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Is the UK car industry relying too much on the scrappage scheme?

As new registrations in the car industry rose by a further 6% to just over 67,000 in August, mainly thanks to the UK government's car scrappage scheme, there are concerns that the industry is starting to depend too much on the scheme. It is forecast that by early next year the funds put aside by the UK government will have been exhausted and the scheme will ultimately end. So what will happen after the money runs out?

While the figures recently announced regarding the UK car industry are encouraging they are still but a fraction of the figures prior to the recession. Without question the car scrappage scheme has prompted many consumers to consider their vehicles and many have taken advantage of the potential £2000 discounts available on a new vehicle. However, unless we see a significant increase in the UK economy in the short to medium term there will be fewer buyers available to pick up the slack when the scheme ends.

In many ways this particular situation can be compared to the quantitative easing program currently ongoing in the UK economy. There are also concerns that once this particular program has ended there will be a fallback in economic activity which could push us into difficult territory.

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