UK car retailers not yet out of recession

The majority of franchised motor dealers think the car retail sector will not emerge from the recession for up to two years, according to research by accountants Baker Tilly.

Retailers blame the slow emergence on the end of the scrappage scheme, higher VED on cars, the return of 17.5% VAT and the introduction of showroom tax. However, the bleak prediction comes despite the majority of dealers expecting to remain profitable this year.

Baker Tilly’s latest Franchised Dealer Retailing survey, conducted with key decision makers in franchised motor dealerships last month, gauged their current views and future predictions for the motor retail industry, with results including:

• 77 per cent think the industry won’t begin to pull out of recession until 2011 or 2012
• One in seven respondents (or their businesses) are looking to exit car retailing in the next two years
• Used cars continue to be vital for trading – despite 57 per cent of dealers saying used-car demand was declining

Post-scrappage scheme support proposed by car makers to their dealers has helped only a few. Almost three quarters said they had not received any support following the end of the scrappage scheme.

• 80 per cent of dealers expect to end the current financial year in profit
• 54 per cent think the new VED rates and showroom tax will negatively affect new car sales
• 34 per cent felt the removal of the scrappage scheme would reduce retail sales

Graham Bushby, Head of Motor, Baker Tilly Restructuring and Recovery, said:

“It has been a tough period of trading. Predicting just another two years before the end of the recession might be wishful thinking on the part of the motor dealer.

“The survey highlights that the positive effect of the scrappage scheme was only felt by 36 per cent of dealers, most likely reflecting that some car makers had budget priced models that sold well while other car makers simply did not have the right vehicles or stock to cash in on the scheme. Furthermore, the perceived lack of support from car makers following the end of the scrappage scheme has caused increased disappointment amongst dealers.

“As smaller dealers focus on used car sales over the next two years, I hope additional disappointment isn’t generated by false expectations for the end of the recession."