Number of repair bodyshops down 32%

The number of car repair body shops has fallen 32 per cent during the last decade. And what’s more the total is still falling, with a further 9 per cent decline predicted by 2020, leaving just 3,020 bodyshops in the UK. The outcome is expected to be increased costs and customer frustration, according to new research.

The latest UK Car Body Repair Market report, by independent research company Trend Tracker reports that the decline in bodyshops, combined with an expected 2 per cent increase in the number of repairs, will create an 11 per cent shortfall in repair capacity by 2020. The resulting backlogs will increase insurers’ costs and leave vehicle owners frustrated.

With insurance companies financing around 70 per cent of all accident repairs, bodyshop owners have long bemoaned the lack of profit in insurance-funded repairs. This, coupled with a fall in the number of accident repairs since the 2006 peak, has led to many bodyshop closures.

Based on an average insurance accident repair cost of £1,380, a large insurer-approved bodyshop, operating on modern factory flow-line repair principles, will typically earn just £13.52 net profit on a job taking 15.7 hours to complete (source: ABP Club). This equates to a profit of just 86p per hour per repair.

Robert Macnab, lead analyst at Trend Tracker, commented: “As recently as 2004 there was a repair capacity excess of nearly 50 per cent. Insurers were spoilt for choice in terms of who to give work to and could dictate terms. The increasing repair capacity deficit will put quality bodyshops in a much stronger position to secure a better deal from insurers.

“We will see more repairers renegotiating or simply rejecting the least profitable insurance contracts, particularly where there is an open-ended obligation for them to provide courtesy cars at their own expense. The hourly labour rate is also likely to rise, further denting insurers’ profits.”

Since peaking in 2006, the annual volume of car body repairs has fallen by 28 per cent and the number of car body repair workshops has declined by 24 per cent. The rise in oil and petrol pump prices during that time discouraged consumers and businesses from using their cars, resulting in fewer accidents. This trend was compounded by the onset of recession in 2008.

Now the market seems set for a period of sustained albeit modest growth, as lower fuel costs encourage greater car use, resulting in an increase in the number of accidents and the number of car body repairs.

With the number of repairs forecast to rise from 4.2 million in 2014 to 4.3 million in 2020, and the average repair cost to rise from £1,115 to £1,157, the overall market size will increase by 5 per cent to £4.94 billion by 2020 (based on 2014 prices excluding VAT).

If you ignore investment returns, motor insurers as a whole are expected to have been loss-making in 2014, with a combined ratio of 109 per cent. This is partly due to excessive competition and persistently high personal injury claims, although accident damage claims account for two-thirds of all motor insurance claims, according to Trend Tracker.