While predicting a rise in the company car market, the report - 'EU Company Cars' - supports current thinking that a combination of tax levels, running costs and environmental pressures will lead to more smaller engined cars joining the UK's fleet.

Despite the growth optimism MarketLine claims last week's Budget will have some effect with the increases in the tax charge of 13% for petrol and 15% for diesel on free fuel provided for the private use of company car drivers likely to have most impact. The company suggests the change will force many employees to consider more economical cars and could alter the structure of the corporate car fleet in terms of vehicle size.

MarketLine also said the tax hike on scale charges could encourage the increased acceptance of cash alternative schemes, although it admitted the success of cash options was limited due to the amount of cash on offer being below driver expectations.

'EU Company Cars' is available from MarketLine International. Contact Jeff Howard on 0171 624 2200.

THE European company car market is expected to expand in the next five years, with annual corporate sales increasing from around 4.5 million units to more than five million, according to MarketLine.

Despite the Europe-wide recession of the early 1990s, rising unemployment and more recently tax increases, the company's new report says: 'Despite these negative influences, recent growth suggests that this market sector remains vital to the European passenger car market.'

The report reveals that Germany, the UK and France are the largest corporate car markets in the EU, accounting for 71.7% of the total European fleet, with the UK having the most developed corporate car fleet accounting for 12.3% of the national car parc. In Spain and Greece just 2.7% of cars are corporate-owned.

MarketLine calculates that there are currently 13,372,000 company cars in the EU-member countries with outright purchase being the most popular method of acquisition accounting for 57.2% of vehicles. However, acquisition via leasing methods is expected to rise as the industry develops across the whole of the EU as are added value services. The report also says the Vauxhall/Opel marque is the market leader in five countries - Finland, Ireland, Holland, Portugal and Spain - with Volkswagen/Audi also having a strong presence, while Ford is the market leader in Denmark and the UK.