accounting standards and emissions testing.

A key issue will be Brexit, with Henson highlighting that initial concerns and fear of recession have receded, but UK GDP is expected to fall back to 1.2% and UK consumer spending growth is forecast to drop by around 2% while inflation is forecast to rise.

However, Henson says such concerns need to be seen in context; “2.3% CPI inflation may be above the 2% target, but it is relative to the unprecedented low inflation, low interest economy the UK has enjoyed for an extended period.”

New car registrations – which reached record levels in 2016 – are also expected to fall this year. The SMMT is forecasting a contraction of 5% in 2017 and a further 1.3% on 2018.

In response, Henson said: “2017 is set to be a buyer’s market and fleets will be well-placed, if there is the demand from them. In November, the CBI’s growth forecast for 2017 picked up slightly and while the service sector led manufacturing, the potential to increase exports because of lower Sterling is clearly possible. Consequently, the fleet outlook should mirror the CBI’s cautious optimism.”

A further key challenge in 2017 is the introduction of the new Worldwide Harmonized Light Duty Vehicles Test Procedure (WLTP), which is due for implementation in September 2017 and will have implications for CO2 emissions. Kee Resources warns this could impact on Benefit in Kind (BIK) taxation with the potential for additional National Insurance Contributions from employee and employer.

The changes to salary sacrifice and cash-or-car schemes will also impact on fleets.

Deloitte claims as many as 500,000 company car drivers could be hit with the salary sacrifice changes – around 50% of the 970,000 employees identified by HMRC as paying Benefit-in-Kind (BiK) tax on a car – while up to half of the remaining company car drivers – some 360,000-450,000 employees – have a cash allowance option.

The route ahead will become clearer in Q1 following a period of consultation by HMRC with new rules expected to be adopted from April 2017.

And Henson adds that the forthcoming International Accounting Standards Board requirement for companies to identify leased assets on their balance sheets, and incur a liability for future rental payments from 1 January 2019, is a major change impacting operating leases (contract hire) that will need to be carefully managed and communicated.

He added: “While January 2019 might seem a long way away, the long-term nature of contract hire agreements means that it is a topic that will gain much airing in 2017.”

In conclusion Henson added: “There can be no question that the year will be challenging. A 5% drop in new car registrations is not what anyone wants, but if there is to be a silver lining, it is that a collapse in residual values, which very arguably would have even deeper implications for the whole industry, is less likely.”