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The UK Business Secretary Peter Mandelson is to meet with car makers on Wednesday to discuss how the government can help the industry deal with the downturn and plummeting car sales.
The Department of Business has declined to give details on the forthcoming discussions but Lord Mandelson has said one of the possible outcomes would be to give help to car finance companies to enable them more easily to offer loans to customers.
Sales of cars went into freefall in December, down 21.2 per cent and an early report indicates January has got off to a bad start, with registrations down 28 per cent.
So far the UK car industry has responded with job and manufacturing cuts.
Dealers are also suffering with administrations and reduced profits. According to research carried out for Motor Trader, the average UK dealer recorded a trading loss in 2008, the first loss in a decade.
Accountancy firm Trevor Jones/ASE, which carried out the research, is urging dealers to address cash flow difficulties as the market tightens.
“Cash management is crucial this year. It will save a number of dealers from going to the wall. It’s not loss of profit that makes businesses fail, it’s running out of cash,” he said.
He said 2009 would be very similar to the last six months of 2008 and an improvement should come in the first quarter of 2010.