Insolvencies could climb
as support gets sparse. Fred Crawley reports.
Go deeper with GlobalData
Finance provision will be a
crucial factor in keeping dealers afloat during what is looking to
be an extremely tough quarter for the UK automotive industry, says
business restructure and insolvency specialist Begbies Traynor
(BT).
BT regional managing partner
for the Midlands John Kelly said the scrappage scheme had kept a
lot of dealers, manufacturers and parts suppliers in business
during 2009, but industry support was looking sparse for
2011.
Research by BT released last
month showed the UK automotive sector stands alone as the only area
of British business in which the number of companies facing
“significant or critical” problems increased between the second and
third quarters.
According to the figures,
3,352 companies in the sector were found to be in distress,
compared to 3,007 in the second quarter of 2010, meaning the auto
sector is underperforming even in relation to other famously
troubled sectors such as print.
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By GlobalDataWhile the third-quarter
figures still represent a 15 percent fall compared to 3,922 in the
same period last year, BT feels “the impact of the ending of the
scrappage scheme and a downturn in consumer confidence are showing
themselves all too clearly.”
According to Kelly, companies
supplying parts to auto manufacturers are those taking the biggest
hit at present, and are showing the greatest proportional increase
in insolvencies and distress.
Particularly affected are the
subcontracted parts makers contracted to supply parts to “tier one”
firms making larger components.
These parts makers, Kelly
said, were losing large numbers of orders as the first-tier
suppliers were starting to take a lot of work in-house to increase
efficiency levels.
In terms of motor retail,
Kelly advised the industry to expect “greater levels of
consolidation” as margins become tighter for smaller dealers, and
greater manufacturer involvement in the industry through franchise
operations.
This will include continued
growth for manufacturer-owned finance companies in the point of
sale market, as captive finance has become “inextricably linked”
with the survival of dealerships.
“Dealers without manufacturer finance relationships will
find it increasingly difficult to survive,” Kelly said.
