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Insolvencies at an industry high

The number of motor traders going bust in 2005 was the highest since 2001, at 260 businesses, a rise of 7.9% compared to 2004.

This occurred despite a promising end to the year when insolvency fell by 1.6% between October and December compared to the same period in 2004.

The number of failures amongst motor traders in 2001 was 250. The number had started to fall during 2002 and 2003, but rose sharply in 2004 and is likely to continue into 2006, according to Experian, the global information solutions company.

The results are part of Experian’s survey of 34 industries in the UK, which revealed that 2005 has been a difficult year for the economy as corporate failures throughout these industries rose by 11%, despite having fallen in the previous two years. It is the highest number of corporate failures recorded across the UK since 2002 and Experian has predicted an upward trend in 2006.

Rob Whalley, managing director of Experian's automotive division, said: "The automotive industry has been affected by a slowdown in consumer spending and by inflation. New car sales saw a 5% drop in 2005 and forecasters are predicting a further 2.5-5% drop in 2006. Coupled with manufacturers’ targets remaining high and more new models than ever before being launched, supply will continue to outweigh demand.

“The effect of this is that residual values will continue to fall, so the ability to make a profit will become even more important – and difficult – in 2006. Those dealers who understand their customers and use new and innovative methods to reach them will help to prevent them from appearing on the list of business failures in 2006.”

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