Dateline: 16th March 1994

It is quite clear, following the sale of Rover Group to BMW, that the main barrier to a British sale or flotation of the shares was the very large financing cost of Rover's operations.

Few in politics grasp the difference between investment in and the financing of a business. Several City institutions were prepared to invest capital in Rover but banks were apparently unwilling to commit loan facilities to cover peak financing requirement of more than £2,000m.

But this huge financing need occurs (as most of the problems of the British car industry since the war) because of the action of government. While Rover's monthly financing requirement averages no more than £200m - £300m there is a very large annual peak in the run up to August when the new licence prefix attracts the more adolescent of our fellow citizens into the car showrooms.

This ludicrous practice has always plagued British car manufacturers and suppliers and of course their banks who inevitably regard such massive financing peaks as far more risky than a standard pattern of company financing. They either require far more base capital from British manufacturers than they would in other countries or they refuse to finance at all until (as has now happened) a company based in a country, which has no state induced sales peak, takes over the British manufacturer.

Now that this long standing problem has been a major contributor to the loss of British ownership of our car industry is it too much to expect that even politicians might wake up and put an end to this disastrous August car binge?  

POST SCRIPT - 2002

Eventually, years after the takeover of Rover by BMW and the loss of thousands of British car workers jobs, the above advice was heeded by the British Government. Rover is now once again an independent company, there is no longer an August rush to the salesrooms and there are further signs of progress among smaller British car manufacturers.