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Automotive business insolvency drops

The amount of automotive businesses that went out of businesses in the UK has dropped by 6.1% in the first quarter of this year.

This bucks the trend in the UK, with total businesses that have failed rising by 8.5% in total.

The figures come from Experian, the information services company, which is warning dealers not to become complacent despite the positive trend.

Kirk Fletcher, managing director of Experian’s Automotive division, said: “With the current climate of cautious spending and aggressive competition, the general feeling has been that that the insolvency figures for the automotive industry were not going to look good.

“However, this is the second year the number of business failures recorded for the automotive industry fell during quarter one, suggesting a positive start to the year.”

Fletcher said contrasting feedback from dealers has been that the last few months have been particularly tough.

He said: “Dealers will have to work harder to pull in the customers who are spending cautiously. Smaller dealers are feeling the trading conditions the hardest, while the bigger groups are keeping their heads above water and avoiding big buyouts, focusing instead on smaller, single site buyouts, which could account in part for the fall in dealers failing.”

Fletcher said it was important to remember that during 2006, the automotive industry saw the biggest increase in failures since Experian first started collating the information in 1997, so it’s not surprising the following years are seeing an increase.

The latest insolvency report shows 62 automotive business failures during quarter one, compared to 66 during quarter one 2007.

The automotive industry was amongst 19 of the 34 sectors that saw a decline in business failures during January, February and March.

Fletcher added: “While these figures are positive, we must not lose sight of the very real hurdles still to overcome. New car sales fell during quarter one and used car sales, which had been falling throughout 2007, are likely to follow suit.

“There is little sign that the current squeeze on spending and lack of consumer confidence will ease up anytime soon and the recovery over the last two years could quite easily be cancelled out by the rise in fuel duty and as well as the imminent increase in car tax.”

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