The government must extend its scrappage scheme incentive to avoid the risk of undermining recovery in the UK’s manufacturing industry, according to EEF, the manufacturers’ organisation.
In a letter to chancellor Alistair Darling, EEF warned that future consumer levels of spending for motor vehicles may decline without industry and government support to replace older vehicles with new models.
It claims that the current scheme, through which consumers receive a £2,000 discount on a new car when trading in a car older than 10 years, has successfully slowed the decline in production while helping to secure jobs both in the industry and its supply chain.
However, the organisation said that any further decline in the output of the automotive sector will have serious consequences for a recovery in manufacturing with the effects compounded by an expected deterioration of the UK aerospace and defence industry in 2010.
Steve Radley, director of policy at EEF, said: ‘The success of the scrappage scheme has been clear for all to see and has put a floor under manufacturing recession and helped retain skilled employees. However, it is by no means certain that this positive trend will continue in the near future with consumer confidence still fragile and unemployment still rising.
‘Failure to extend the scheme before a stronger recovery is in place runs the risk of pulling the rug from under the automotive sector, damaging key supply chains and prospects for a better balanced economy in the upturn.’EEF’s views have been supported by a number of other industry trade bodies. The Society of Motor Manufacturers and Traders (SMMT) recently raised concerns that the fund would run out by the end of October 2009 and asked the government to extend the scrappage scheme until February 2010.