Scrap scheme may be extended

The UK scrap scheme may be extended after a formal request was made by the Society of Motor Manufacturers and Traders (SMMT) to the Government. The car industry trade body will meet with Business Secretary Lord Mandelson today (Friday 18th September 2009) to convince him that an abrupt end to the scheme will damage car sales.

Industry confidence received a welcome boost in August when a six percent rise in sales was reported, ceasing a freefall that had lasted over 15 months. Total new car sales are still 21.5 percent lower than they were in 2008, but the SMMT and a number of manufacturers believe an end to the scheme will see sales drop off a cliff. As such, some are proposing a 'soft' end to the scheme, in which the amount of discount offered is reduced from its current £2,000 level.

In addition, VAT is set to rise back to 17.5 percent in January, which the SMMT believes will divert even more people away from showrooms. Officially the Government has "no plans to extend the scheme" after the £300m pot runs out - expected to be in October - although the fact Lord Mandelson is meeting industry figures today will give some makers hope. Some perceive an extension as a 'no lose' proposition for the Government in any event, because it comfortably makes back its £1,000 half of the discount in VAT payments on the car sale.

The German scrap scheme has just ended, though it's too early to know the effect it will have. On the other hand, France has just extended its scheme.

Mark Nichol