Home comforts for UK manufacturers

Cars manufactured in Britain are becoming more British, according to a new Automotive Council study released today. The report, Growing the Automotive Supply Chain – Local Vehicle Content Analysis, shows that 44% of all components used by UK car makers now come from domestic suppliers, compared with 41% in 2015 when the study was last carried out.

The figures are a significant move in the right direction as efforts to re-shore the automotive supply chain continue. In 2011 local vehicle content stood at just 36%, which itself was an improvement following years of decline in UK automotive manufacturing.

British car manufacturing hit a 17-year high in 2016 with more than 1.7 million vehicles made and, since 2009 when the Automotive Council was formed, production has risen more than 72%. Another measure of success is the amount of locally sourced parts and components used in vehicle manufacturing.

In pure financial terms, with regard to output of the UK automotive parts sector, turnover has increased from £9bn at the start of 2011 to £12.7bn today.

Exhausts, large pressings, small pressings and plastics have all enjoyed growth, though opportunities to increase production capacity in these commodities, and others, remain. When combined with the increase in the proportion of parts sourced locally, it means domestic suppliers have increased their output by 60% since 2011.

Increasing the British supply base in this way offers benefits to the UK’s vehicle manufacturers. Operating on a ‘just in time’ delivery basis, sourcing from UK suppliers reduces time and cost of supply chains, reducing the risk of delays which can halt production. Growing local content – and thus the domestic supply chain – also helps increase the attractiveness of the UK as an inward investment destination as a healthy supply chain is a pre-requisite of vehicle production location decisions. Furthermore, if the industry is to take advantage of beneficial trading terms included in free trade deals, originating content must meet minimum rules of origin thresholds else reduced tariffs may not apply.

Secretary of state for the department for business, energy and industrial strategy Greg Clark, said, ‘This Automotive Council report shows that we are still making good progress in increasing the UK content of the vehicles we produce. It also highlights that there are many more opportunities for us to exploit. Through our modern Industrial Strategy we will build on our strengths in the automotive sector in R&D, creating skilled jobs and further extending our supply chain. The government is committed to maintaining the international competitiveness of the UK automotive sector.’

International trade minister Mark Garnier, added, ‘Our car industry is highly competitive and these figures are a vote of confidence not just for the UK automotive supply chain, but the sector as a whole. As an international economic department, DIT is committed to supporting British businesses to achieve success at home and overseas. That’s why we work closely with vehicle makers and supply chain companies across the country to attract further inward investment into our automotive industry.’

Mike Hawes, SMMT chief executive, said, ‘The domestic supply chain is the backbone of UK automotive and its health is crucial to the success of the whole sector. While it is good news that British cars are becoming more British and re-shoring efforts are enjoying success, the process takes considerable time. To grow our supply chain further, the long term competitiveness of the UK must be maintained. Collaboration with government has been an undoubted factor in the recent success and we hope to continue this approach to ensure the economic and trading conditions we currently enjoy are maintained.’