Q. What challenges does the UK automotive sector face in the global market?
A. The automotive industry is very important to the UK economy. In 2017, the sector turned over £82bn and employed some 856,000 people across the UK.
The majority of companies in the sector are small and medium-sized enterprises (SMEs). They export, are highly specialised, and are part of global supply chains.
But because of this, UK automotive SMEs can often find themselves at the bottom of the pecking order when it comes to payment. For these businesses, a lack of funds creates a working capital squeeze, limiting their ability to trade and grow.
However, as SMEs are often ambitious and a vital source of innovation, we need to do all we can to provide them with the finance they need to grow.
At Wyelands Bank, we help small and medium-sized businesses to trade, grow and create jobs, by freeing up working capital that would otherwise be tied up in other assets. We get to know our clients’ businesses – providing the right combination of asset-based lending and asset finance.
Q. What contribution does the sector make to UK imports and exports and where are the fastest-growing markets?
A. Our research with Global Trade Review, the trade and finance media company, reveals that three out of the top five fastest-growing export markets for the UK automotive sector are outside Europe.
These markets include the US, Japan and Australia, where UK exports are growing at 4.3%, 3% and 2.6% respectively. The Netherlands and Italy make up the remainder of the top five where exports are expected to grow at 4.3% and 2.1% per year to 2021.
In all, automotive exports to these five markets were worth $17.9bn last year. The projected growth could generate an extra $677.7m a year for UK exports to 2021.
Q. How large is the UK automotive export sector?
A. The research shows that, at $54.7bn, the automotive sector is the second-largest export sector by value in the UK. This is behind machinery and components at $55bn.
Automotive exports as a whole are expected to grow by more than 1.7% annually to 2021. This makes the UK the fourth fastest-growing automotive exporter globally, behind Mexico, China and Spain respectively.
Q. What about imports?
A. UK automotive imports were worth $85.6bn in 2017 – an increase of more than $5bn from 2016. The UK imports an estimated 42% of the value of the cars it exports and has a large trade deficit in the automotive sector.
Looking at components, the UK has a trade deficit in gearboxes, dashboards, brakes, windscreen glass, rev and speed monitors, and bumpers and bumper parts. Only in radiators and engines does the UK export roughly what it imports.
The situation is similar for powertrain and assembly components where the UK has a deficit across all areas other than car seats. Parts in deficit are safety belts, chassis with engines, silencers and exhausts, car bodies, suspensions and shock absorbers, tyres, steering wheels and columns, and drive axles.
Q. Are there any risks ahead?
A. The research shows that the US trade tariffs are a serious threat. The UK has a surplus in automotive trade with the US and tariffs may endanger the projected growth in the sector.
However, the global economy as a whole is set to grow and this is likely to increase the demand for cars, benefiting the industry in the UK.
Given the current environment, it’s important that the sector’s businesses are well placed to take advantage of new opportunities, but, in order for companies to do this, they need working capital.
It is only by providing better access to funding that we can support businesses to trade, grow and create jobs.
Content published by Professional Engineering does not necessarily represent the views of the Institution of Mechanical Engineers.