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UK Car Dealers Cannot Rely on Manufacturers Indefinitely

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UK Car Dealers Cannot Rely on Manufacturers Indefinitely

Dealer networks with high exposure to new cars on the forecourt may need to act now to protect cashflow

The UK new car market fell further in March, according to figures released by the Society of Motor Manufacturers and Traders (SMMT), with 474,069 new cars driven off forecourts in the month, a 15.7% decrease from 2017. According to the Restructuring Advisory practice of Duff & Phelps, the global advisor that protects, restores and maximises value for clients, the dramatic fall in sales was driven by a near total collapse in diesel sales, while petrol sales rose by 0.5% year on year.

Michael Bills, Managing Director in the Restructuring Advisory practice at Duff & Phelps, stated: “This March has presented the UK dealership sector with a real challenge, especially if those dealers have new stock irrespective of whether they are petrol or diesel. Year-to-date sales for new cars are down 15.7%, however, much of that fall can be attributed to bumper sales in March 2017, as drivers flooded to dealers to beat the then-new road tax system. But the devil is in the detail. Petrol sales are in fact up – albeit by 0.5% year-on-year, but it is diesel that is dragging the industry down, with a 37.2% fall in March sales, compared to a 23.5% fall in February.

According to the SMMT, March marked the 12th consecutive month of declining new car sales and the market was down 12.4% year-to-date. Last month was still the fourth biggest month on record for the industry, with a total of 562,337 cars sold.

“As with any business, cashflow is king and March has delivered a mixed picture for the industry. The bad weather – including the ‘Beast from the East’ – inevitably reduced footfall’s presence on dealer forecourts. Easter coming earlier this year did not help either as it tends to be a family-focused time of year, as opposed to car buying. Our view is that there will be some dealers with large numbers of new vehicles sitting on their stocking plans that will be due for payment unless the dealers can negotiate further lines of finance from their manufacturer partners, who will have to continue to support them if new car sales continue to falter,” Michael added.

“Manufacturers have clearly been supporting their dealer networks through the relaxation of onerous franchise terms as well as through strong bonus and incentive schemes. However, it is not clear how long this support will continue. The sector is facing some critical structural issues as the era of cheap money and PPI payments comes to a close, and consumers increasingly continue to turn to the Web to do their research on brands.

“However, not only is the market facing a threat from the drying up of cheap credit, the current negative sentiment towards diesel cars and the lack of infrastructure for mass use of hybrid and EV cars poses a threat as well,” added Michael. “Our advice to those UK car dealerships already feeling the pinch on cashflow is to act now.

“One key point is that the used car sector is buoyant. But, you can only sell a customer one car and if they decide to buy a nearly new pre-reg rather than brand new, then the dealer networks face a very real challenge of meeting targets set by manufacturers. There is no doubt that some manufacturers are performing well. Those franchise dealer networks performing less so will have missed out on their March bonuses and that may very well be adding pressure to already strained cashflow positions.

“Manufacturers will not want to see long standing dealerships suffering and possibly even disappearing as a result of an economic slowdown. Accurate forecasting, planning ahead and embracing of the rescue principles promoted by Duff & Phelps will be necessary to manage a tricky economic period. Our UK advisory team is uniquely positioned to advise dealerships and their stakeholders in a variety of distressed and special situations. Our team has sector experts, recruited from the industry and with real ‘workshop floor’ dealership experience and we understand the challenges being faced, so we would urge those dealerships facing tougher trading conditions to contact us,” concluded Michael.

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UK fishing sector sees more job losses if post-Brexit export troubles not tackled soon

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UK fishing sector sees more job losses if post-Brexit export troubles not tackled soon 1

By Maytaal Angel

LONDON (Reuters) – Britain could lose more jobs in its fishing sector if the current delays and increased costs involved in exporting to the EU post-Brexit are not ironed out soon, industry groups told British government officials on Tuesday.

Speaking at an Environment, Food and Rural Affairs (EFRA) select committee inquiry, representatives of Britain’s fishing sector said small to medium-sized enterprises were especially at risk and called on the government to urgently negotiate new export rules with the EU.

“(Even) if we get (export) systems sorted, we will still have cost implications. In the medium term, small companies will stop trade to Europe and it may even be their demise,” said Donna Fordyce, chief executive of Seafood Scotland.

