Would a scrappage subsidy help the UK motor industry?
As we move ever closer to this year's budget, on 22 April, there are high hopes that Alistair Darling, the Chancellor and Exchequer, will announce the much heralded car scrappage subsidy. Initially, as we have covered on a number of occasions, the scheme had been rumoured to pay up to £2000 per scrapped car aged 9 years and over if the owners replaced them with more efficient vehicles. However, over the last few days it has been announced that a potential £5000 subsidy could be made available for electronic cars and other "greener" vehicles. However, there are concerns that UK taxpayers could end up funding overseas car manufacturers as the UK imports a massive numbers of vehicles each year.
Even though the UK has a substantial car manufacturing sector, the vast majority of these cars are exported overseas and the vast majority of cars sold in the UK are imported from overseas. There are serious concerns that the scrappage subsidy could backfire substantially and see UK taxpayers bailing out overseas car manufacturers, leaving UK car manufacturers in a worse position.
This is all a very tricky balancing act for the UK government and while rumours persist about a number of issues surrounding the proposed car scrappage allowance, we have yet to see the fine print and any forecasts of the impact this may have on UK-based car manufacturers.
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