Recovery to UK economy and auto industry fragile

UK: Recovery to UK economy and auto industry fragile - academic

Author: Dave Leggett | 28 January 2010

A leading British academic has warned that the economic downturn impacting Britain's car industry is 'deeper and longer' than the recession of the early 1980s and that a shallow recovery is in prospect.

Professor Garel Rhys - a respected academic from Cardiff Business School - told just-auto that while the UK's unemployment statistics may not be as bad as had been expected, they hide cuts to incomes and the cost of labour.

Speaking at a lunch in London yesterday hosted by UK-based PR firm Automotive PR, Rhys maintained that the current position of the UK economy is extremely weak, that there is a danger of a 'double-dip' and that the UK car market faces a volume squeeze in 2010.

"The unemployment numbers are not quite what they seem," he said. "Incomes have been falling and people are staying in employment by earning less. Indeed, the overall prognosis for the UK economy is far from strong, as it claws its way up from a very low base. It wouldn't take much to damage fragile confidence.

"Higher taxes would do it - and the big worry for the UK economy historically has been unemployment, and that is still a major concern. There remains a real risk that rising unemployment could derail this economic recovery. This recession and the shallow upturn already makes this economic downturn deeper and longer than that of the early-1980s."

Rhys also warned that the UK car market faces specific concerns.

"There is the double-whammy of the increase to VAT and the ending of the scrappage scheme."

Rhys forecasts that the UK car market will fall around 10% to 1.8m units this year, with a slow recovery thereafter: 2011: 1.9m; 2012: 2.3m; 2013: 2.4m.

He also sees the trend in UK commercial vehicle production figures as illustrative of the underlying current weakness of the British economy.

"Just 96,000 commercial vehicles were built in Britain last year," he says. "That total was the lowest since 1938."

Sectors: Commercial vehicles, Vehicle manufacturing, Vehicle markets