New car sales in Britain will reach record levels this year with private buyers leading the surge supported by strong sales in the fleet and business car sectors.

Leading economists are forecasting that the combination of a sound economy, the possibility of interest rate falls, the release of pent-up demand caused by private buyers waiting for new car price reductions and a raft of new models will result in record-breaking 2.33m new car market.

However, a boom in private new car sales will further depress the used car market, resulting in residual value falls, as buyers opt for a cut-price new car as an alternative to a nearly-new or ex-company car.

The new car market forecast comes from HSBC Bank and, if realised it would send new car sales soaring past the record 2,300,944 units sold in 1989.

Mark Berrisford-Smith, senior economist in the business economics unit at HSBC Bank, said: "The motor trade is emerging from a long period of uncertainty brought about by the inquiry into new car prices. "While the economy as a whole has enjoyed a lively revival during the past 18 months, the new car market has been stuck fast in the mud, as potential buyers have held off in the expectation that prices would eventually come down."

However, last month saw private buyers begin to move back into the new car buying market and Berrisford-Smith said that trend should be sustained so long as manufacturers do not try and reverse recent price cuts and customers do not form unrealistic expectations on the basis of inappropriate price comparisons with some continental countries where the tax regimes are markedly different.

He said: "We expect the overall new car market to grow by a healthy 5% in 2001. This would take new registrations to 2.33m, just ahead of 1989's all-time record."

However, the Society of Motor Manufacturers and Traders takes a more conservative view, predicting a 2,225,000 market.

Head of policy and economics Paul Everitt said: "We always take a cautious vie. There is a degree of pent-up demand and the market is always a bit of a roller-coaster and we oud see a 2.3 or 2.4m market." This article originally appeared in Fleet News. Its website is at www.automotive.co.uk