Prime Minister Gordon Brown’s decision to “act now on tax” and cut VAT from 17.5 to 15 per cent is welcome news to those watching household incomes as the dreaded recession bites. The VAT cut means the average family (according to the Low Tax Alliance) will save £341 a year – about enough for four bread and butter tyres or a pair of premium high-performance products. But, while increasing consumers’ ability to spend is always welcome to the trade, it doesn’t have any bearing on what tyre manufacturers will do with their prices in 2009.

For the last six years there has been a continuing upward trend in tyre pricing, mainly driven by increased fuel and raw material costs. In recent months the rate and volume of price increases has crescendoed. Far Eastern suppliers have increased the prices the most, but it is a trend that can be seen across all segments and markets. However, the ripple effect the global economic slowdown has had on things like OE production looks like it has put paid to these kind of continuing price increases. Lower demand and less competition for raw materials means increasing pressure to put the price hikes in reverse.