Committee calls for easier access to funding for motor industry

The latest Business and Enterprise Select Committee Inquiry has recommended that the Government needs to do more to support the UK car industry.

The inquiry assessed the affects which measures taken to support the car industry have been effective. This includes the scrappage scheme and the Automotive Assistance Programme (AAP) launched on 27 January 2009, designed to support the industry through the economic crisis.

The Society of Motor Manufacturers and Traders (SMMT) has backed the findings of the Committee inquiry that expresses ‘serious concern’ about the effectiveness of the AAP. The programme announced in January 2009 set out £2.3bn in loans and loan guarantees for the motor industry, yet to date no companies have benefited from the scheme. SMMT has called for greater flexibility in AAP eligibility to ensure quicker delivery of credit to companies throughout the automotive sector.

“There is an urgent need for the Automotive Assistance Programme to start delivering the support the UK motor industry needs”, said SMMT chief executive, Paul Everitt. “The availability of affordable finance and credit remains the number one priority for companies at all levels of the supply chain. It is essential that a more flexible approach is adopted so that viable businesses can access the working capital they need in the short term and support investment in future technologies for the long term.

“Industry remains concerned that the reluctance of banks to provide direct support to the automotive sector is limiting the effectiveness of the programme and its benefit to companies in the supply chain.”

In giving evidence to the inquiry on the AAP, SMMT identified the following key issues; that banks remain reluctant to lend to the automotive sector , the majority of companies need access to working capital above project finance and that the removal of trade credit insurance has further undermined the banks’ attitude to risk in the automotive sector .

Commenting on the Committee report on Government, Stephen Sklaroff, Director General of the Finance & Leasing Association welcomed the Committee’s recognition of the importance of the motor finance sector to the overall health of the UK car industry. He said:“Access to well-priced wholesale funding is still a problem for many motor finance providers and that means they may become unable to meet customer demand for car finance. We have been discussing the issue with the Department for Business since November 2008. We now need practical action on schemes to help improve the availability and affordability of funding.”

“It was refreshing to see that the House of Commons Business and Enterprise Committee’s Report on the Automotive Industry recognised the significance of the motor retail sector, and the part it plays in providing the conduit through which vehicles are sold, and the servicing back-up it provides to millions of UK motorists,” said Paul Williams, Chairman of the Retail Motor Industry Federation (RMIF), the trade association UK motor sector.

Adding: “It must be remembered that the annual turnover of the UK retail motor industry is £14 billion, and it employs 570,000 people in 70,000 businesses.

“The introduction of the vehicle scrappage scheme has provided a boost to the sector at a critical time, and this is recognized in the report. However a long-term view is required, and the RMIF will continue to lobby for measures that enable the continued growth of an efficient and productive motor retail sector.”

Author: Faye Sunderland, July 17, 2009
Filed under: FLA,Fleet news,SMMT