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Is the UK car industry masking problems elsewhere?

It is no secret that the UK government's car scrappage scheme has led to an enormous increase in business in the UK car market, but is this sustainable and is this rise masking other issues in the wider economy?

The fact that the UK government recently extended the car scrappage scheme, and would seem highly likely to extended again as we approach the election, should not go unnoticed by those looking at the UK economy. There is now a feeling that the momentum caused by the UK government's car scrappage scheme may well push the UK economy back into growth in the third quarter of 2009. However, what will happen when the UK car scrappage scheme finally ends in 2010?

There is deep concern that the UK government, which has received more in increased VAT payments that it has actually invested in the car scrappage scheme, is not willing or not able to invest significant funds in the long-term. Despite the fact the authorities have made it known there is £2.5 billion to spend on the UK car industry, only a tiny portion of this has been allocated so far. Whether the UK government is keeping its powder dry as we approach the election, with more potential "bribes" to be announced, or is in fact unable to fund significant investment, very much remains to be seen.

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