Last week the Bank of England raised interest rates to 5.75 per cent – the fifth rise since August last year - and analysts are warning the increase will hit the automotive retail sector hard.

“As the recent rises in interest rates impact further on private sector demand, we should not be surprised to see downward pressure on sales through the second half of the year.” said Keith Parry, head of motor retail at Barclays Business Banking.

“I would expect the fleet market to continue to be the most resilient.”

Parry warned that margins had suffered with each successive rate rise and that trend was set to continue.

“As interest rates have risen, dealers have moved to offer greater incentives to maintain volumes,” said Parry.

“Margins have been the main casualty of such an approach and they cannot be squeezed indefinitely.”