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EMERGENCY BUDGET: Industry response

Inudstry comment on the Emergency Budget which was delivered by chancellor George Osborne today:

The Retail Motor Industry Federation expressed concerns over the rise in VAT to 20% but was pleased dealers would have the second half of the year before the new rate is introduced.

Sue Robinson, RMI director, said: "The RMI is pleased the rise in VAT is to be deferred until January 4, 2011, this will produce a short term stimulus in sales, with buyers bringing forward purchases, which presents an opportunity for consumers and dealers to beat the rise by purchasing or selling over the coming months.

"However, today’s announcement will, in the longer term, damage the recovery and dent consumer confidence. The retail motor industry is only just emerging from one of the most difficult periods in recent times and to increase the VAT rate does nothing to help either the consumer or the retail motor sector. Car buying patterns reflect the state of the economy and business will be forced to pass on the VAT increase to the consumer.

"Today’s increase will raise the cost of the average family car by approx £375 (£15k car)."

Neville Briggs, managing director, Pinewood, said: “The VAT rise, while not unexpected, is very much the headline here. It will undoubtedly have an effect on both consumer and business confidence – the question is by how much and to what degree will new and used car sales and aftersales be affected?

"There is a strong possibility that an onus will be placed on dealers and manufacturers to, as much as possible, not pass on all the increase to either fleet or retail customers. This will only be achieved by revisiting the cost controls that have been put in place since the start of the recession and looking for new savings while maximising opportunities for profits. We believe that technology will have a key part to play in this and will be working closely with our customers in the coming months to help them identify areas where further reductions can be achieved and new business opportunities exploited.”

Business measures

Robinson said the reduction in the small business rate to 20% would encourage enterprise.

She said: "Furthermore, the gradual reduction of the main rate of corporation tax over the next four years will act as a welcome stimulus for business.

"However, we are disappointed that the chancellor has chosen to reduce the annual investment allowances for capital investment to £25,000 per annum. This will dissuade businesses from making large capital investments, such as replacing heavy truck fleets.”

Insurance premium tax

The RMI was dissappointed with the increase in insurance premium tax.

Robinson said: "With one in 10 of the cars on the road uninsured, this additional rise will inevitably lead to an increase in the number of drivers flouting the law as it will increase the cost of insuring a vehicle."


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