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The UK Car Market

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Political - Amendments to the European Union’ s "block exemption", which came into effect in late 2002, have exerted downward pressure on prices by allowing dealers to sell multiple makes and foreign dealers to advertise their prices in the UK. However, restrictive practices between car manufacturers and dealers may be difficult to eliminate altogether. The block exemption regulation is intended to give dealers greater independence from carmakers, promote inter-brand competition, encourage harmonization of prices across the European Union and thus ensure consumers get a much better deal. The location clause essentially prevents dealers from expanding outside their territories, but any dealer selling passenger cars and commercial vehicles and who meet the manufacturer's standards will be able to set up secondary sales and delivery outlets anywhere within the EU, Norway, Iceland, and Liechtenstein.

With this new legislation, British dealers sold an average of 444 new cars in 2004 reflecting the fact the market has already consolidated. However, this “ block exemption” could be detrimental to small-time car manufacturers. This is because this legislation will benefit only large companies already operating on an international basis have the resources to expand across borders (Just-auto. com, 16 Aug 2005). Economic – According to Euromonitor International (18 August 2006), the British economy grew by 1.8% in 2005.

In 2006, growth should be 2.5% while forecasts for 2007 call for growth of 2.7%. Inflation was 2.1% in 2005 and will be about 1.9% in 2006. Forecasts call for prices to rise by 1.9% in 2007. The economy rebounded strongly in 2006 after a disappointing showing in 2005. The slowdown was primarily due to poor performance in the manufacturing sector.

The pace of growth in private consumption also slowed due to a weaker housing market. However, most economists agree that the economy will turn in a much better result in 2006, probably beating the IMF growth forecast of 2.5%.

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