Last year saw a 54% rise in the number of businesses in the automotive retail sector admitting they were experiencing financial problems.

According to accountancy firm KPMG, 88 businesses in the sector made negative financial or performance announcements in the last half of 2000, compared to just 57 in the first half.

There was better news for parts suppliers. While 788 said they were experiencing problems throughout the year, the first half of 438 dropped to 340 in the second half.

Richard Boot, head of industrial and automotive products at KPMG, said: "Our figures show a tale of two sector. The much maligned manufacturing sector is showing signs of improvement and learning to cope with the obvious pressures it faces. However, the figures also show the extent of the difficulties which affected the retailers in the tail end of last year.

"Of the 145 announcements made nationwide during 2000, 54 of these occurred from October to December.

"The most likely reason for this was companies' nervousness over how the decreased production schedules of the major automotive manufacturers would affect them.

"The disappointing thing was that this nervousness negated the optimism brought about by improving car sales figures in the second half of the year when dropping car prices attracted consumers back into the showrooms.

"Thankfully this situation has been turned around. The improvements, in performance terms, that these businesses have already started to show this year, due to continued increased consumer confidence, shows how that nervousness was misplaced. However, the uncertainty over how the industry will be affected by the block exemption review still remains."

Within the statistics, the West Midlands accounted for 31 of the 145 negative announcements. They were closely followed by the eastern counties with 25.

Mr Boot said: "My estimation is that the majority of the struggling companies would be made up of component and capital goods manufacturers. These two sectors have suffered more than most due to the currency and export problems and the uncertainty over domestic demand."