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UK car scrappage scheme comes under fire

In what could be a body blow for the UK government it has been revealed that the U.K.'s largest car dealership, Pendragon, has dismissed the scrappage scheme as "irrelevant". It is interesting to see that despite initial indications of a £5000 offset towards a new car, the figure has fallen to around £1000 for the vast majority of cars to be scrapped in the UK. However, even this may be too much for car retailers to match as margins fall and business is still very tough.

Under the UK scheme, car retailers will be forced to match the scrappage allowance being offered even though many are now dealing at rock bottom prices in order to keep cash flow positive. There is little, if any, scope for further reductions in the short to medium term as both second-hand and new car prices in the UK continue to come under pressure. It is also worth remembering that other European governments have been offering significantly higher scrappage incentives which were entirely funded by the government, with no matching obligation from retailers. The UK deal, as good as it may be on paper, requires the participation of car retailers across the UK even though many are on the brink of collapse.

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