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April 20, 2010

ANALYSIS: UK industry optimism grows – but no room for complacency

With every passing week there is growing optimism that the UK automotive sector is emerging from the recession, but there is no room for complacency, leading economist Professor Garel Rhys told delegates at the Sunderland International Automotive Conference today (April 20).

With every passing week there is growing optimism that the UK automotive sector is emerging from the recession, but there is no room for complacency, leading economist Professor Garel Rhys told delegates at the Sunderland International Automotive Conference today (April 20).

Professor Rhys, of Cardiff Business School, told 140 delegates at the Stadium of Light that the most recent production figures from UK factories were better than estimates but the market remained fragile.

He said the European wide incentive programmes to scrap older cars and replace them with new low carbon emission models had accelerated some demand by bringing forward sales, changed buying patterns as motorists switched models and meant sales have improved overall.

Prof Rhys added that it could be two years before the true market demand situation was realised after all the variables had been taken out of the sales figures.

“From the summer of 2008 a real economic crisis hit the car industry and in the UK it was the worst since World War 2. It really has been a very dreadful recession but now the industry worldwide is coming out of it slowly,” he said.

“What we must hope for is that there is no double-dip but with each passing week the probability of a double-dip is receding although I think it is too early to say we are over the problems.” Prof Rhys said the UK scrappage scheme had done little to help the UK automotive sector but helped keep car workers employed in foreign plants supplying cars to the UK, the dealer network, finance and insurance sectors. What happened abroad was more important to the UK automotive sector, he told delegates, as the UK was a major exporter of components and its success relied on strong demand for cars and vehicles abroad. Prof Rhys said that over the next 20 years around the world, more vehicles will be made than in the last 110 years due largely to the growth of demand in China and India, which are at last beginning to take off after years of promise.

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