Fresh calls for scrappage extension

Author: By David Prosser, Business Editor

In a letter to the Chancellor, Alistair Darling, the EEF, the manufacturers’ organisation, recommends the extension of the £300m scheme, in which motorists are given £2,000 of vouchers towards the cost of a new car when they trade in an older vehicle. The scheme is widely expected to end next month. The EEF says scrappage has saved Britain’s car industry from sliding into depression but warns that without further support any recovery is likely to be short-lived. “The success of the scrappage scheme has been clear for all to see and helped retain skilled employees,” said Steve Radley, the EEF’s director of policy.

“However, it is by no means certain this positive trend will continue with consumer confidence still fragile and unemployment still rising. Failure to extend the scheme before a stronger recovery is in place runs the risk of pulling the rug from under the automotive sector, damaging key supply chains and prospects for a better balanced economy in the upturn,” Mr Radley added.

While a relatively small number of UK manufacturing jobs are in car production, the associated supply chain employs tens of thousands of people. No UK car plant has shut down during this recession, but Jaguar warned last week it intends to close a West Midlands plant, and the future is uncertain for Vauxhall’s factories since the plants were sold by General Motors to Magna, the Canadian car-parts maker.

The only bright spot in last week’s figures from the Society of Motor Manufacturers and Traders was an increase in the number of cars produced for sale in the UK, where scrappage has raised demand.

David Raistrick, UK manufacturing leader at Deloitte, said the numbers added to the case for an extension of scrappage, which is a cheap initiative since extra car sales generate significant VAT receipts for the Treasury.

“This is the wrong time for the industry to lose the support of scrappage which has without doubt boosted car-registration figures and helped production figures,” Mr Raistrick said. “Any extension needs to be announced in the next week or two.”

Deloitte said the scheme should be extended until next June, with an additional £300m made available by the Government.

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