Autocar magazine claims that UK price cuts, faltering exchange rates and worries over dealer quality are strangling the new car ‘parallel import’ trade. Dozens of companies have already gone out of business and more are likely to go bankrupt as the tide changes.

Imports accounted for 123,000 new car registrations during 2001-02 – but this year the figure is forecast to be 57,000 or lower as customers return to their local and trusted UK dealer.

Britain’s car purchase tax is among the lowest in Europe: VAT 17.5% and a first registration fee of £25 in contrast to Denmark where customers pay an astonishing 105% tax on new cars – plus VAT.

“It’s good news for the UK dealer network to see customers back in their showrooms. 2003 is forecast to be the second highest sales year on record with 2.5 million registrations, so it’s even better news for buyers who can get the cars they want, at a price they are happy with from the dealer they know and trust,” said Autocar editor Steve Sutcliffe.

The historically high cost of buying a car in the UK began to tumble in 2000 after consumers campaigned for prices to be aligned with their European neighbours.

As the campaign gathered momentum, thousands of Britons took advantage of the considerable savings abroad by buying their new, right-hand-drive cars through an import company – shunning the UK dealer network.

Centre for Economics and Business Research chief executive, Douglas McWilliams, said: “The margin to make money on imports is now tiny.”

Those import companies still in business are now having to act as brokers sourcing their stock from UK suppliers.

A Virgin Cars spokeswoman said: “When we started in 2000 everything we sold was imported. Now that the exchange rate has collapsed, 80% of our business is UK-sourced. The only savings on imports are on Mercedes and Audis costing over £40,000.”

There is however one sector of imports that are continuing to  buck the trend – 40,000 ‘grey imports’ are forecast to reach UK shores during 2003. Grey imports are non-European vehicles mainly from Japan, the most popular models being high-performance saloons and luxury SUVs.