Institution news
This week we published our third Automotive Manufacturing report which gives an overview of the challenges and opportunities facing the industry and supply chain. The report spoke to businesses across England and Wales from across the automotive OEM and supply chain industries of all sizes and provides valuable insight for the industry.
Global industry
Manufacturing has never been more important to the success and growth of the UK economy, with the automotive industry representing about eight per cent of manufacturing output. The sector had a record 2016, building more than 1.7 million cars and making it the UK’s largest manufacturing export sector. But what did the report tell us about the state of the sector?
I’ll go into more detail shortly but overall the research found that the UK automotive industry remains resilient but cautious despite ongoing uncertainty presented by the global economy and the UK’s future relationship with the EU.
As you know the UK is home to world-class manufacturing facilities and through the automotive sector we have created one of Europe’s most highly skilled, flexible and productive workforces.
The industry remains the UK’s largest manufacturing export sector with a presence in every region and a national supply chain which has evolved into a well-run machine. Through lean manufacturing and the latest automation processes, the UK has become the second biggest producer of premium vehicles in Europe, behind Germany, and the third largest car producer.
Investment and growth
While investment plans are broadly stable at the moment, firms are waiting for the outcome of EU negotiations with the industry eager to put any uncertainty behind it.
The research revealed average investment over the next two years is due to hold firm at 19 per cent of turnover and forecast a 15 per cent growth in turnover over the next two years, providing there are no political or economic shocks affecting demand or supply. Almost four in ten businesses (39 per cent) expect growth to come from new product development.
EU exit remains biggest threat to UK automotive firms
2016 was a tumultuous year, with political change and economic volatility across the globe.
The UK’s decision to leave the EU has created a level of uncertainty for the industry, especially as a large majority of our car makers and their supply chains are reliant on the EU for more than half of British car sales. Almost a third of automotive manufacturers (30 per cent) consider the exit from the EU as the biggest threat to supply security over the next two years.
The weakness of sterling is also a challenge for manufacturers with more than a quarter (26 per cent) identifying it as a potential issue. However, more than a third of businesses (34 per cent) hope to benefit from a more competitive export environment.
Investment in R&D looks to future-proof sector
Technological innovation will continue to shape the sector over the coming years as it goes through one of its biggest periods of transition, with technology firms like Google, Apple and Uber all looking to enter the market.
Firms are therefore planning to invest an average of 24 per cent of current turnover into R&D over the next two years, up from 17 per cent which will help them develop low carbon or electric vehicle technology as well as driverless vehicle technology.
This innovation will help British manufacturers secure their position at the heart of the new global automotive industry and we want to help them overcome any bumps in the road ahead.
View the full report