Britain's car makers slide pounds 2.8bn into red

BRITAIN'S motor industry plunged pounds 2.8bn into the red last year as its trade deficit virtually tripled from the 1991 level, figures released yesterday show.

The sharp rise in the trade gap was blamed on sterling's enforced exit from the European exchange rate mechanism, which forced up the price of imported cars, and a downturn in overseas markets.

The deficit reached pounds 226m in the final quarter of 1992. This compared with a surplus of pounds 121m in the same period in 1991 and a pounds 1.2bn deficit in the third quarter, said the Society of Motor Manufacturers and Traders.

Although the deficit remains well below the pounds 6bn level of the late 1980s, last year's rise from the pounds 1bn recorded in 1991 will come as a blow to the Government.

Ministers had calculated that rising production at Japanese car plants in Britain would help steadily to erode the deficit and turn it into a surplus by the mid- 1990s. Nissan, Toyota and Honda together will be assembling nearly 600,000 cars a year at their UK plants in the next four years, and about 70 per cent will be exported.

Instead, imports of automotive products rose by 24 per cent in the final quarter to reach pounds 3.4bn despite attempts by importers to absorb increased costs caused by sterling's devaluation.

At the same time the motor industry's export performance, though heartening, was not as buoyant as expected. 'While the devaluation has obviously enhanced the competitiveness of UK products, exporters have been unable to take full advantage of this because of the contraction in many of the main UK export markets,' said the SMMT.

Export earnings ended the year 3 per cent up on 1991 at pounds 11.1bn after rising by 11 per cent in the final quarter, while imports for the year reached almost pounds 13.9bn - 18 per cent higher than in 1991.