Car scrappage scheme would quickly benefit UK economy, says GlobalData

Following reports that a scrappage scheme to boost UK vehicle sales is now unlikely;

Calum MacRae, Automotive Analyst at GlobalData, a leading data and analytics company, offers his views:

“Just a few days ago, it seemed that a £6,000 new car purchase incentive scheme was close to being signed-off, but it looks like the Treasury is now considering a wider-ranging fiscal stimulus package that will forego specific incentives for the automotive sector.

“The reasoning is that a scrappage scheme focusing on electric vehicles would stand to serve overseas vehicle manufacturers far more than it would the UK’s domestic manufacturers. While there is some merit in this argument, it ignores Nissan’s long-term presence in the electric car market with the Leaf and Toyota’s extensive focus on hybrid vehicles.

“Furthermore, the viewpoint ignores the fact that the automotive sector is a highly efficient part of the economy to inject fiscal stimulus due to its high gearing. In other words, money spent in the automotive sector winds its way to other parts of the economy quicker and with less friction than if spent elsewhere due to the sector’s multifarious indirect benefits. It’s also relatively straightforward to institute as has been proven in the past.

“The latest reports introduce more uncertainty into the economy and the car market. Consumer confidence is already severely eroded and fragile. “GlobalData’s 2020 forecast for light vehicle sales in the UK of 1.88 million – a 29.9% fall on 2019 is predicated on some form of sector stimulus being introduced in the second half of the year. If no such stimulus is introduced it’s hard to see the UK market recovering much beyond the 51% fall in the market recorded year-to-date.”

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