The Helphire Group - a major provider of replacement cars to drivers involved in crashes that were not their fault - has begun a significant cost-cutting excerise.

The commpany issued a pre-close trading statement yesterday in which it describes difficult market trading and a poor outlook.

Despite an increase in business levels associated with winter weather, the company said this increase has come later than usual and this adds to the fact that accident frequency and hire durations remain below anticipated levels.

Therefore profitability is "materially below management expectations".

The group’s chief executive, Mark Adams, said: "Our plans now assume that these trends will not reverse while the economy remains depressed and we will, therefore, manage our business accordingly.

"We have embarked upon a programme of cost reduction and process restructuring."

He said the group entered the current financial year with an infrastructure designed for higher business levels than are now likely.

"We have embarked upon a programme of cost cutting and efficiency improvement which will correct this imbalance," he said.

"We have initiated cost reduction measures which will be implemented over the coming months.

"These measures are expected to involve a reduction in the size of the fleet and reductions in administrative costs.

"In the near term, we expect to achieve an annualised reduction in operating costs of approximately £5m and we expect to achieve significantly greater savings as longer-term process changes take effect.

"We anticipate that the programme will give rise to certain exceptional costs."