Spending on cars is key to economy

Spending by car buyers and the motor industry is key to economic recovery and both should be supported and encouraged by the Government, according to a new report by the Centre for Economic and Business Research.

The report says car buyers, as well as business, need easier access to cheaper finance to secure sustainable growth in the UK.

Commissioned by the Society of Motor Manufacturers and Traders (SMMT), the CEBR study also says research and development spend is too low compared with other leading markets. This is despite the role that Nissan's plant in Sunderland will play with the battery technology with the all-electric Leaf.

It has called on the Government to encourage further investment by car manufacturers in the UK in a bid to secure a position at the heart of low-carbon vehicle technology development.

SMMT chief executive Paul Everitt told whatcar.com: 'We are not looking for a massive cash handout like the scrappage scheme here, but the Government needs to signal its support on what it knows is a part of the economic recovery.

'It has already moved from a position of laissez-faire to one of recognition that it has a part to play.'

In terms of finance, Everitt said there was a 'social contract' between tax payers and the Government over the ownership of banks like RBS.

'Perhaps they should make 50% less profit and look at ways of helping those on the fringes,' he said.

The SMMT will soon discover whether its report has had an impact on the Government because wide-ranging budgets cuts are to be detailed in the Comprehensive Spending Review next month.

Calls for cheaper, easier finance may also fall on deaf ears because recent new requirements for banks to have higher cash reserves could lead to financial institutions becoming even tighter with credit than they already are.

Credit history specialists Experian recently said that car finance fraud had hit its highest level in three years as buyers struggled to get accepted.

'Lending is far below the level needed for economic recovery,' said Everitt.

We hope to have a five-minute interview with Transport Secretary Philip Hammond tomorrow (Thursday, September 16) so we'll ask what his reaction to CEBR study is then.