The UK’s auto industry trade association, the Society of Motor Manufacturers and Traders (SMMT), has said it supports the substantial, but temporary, economic stimulus package announced in yesterday’s ‘pre-Budget report’. It says it provides positive incentives for consumers to begin spending, but ‘will need to be accompanied by a more active approach to lending by banks and financial institutions’.

Commenting on the report, Paul Everitt, SMMT chief executive said, “The chancellor has made a positive first step to help restore consumer confidence and kick-start responsible spending. We now need to see action to remove the constraints on credit and finance so consumers and businesses can take advantage of the changes announced today.”
 “The 2.5% cut in VAT combined with the recent cuts in interest rates will encourage consumer spending, impacting on both the new and used vehicle markets. Any move to boost responsible spending is welcome but specific action to improve the affordability and accessibility of credit is needed if the vehicle market is really going to benefit,” he said.
And he also welcomed the postponement of VED (annual ‘road tax’) rises.
SMMT also reiterated its call for government to implement a package of measures to bridge short-term cash flow problems created by the banking crisis.
“The motor industry faces a set of unprecedented market conditions. The dramatic fall in demand for new vehicles around the world, combined with the limited availability of funding and liquidity now puts at risk valuable industrial capability. Urgent action is required to boost demand for new vehicles and ease pressure on UK automotive suppliers,” said Paul Everitt.

Senior executives representing the UK automotive sector from component manufacturers, through vehicle producers and the retail network will meet the secretary of state for business, Lord Mandelson, on Thursday 27 November.

The automotive sector is calling for support measures to include:

  • Allowing manufacturers’ finance companies access to the funding available to banks through the special liquidity arrangements. This would allow them to support customers and their franchise networks.

  • Scrapping plans for increased VED and new first year rate. This would provide a strong signal to buyers and help to improve residual values.

  • Increased capital allowances for fleet buyers, particularly for buyers of commercial vehicles, to stimulate immediate demand.

  • Shelve plans for reform of business car capital allowances, as overall impact and timing is unhelpful.

  • Remove expensive car restrictions under capital allowances to help demand for UK higher end manufacturers.

And, manufacturing support to include:

  • UK support for the European Investment Bank’s (EIB) proposed €40bn automotive industry loan package so UK companies throughout the supply chain can support their operations and continue to invest during the economic downturn.

  • National arrangements to allow manufacturers and suppliers access to loan facilities, including potential government guarantees, to maintain liquidity and investment.

  • Help to speed up the allocation of existing funding to support training, R&D projects and energy efficiency measures. This would help upskill employees, accelerate innovation and provide an immediate stimulus for green collar jobs.

The retailers’ body, the Retail Motor Industry Federation (RMIF), also gave the pre-Budget statement a cautious welcome.
“The reduction in VAT means that car prices will fall, and could encourage consumers to return to showrooms. The VAT drop will also have an impact on the prices of thousands of other consumer goods and services, leaving cash-strapped households with more money to spend. This will help to restore consumer confidence, which is key to the revival of the overall economy,” said RMIF Director Sue Robinson

However, freight hauliers weren’t happy.
The Road Haulage Association said it was both bitterly disappointed and angry that despite putting forward a strong case for UK hauliers that seemingly received a sympathetic response from Government, there was an increase in fuel duty to compensate for the VAT reduction by 2.5 per cent.
“This is an outrageous announcement”, said RHA Chief Executive Roger King.  “We have been putting forward the case of unfair competition from foreign hauliers for many years.  Indeed the Transport Select Committee itself made a case for measures to level the playing field between UK hauliers and their continental counterparts.  Therefore this announcement represents not only a smack in the teeth for UK hauliers, but challenges the conclusion of Westminster’s own Select Committee.
“The Chancellor claims that the increase in duty is offset by a reduction in VAT.  But he does not seem to appreciate that while this may be true for motorists, it is NOT true for hauliers because they can reclaim VAT in full. So this represents a real increase in the industry’s operational costs and is not what we expected or what UK plc deserved.”

RHA National Chairman Andy Boyle added: “I am absolutely livid at this announcement. If things were not bad enough, it now seems that we have a Chancellor who does not understand his own tax system.”