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Why scrappage incentives are wrong

Thursday, November 05 2009 :: Keywords: scrappage

Former Trend Tracker analyst and now business academic Dr.Michael Wynn-Williams has contributed our latest white paper, Scrappage by Numbers, explaining why importers have been almost alone in benefiting from the taxpayer's investment in resuscitating employment in UK car production. And sad to say, although we like to be right, two reports from the BBC noted by Trend Tracker's Chris Oakham confirm his argument:

On 5th November a BBC online news item entitled "Scrappage sees UK car sales surge" reported that new car sales had recorded their biggest increase so far this year in October, helped by the scrappage scheme. "Encouragingly, there has also been an increase in demand in the fleet and business sectors, which will be critical in sustaining recovery next year," the BBC reported SMMT chief executive Paul Everitt saying.

On 11th November, another BBC online news story reported, "UK trade gap widens in September". The UK trade deficit widened more than expected in September, it said, led by a jump in car imports as Britain's scrappage scheme helped foreign carmakers. The difference between what the UK exports and what it imports was £7.2bn in September, well above analyst expectations of a £6.1bn deficit. September's overall trade deficit was the biggest since January.

Who'd have thought that one might cause the other?

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