A new report on the UK Car Body Repair Market by independent analyst MFBI predicts that winter repair capacity shortages will increase from 13% to 28% by 2006.

However, its findings have been contradicted by the MVRA, which believes there are too many repairers in the UK. Wet, snowy and icy conditions this winter have left bodyshops working at full capacity and insurers struggling to place work with their approved networks.

According to MFBI, the reason for the capacity shortfall is the decline in the number of bodyshops due to low or negative profitability.

The major cause of bodyshop failure is low labour charge-out rates paid by insurers, which currently average £21.50 an hour. Many insurers refuse to accept that labour rates are the key issue in bodyshop profitability and argue that lack of efficiency in supplies purchasing and productivity are the main concerns.

The MFBI report, though, reveals that labour sales are insufficient to absorb a bodyshop's total operating costs. It claims all bodyshops make an operating loss on labour at an average 15% of labour sales turnover.

MFBI's Robert Macnab said: "Insurance companies cannot expect the repair industry to invest in new equipment and new repair methods, and maintain sufficient spare capacity to cover winter demand peaks, while operating at only marginal levels of profitability."

Despite the MFBI's analysis, the Motor Vehicle Repairer Association claims there are not enough repair jobs to satisfy the 6,500 UK body repairers.

It says there is on average 3.7m bodyshop repairs in the UK each year, which should support an industry consisting of around 2,466 repair centres.

MVRA managing director Mike Monaghan said: "Given that some repair centres are able to repair over 3,000 jobs a year, it is clear that the market still has a substantial over capacity. There are too many body repair shops within the UK for the available repair business."