Automotive insolvencies hit seven-year high

Insolvencies between January and June were up 10.7per cent, with 134 firms going bust. Experian's figures don't identify particular car trade sectors, but Trend Tracker director said that smaller used car dealers could be significant victims of the current economic turmoil.

“It's most likely to be independent used car dealers. The general attrition of small businesses just gets a nudge forward in times of stress. I reckon used car customer sales are very important with this,” said Proctor. He suggested that independent service garages could also be feeling the pinch as drivers delay or cut back on maintenance. “These latest figures reveal a worrying nose dive,” said Experian Automotive division managing director Kirk Fletcher. “The year began positively –with quarter one seeing a six per cent drop in insolvencies and both new car sales remaining fairly stable –there was hope the industry may manage to ride out the credit crunch for a few more months.” He now believed this optimism was misplaced. Toby Proctor said that second guessing the economic outlook was almost impossible, but he agreed with pundits who reckoned conditions would continue to be bad for the next eighteen months. “Credit is going to be tight and I think we haven't had all the bad news from the banks.” He said that the quantity of bad news could dent business confidence, and that vehicle sales haven't suffered the more-than 20 per cent drop suffered in the early 1990s. Kirk Fletcher believed that credit worthiness was an important element of survival for the vehicle sales sector. “Whilst generating sales is important, maintaining a good business credit score and a low risk profile will be factors that help dealers retain their business relationships and lines of credit,” he said. Experian surveyed some 34 businesses, and saw a near 20 per cent rise in overall insolvency levels. The automotive sector suffered the tenth highest second quarter rise in failures.