UPDATE 1-UK new car sales rose 32 pct in October - SMMT

LONDON, Nov 5 (Reuters) - New car sales in Britain rose 32 percent in October year-on-year with the fourth consecutive monthly rise being helped by a government incentive scheme, the Society of Motor Manufacturers and Traders said on Thursday. The industry body said 168,942 cars were sold last month. "October has seen this year's biggest monthly increase in registrations with the successful scrappage scheme accounting for over 20 percent of them," SMMT chief executive Paul Everitt said on Thursday. The government introduced a scrappage scheme earlier this year which effectively gives drivers 2,000 pounds ($3,300) to trade in cars more than 10 years old against a newer model. The scheme, co-funded by the car industry, has proved popular and the government agreed last month to boost funding for the venture to include an additional 100,000 vehicles. Demand was also boosted by customers wanting to avoid the planned increase in VAT sales tax in January, Everitt said. New car sales in the business sector rose 12.1 percent in October, an encouraging sign as this area "will be critical in sustaining recovery next year", he said. Analysts said the scrappage scheme's overall boost to the economy would depend on how far it lifted overall consumer spending, rather than just encouraging people to divert their spending to new vehicles from other products or services. "Hopes that significantly higher car sales would help the UK economy return to growth in the third quarter, as had been the case with both Germany and France in the second quarter, proved misplaced," said Howard Archer, economist at IHS Global Insight. "Nevertheless, the further marked improvement in car sales should help the economy to finally return to growth in the fourth quarter." The scheme's benefit to the wider economy would also depend significantly on what proportion of the new cars bought under it were manufactured in Britain, he said. The British industry received a boost this week when U.S. carmaker General Motors decided not to sell its European Opel unit, including its British Vauxhall plants, to Canadian auto parts supplier Magna. GM is now expected to go ahead with restructuring plans, which originally included bringing production of new models to Vauxhall's plant in Luton, north of London. British unions welcomed GM's U-turn. (Reporting by Christina Fincher and Kylie MacLellan; Editing by Dan Lalor) ($1 = 0.6071 pound) Keywords: BRITAIN AUTOS/ ([e-mail] [phone]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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