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Red tape takes toll on UK auto industry

The motor industry has managed to pull itself back from the high levels of insolvency recorded in 2004, despite more limited businesses in the UK failing in the first quarter of 2005 than in the same period last year.

Research from Experian, the global information solutions company, has revealed that red tape, lower consumer spending and higher costs have taken their toll on UK businesses.

However, and despite the drop in sales since the start of the year, the motor industry has shown a 12% decline in the number of business failures in the first three months of the year. Last year, 61 businesses collapsed in the first quarter, but this year saw the figure dropped to 54 business failures.

Experian found that, in total, 4,168 companies failed during the first quarter of 2005, compared with 4,092 in the first quarter of 2004. This represents an increase of 1.9%.

Rob Whalley, managing director of Experian’s Automotive division, says: “The motor industry is a highly competitive sector and has had to cope recently with an overall lower level of sales.

“However, the majority of used car dealers have still managed to either grow or maintain sales during the first quarter of the year compared to the same period in 2004. This could be due in part to the fact that nearly new cars (one year old) and used cars have dropped in value.

“The new car market has been hit hardest by the drop in sales, but the rate at which prices were rising has slowed down, compared to previous years. It indicates that vehicle manufacturers are responding to the recent fall in consumer demand for new cars.”

Despite the positive picture among dealers, an 83% increase in business failures was recorded in the servicing and repair sector. Eleven businesses collapsed in the first three months of this year compared to six in the same period last year. This is despite sales volumes remaining strong in this sector.

Whalley says: “Whilst sales have been flagging, the industry has found ways to keep its head above water. However, despite the decrease in business failures, the motor industry is still facing the same threats of lower consumer confidence and spending and needs to be vigilant in order to safeguard its future.

“The motor industry can continue to buck this trend if they ensure best practice and continue to look for more effective ways of marketing and selling their products and services.”

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