Sustained government support necessary to safeguard motor industry recovery

07 December 2009 #SMMT News

Government must deliver on its current support measures and not increase the fiscal or regulatory burden on businesses if the UK motor industry is to sustain recovery.  This message was delivered in a letter to chancellor Alistair Darling ahead of the 2009 Pre-Budget Report (9 December) by the Society of Motor Manufacturers and Traders (SMMT), on behalf of the industry.

To allow the UK motor industry to recover and plan with confidence for the medium- and long-term, SMMT is calling for a sustained and strategic approach to recovery from government:
Maintaining private market demand
The success of the Scrappage Incentive Scheme has been crucial to stimulating private demand throughout the second half of 2009.  It is vital that government does not impose measures that could deter private purchases at this critical time.  The SMMT calls for government to:
·         Maintain the reduced 15% VAT rate into 2010 and phase-in gradually any increase to avoid a sharp fall in consumer demand.
·         Defer the third stage of increases to DVLA first vehicle registration fees.
·         Remove the 3% diesel car penalty in the company car Benefit In Kind calculation.
Taking steps to support business
Government must reduce financial and legislative burdens to help generate demand, especially for premium vehicles and in the hard hit commercial vehicle market.  Government should:
·         Encourage commercial vehicle purchases by maintaining and increasing the enhanced writing-down allowance to 60%.
·         Reconsider lifting the expensive car cap (£80,000) in the company car tax regime to remove the stigmatising effect on UK premium products during these difficult market conditions.
·         Make an exceptional enhancement to the Annual Investment Allowance, increasing it to £500,000.
Securing future growth opportunities
The UK has the potential to become a global leader in the development of and demand for ultra-low carbon vehicles.  Government must show that the UK is an attractive option for inward investment by global automotive companies through promoting business confidence and its support for new technologies.  Government should:
·         Speed up the release of funds from the Automotive Assistance Programme.
·         Prioritise funding for the research, development and demonstration of technologies required to deliver future low carbon vehicles.
·         Maintain a consistent policy in support of alternative technologies and infrastructures being developed as part of low carbon vehicle strategies.
·         Continue consistent and durable incentive programmes for biofuels, ultra-low carbon vehicles and their associated infrastructures.  In particular, government should urgently reconsider the removal of the 20ppl duty incentive for biofuels scheduled for April 2010 and consider enhanced capital allowances for ultra-low carbon commercial vehicles.
“The Pre-Budget Report provides an important opportunity to sustain the recovery and support the longer-term competitiveness of the UK motor industry,” said SMMT chief executive Paul Everitt.
“It is essential that existing support schemes begin to deliver more quickly and help to encourage investment in R&D, skills and productivity. Measures that help to signal a long-term commitment to manufacturing and help to stimulate key parts of the market will boost business confidence and the attractiveness of the UK to inward investors,” he continued.
Government’s commitment to create an Automotive Council and its endorsement of recommendations made by the New Automotive Innovation and Growth Team (NAIGT), demonstrates a desire to support the industry over the long term.  However, this initial support must be backed-up by immediate actions to ensure future success for the sector.
Prior to Budget 2009, SMMT encouraged government to adopt a Scrappage Incentive Scheme (SIS) to stimulate demand in the recession-hit new car market.  Following the SIS introduction and its overwhelming success, SMMT made the case for an extension to the scheme, resulting in an additional £100m being added to the initial £300m.
SMMT is also working with government to ensure businesses receive appropriate financial assistance.  This could come in the form of assisting with access to credit, cash flow management, trade credit insurance and tax payment rescheduling.

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