Northgate, the UK’s largest vehicle rental firm, is launching a new division targeting the public sector market.

The daily rental firm, which specialises in commercial vehicles, is aiming to be the market leader in this area within three years.

Last year, Northgate supplied around 3000 vehicles to public sector fleets largely as a result of business relationships through its 75 rental depots.

However, the company is looking to gain a significant increase in rental business in this market. Phil Moorhouse, managing director, said: “Rental has historically been viewed as a stop-gap transport solution. But the recession is changing that perception and more public sector fleets are waking up to the fact that it is vehicle usership and not ownership that is key.”

The new Northgate Public Sector division will be managed from the company’s Darlington headquarters by Paul Robinson, who has been with the company for six years and has been promoted to head of public sector from the post of strategic account manager.

Moorhouse added: “With the onset of recession and the expectation that economic recovery is many months away, public sector transport decision-makers in many cases are reluctant to commit to either investing in new vehicles or signing leasing agreement that can run for three or four years or longer.

“With public sector finances under intense scrutiny, our contract-free, fully flexible Norflex rental proposition makes financial and operational sense as organisations can rent a vehicle for as long as needed and then hand it back the moment it is not.”

Commenting on the new division Robinson said: “Our existing public sector customers are benefiting from the economic of scale that we can offer as Britain’s largest rental company which ensures ultra competitive pricing and a modern fleet. But, in many cases, they want a business partnership with a local supplier.

“Northgate offers that business opportunity because of our unique approach of a major company investing in a range of key transport solutions, which are then delivered at a local level enabling close business relationships to be formed. We want Northgate to become synonymous with the public sector.”

The news comes less than a month after Northgate revealed a pre-tax loss of £195.6m for the year ending April 2009.

The loss was attributed to a lowering in demand for vehicle rental and the fall in used vehicle values. The group, which operates in both the UK and Spain, lost £180.9m thanks to the reduction in value of its vehicles and other assets.

Northgate took several steps to deal with its losses, including increasing its average vehicle age from 17 to 22 months. It has also cut its depots from 86 to 80 and cut staff numbers by 193.