Driving Innovation, the second report on the English and Welsh automotive manufacturing sector, analyses the state of the industry today, and the opportunities and challenges it faces in the future.
The report, part of a series that analyses the role of key manufacturing sectors in Britain’s economy, gathered views from across the automotive supply chain, and found that firms believe the global economy is the prevailing challenge to the industry, with 43% of respondents citing it as their top worry for the second year running.
This challenge is underlined by a significant drop in the number of firms expecting to achieve business growth by entering new markets, falling from 68% last year to 48% this year.
Given that 78% of all vehicles made in the UK last year were exported, the results have heightened fears that the global slowdown will drag on the future performance of an industry that has substantially outperformed the broader manufacturing sector since the recession.
This year’s research findings revealed a particularly big fall in the level of expected exports to the east, where China is a significant market. In 2014, two fifths (41%) of UK automotive manufacturers said they were planning to trade with new customers in Asia and the Far East. This year, that has fallen by more than a third to 27%.
Manufacturers have also revised down their growth forecasts for the next two years since last year’s survey, from 18% in 2014 to 14% in 2015.
Despite the challenge of the global economic slowdown, the overwhelming majority (86%) of respondents plan to create new jobs over the next two years. If their plans are replicated across the UK’s 2,994 automotive manufacturing firms, it would generate almost 85,000 new jobs.
These job creation plans are underpinned by manufacturers’ reshoring activity. While three fifths (58%) plan to bring some part of their manufacturing operations back to the UK in the next two years, half (50%) have already done so, up from 45% last year.
UK manufacturers’ commitment to innovation has weakened slightly with firms planning to invest an average of 17% of current turnover into R&D over the next two years, down from 21% last year.
Report co-author James Walton, manufacturing director, mid-markets, Lloyds Bank, said: “While the automotive industry is forecasting healthy growth, it’s clear that global instability and uncertainty threatens manufacturers’ confidence. In particular, the slowdown in China is a concern given that it is the biggest market for British-made cars outside the EU.
“However the sector is resilient and one of the most dynamic, innovative and exciting industries in the world, with British firms at its forefront. The increase in reshoring activity to the UK is creating more jobs.”
Mike Hawes (pictured), chief executive, Society of Motor Manufacturers and Traders, added: “Lloyds Bank’s second survey of the UK automotive manufacturing industry highlights some of the significant opportunities ahead – not only in terms of economic prosperity, technological innovation and employment potential in Britain, but the prospect for growth across the globe.
“The UK is seen internationally as a centre of innovation. It is home to 13 R&D centres, seven of the world’s 10 Formula One teams and 16 of the top 20 global automotive suppliers. We also have a unique opportunity to lead the development of connected and autonomous vehicles.”
