Ford blames the plunge in sterling for 4% price rises

UK consumers will have to pay more for market leader's most popular cars

Ford is set to raise the prices of its cars in the UK next month, blaming the plunge in value of the pound and saying it was the only way, "to maintain a viable business".

The US car giant announced yesterday that the "sustained weakness" of sterling against the euro had forced it to boost the price of its UK range of cars by 4 per cent from the start of July.

This marks the third price rise the company has imposed this year and it warned there could be more to come. The group currently has more than 17 per cent of market share in the UK.

Ford has suffered as most of the cars and many of the parts it sells in the UK are manufactured in Europe and shipped over. The group makes little more than vans and engines in the UK. Nigel Sharp, the managing director of Ford in Britain, said the currency issue posed problems for the entire industry, adding that the group's losses had run into nine figures.

Ford's most popular cars, which include the Ka and Mondeo, will be about £600 more expensive, as will the Fiesta and Focus, the biggest selling cars in the UK last month. The Ford Galaxy will be £800 more expensive.

"Raising prices in difficult times, and when a scrappage scheme has been introduced, may seem counter-intuitive but with so many of our costs priced in euros, there is no choice if we are to maintain a viable business," he said

One pound was worth about €1.43 at the end of 2007, but as the financial crisis took hold in the UK, it plunged to about €1.16. Mr Sharp said: "The cost impact of this drop on a car priced at £15,000 is close to £3,500, which has to be absorbed into the business."

Other manufacturers have hiked their prices this year. Kia said in March that it was to lift the cost of its vehicles and also directly blamed the 25 per cent plunge in sterling. Kia said most manufacturers had lifted costs, and while it had held off as long as it could, it imposed a 3 per cent rise in April. Vauxhall said in February it would also introduce a range of price increases.

Ford announced it was to cut 850 jobs in the UK in February, blaming the economic slump. Its Transit van plant in Southampton was worst hit.

This comes as the Government has been spearheading a drive to boost the flagging auto market in the UK. It introduced the so-called "cash for bangers" scrappage scheme earlier this year, where drivers would receive a £2,000 discount on a new car if they traded in an existing vehicle older than 10 years. A spokesman for Ford said yesterday: "Scrappage looks to be having a positive impact on the market."

Ford has about 13 per cent of the scrappage market, selling up to 1,500 cars a week.

"That is good as a large proportion of the sales have come at the bottom end of the market where we don't compete," the spokesman added. More than 50,000 new cars have been sold since the scheme was implemented.