Even amid all the good news stories surrounding the economy, the automotive sector stands out as being especially successful.
2014 saw major investment announcements and product launches, whilst 2015 will see new models from several UK car makers that will boost output in both unit and value terms, and generate significantly increased exports.
Vince Cable, Secretary of State, Department for Business, Innovation & Skills, Co –Chair Automotive Council wrote, “The Automotive industry is at the forefront of the UK economy’s recovery. In 2014 we built over 1.6 million vehicles and 2.5 million engines, exporting over 80% of our production.
“The UK is the second largest producer of premium cars in the world, with over 40 companies making vehicles here, at some of the most productive car plants in the world. Output is rising, productivity is rising, employment is rising, and there is a realistic expectation that annual UK vehicle output will reach 2 million vehicles over the coming years.”
Brands such as Jaguar Land Rover, MG, Honda, The London Taxi Company and Rolls Royce are flying the flag for British manufacturing and engineering innovation, but these well-publicised successes of the major manufacturers are only part of the sector’s growth story. As the knock on benefits to the supply chain gather pace, in more good news for UK based manufacturing, research is revealing an increase in the numbers of British cars being made with British-sourced components.
Conversations between vehicle makers, suppliers and Government have led to a number of new supply chain investments.
Sales from UK suppliers to UK vehicle makers have grown by 19% through 2014.
Through this period, UK vehicle makers have been investing in new products for European and global markets, putting in place the conditions for robust growth in coming years, and expanding the opportunity for investment in the UK supply chain.
A steady flow of new supply chain investments is fuelling the opportunity afforded to suppliers by a growing UK vehicle industry as new models come into production and output increases. Research has revealed a £3 billion parts supply gap currently sourced from overseas which represents a growth opportunity for British parts manufacturers.
The appetite for local sourcing is strong, bringing as it does the benefits of responsiveness and reduced logistics costs. As a result British industry has seen a general growth in re-shoring and UK vehicle makers have indicated that at least £1 billion worth of parts production has been re-shored since the original £3 billion opportunity was identified.
Being able to source more components in the UK will help boost the case for further UK investment at the vehicle companies just as investment by the vehicle companies in the UK boosts the investment case for suppliers.
Looking ahead, UK vehicle output is projected to reach two million units in coming years, and this will amplify the supply chain opportunity both for existing UK businesses and those yet to invest here.
It should be recognised that to change established sourcing patterns for multinational foreign owned companies is not an easy process: OEMs need to be
convinced of the credibility of an alternative UK supply; Tier 1’s need to be convinced that investment in new UK facilities will realise a return; SME’s need to be convinced that their organic investment growth will find OEM and Tier1 customers; and Government needs to efficiently commit incentives to act as a catalyst to the process.
The evidence indicates that good progress is being made towards re-shoring the UK automotive supply chain. Vehicle makers report increased UK purchasing spend and this is supported by analysis of available data. The experience of re-shoring to date has been very positive, and the opportunity to increase UK sourcing is stronger than ever.
The Business Secretary Vince Cable confirmed “Our automotive industry has seen a resurgence in recent years and that success means work of some £1 billion has returned to the UK. This is testament to the strength and capability of our supply chain manufacturers and will no doubt lead to new jobs and further growth.
“This has not happened by accident but is the result of government and industry working together through the Automotive Council to strengthen our supply chain – meaning an increasing number of parts made in this country are contained in vehicles rolling off UK production lines.”
Elsewhere in the work of the Automotive Council, the Government is working closely with leading UK automotive manufacturers to boost skills across the sector, inspire the next generation of vehicle and component makers and create new routes into automotive careers.