Shares in British car dealer groups Pendragon, Lookers and Inchcape have risen by as much as 40% as it looks increasingly like the UK government will introduce an old car scrappage incentive scheme in its annual budget statement later this month.


News that all three groups were moving towards a more financially secure footing also helped share values, Reuters reported.


The government finally admitted last Saturday it was ‘considering’ a scheme under which cars more than nine years old could be scrapped in return for a GBP2,000 pound (US$2,945) discount on a new car. A similar EUR2,500 scheme boosted new car registrations 40% year on year in Germany last month and similar successes have been reported in other countries including France and Slovakia.


Auto industry groups such as the Society of Motor Manufacturers and Traders (SMMT) and Retail Motor Industry Federation (RMIF) have been pressuring the UK government to launch a scrappage incentive scheme for months.


“The most likely thing is that the government at long last has decided to do something about the scrapping policy,” Edison Investment Research analyst Nigel Harrison told the news agency, explaining the surge in the car dealers’ shares.

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Inchcape, which operates car importing, distribution and retail dealerships globally, has led the way, helped by an upgrade from Morgan Stanley in the wake of a rights issue to strengthen its balance sheet, Reuters said.


Arden Partners’ analyst Tim Richmond said Pendragon’s and Lookers’ battered shares were also getting a lift from recent refinancing deals by highly-leveraged companies like house builder Taylor Wimpey.


“It seems as though the banks…aren’t going to pull the plug on some of these highly geared companies,” he said.


Both Pendragon and Lookers reportedly are in talks with lenders over their financing arrangements.