The motor industry lost £2.6 billion in revenue last year as a result of declining car sales, according to analysis by AA Cars.

Data from the Society of Motor Manufacturers and Traders (SMMT) shows registrations of new cars fell 5.7% in 2017, from 2,692,786 to 2,540,617.

Further research by AA Cars has explored the key reasons underpinning this decline in new car sales and 31% of respondents stated rising living costs for the reason they didn’t buy a new car in 2017.

The poll also revealed that 13% of drivers believed the key cause for the downturn in new car sales was due to mixed messages from the government.

Seven years of government austerity measures were thought to be the top reason for the drop off in new car registrations by 12% of motorists, while one in 10 named Government policy on diesel vehicles as the key cause.

Other factors highlighted by drivers were higher fuel and insurance costs (8%), Brexit uncertainty (6%), the proposed ban on the sale of new petrol and diesel cars from 2040 (4%) and concerns about new cars depreciating quickly (3%).

Simon Benson, director of motoring services at AA Cars, said: “We know that new car sales had been in decline for much of 2017, but to find that this has cost the industry, consumers and the economy somewhere in the region of £2.6 billion is disappointing and reflects the full impact of this downturn.

“With drivers suggesting all manner of reasons for the downturn in sales, this research just goes to show just how confused the new car market has become.

“The government must act soon to ensure this trend doesn’t continue throughout 2018. With widespread uncertainty rocking the new car market at a time when consumer spending is particularly squeezed, drivers need reassurance about their purchasing decisions.”