“It’s a real worry. These people can’t see a future.”

Under a Brexit deal reached late last year, British trade with the EU remains free of tariffs and quotas. But the establishment of a full customs border means goods must be checked and paperwork filled in, damaging express delivery systems.

Fresh food sectors like fishing and meat have been particularly hard hit, with export paperwork costs soaring and delivery delays prompting EU buyers to reject British produce or to pay less for it.

Sarah Horsfall, co-chief executive of the Shellfish Association of Great Britain, said some British shellfish companies had already shut their doors, buckling under the pressure of the COVID-19 pandemic, and then Brexit.

She said paperwork costs per consignment have increased by 400-600 pounds. On top of that, companies often need to hire two or three extra staff just to fill in the paperwork, adding to costs.

Another point of contention for the British seafood sector is that EU exporters are currently not facing increased costs or delays in sending goods to Britain because the UK has postponed introducing reciprocal customs checks by three to six months.

“Exporters we deal with are considering relocating to the EU. We have to address this urgently if we want to grow, because at the moment we are at the risk of doing the opposite,” said Martyn Youell, senior manager of fisheries and quotas at fishing company Waterdance.

(Reporting by Maytaal Angel; Editing by Sonya Hepinstall)

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Fall in UK economic activity bottoms out in February – PMI

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Fall in UK economic activity bottoms out in February - PMI 2

LONDON (Reuters) – British economic output stabilised in February after a sharp fall the month before, as many businesses continued to suffer from lockdown restrictions affecting hospitality and other face-to-face services, a closely watched survey showed on Wednesday.

Hours before finance minister Rishi Sunak is due to set out his economic plans for the coming year, the IHS Markit/CIPS composite Purchasing Managers’ Index gave a reading of 49.6 for February, up from an eight-month low of 41.2 in January.

The figure means businesses reported broadly stable activity for last month after a steep deterioration early in the year, and is little changed from an initial flash estimate of 49.8.

The PMI for the services sector alone rose to a four-month high of 49.5 in February from January’s eight-month low of 39.5, again in line with the initial flash estimate.

“Restrictions on travel, leisure and hospitality due to the national lockdown continued to curtail overall activity, but there were some pockets of growth in technology and business services,” financial data company IHS Markit said.

Britain entered its third national coronavirus lockdown in early January, closing schools, non-essential shops and most other businesses open to the public, though people can still travel to work if needed.

Last week Prime Minister Boris Johnson set out a path for easing the lockdown in England as vaccinations roll out rapidly. Schools will reopen next week but full restrictions on hospitality venues will not go until late June at the earliest.

Sunak is expected to set out further spending plans in a budget statement around 1230 GMT after providing almost 300 billion pounds of support during the past year.

Business optimism in the services PMI has risen to its highest since 2006 due to expectations of a return to normality. But many firms still reported difficulties from new, post-Brexit trading restrictions that took effect on Jan. 1.

(Reporting by David Milliken; Editing by Catherine Evans)

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Japan’s SMFG likely to halt all new lending to coal-powered plants, sources say

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Japan's SMFG likely to halt all new lending to coal-powered plants, sources say 3

By Takashi Umekawa

TOKYO (Reuters) – Japan’s Sumitomo Mitsui Financial Group is likely to halt all new financing to coal-fired power plants, including the most efficient ones, two sources said, reflecting growing pressure from investors and environmentalists on Japan’s lenders to cut funding to coal.

While SMFG has said it would not finance new coal-fired power plants in principle, up until now it hasn’t ruled out funding projects seen as more environmentally friendly, such as so-called “ultra-supercritical (USC) power plants” that burn coal more efficiently than older designs.

It is now likely to remove that exception from its lending policy, meaning a complete halt to new finance for coal plants, said the sources, who declined to be named as the information is not public.

Japan’s biggest banks are under increasing pressure from global investors and environmental groups over their long involvement in funding coal projects. Prime Minister Yoshihide Suga has also pushed to achieve zero greenhouse gas emissions, on a net basis, by 2050.

“It’s a fact that the criticism from environmental groups has become so strong,” said one of the sources.

A spokesman for SMFG said nothing had been decided.

(Reporting by Takashi Umekawa; Editing by David Dolan and Edmund Blair)

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