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Car parts and derived demand
8th December 2008
Wagon Automotive is a car parts business that supplies a cluster of the biggest volume car manufacturers in the UK. With sales of new cars slumping by over a third, the fall in demand for vehicles inevitably has a negative impact on the demand for component parts - economists call this the derived demand effect. The slump in demand allied to problems in agreeing a fresh line of finance from the banks is likely to cause Wagon Automotive to go into administration this week with the prospect of hundreds of job losses. Expect many more examples of supply-chain demand and employment effects to hit the headlines in the coming months.
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.