Economy

UK automotive turnover is estimated to have improved after the recession, recovering from £41 billion in 2009 to £49 billion in 2010 (pre-recession levels over £50 billion). The sector added some £10 billion to the UK economy in 2010, on par with pre-recession figures, as exports picked up sharply.

The value of UK exports rose to £29 billion in 2010, just ahead of the 2008 peak. The automotive sector represented almost 11% of all UK trade in goods in 2010.

Approximately four out of five vehicles produced in the UK are exported and increased sales of premium products to markets such as China and the US helped lift the UK automotive sector’s performance.

The number of automotive jobs stabilised in 2010 at just below 740,000. Jobs in manufacturing dipped below 150,000, but other direct jobs related to supply and in-use activities rose.

The UK has attracted significant automotive investment recently and the devaluation of sterling has supported the sector.

Export focus to growth

In 2010, 77.9% of all vehicles produced in the UK were destined for export. Of the 1.27m cars produced in the UK almost one million units (78.7%) were exported.

The total number of vehicles produced for export rose by 30.9% in 2010, compared with growth for the home market of 18.0%.

Exports continued to rise in 2011.

New investment to support growth

The automotive industry is truly global and attracting inward investment to the UK remains a high priority for industry and government.

Development of a suitably skilled and flexible workforce is a top priority achieved through investment in training and apprenticeship schemes.

The past two years have seen a number of high-profile announcements regarding investment in the UK automotive sector. These have amounted to the creation of around 8,400 new jobs, the safeguarding of over 12,000 jobs and investments in production expansion and new models worth over £3.9 billion.

Taxation

Each year, the Budget includes specific taxation measures for the motorist. In 2001, government changed the vehicle taxation system aligning it to tailpipe CO2 emissions. This was further modified in 2009 as the limits between bands were tightened.

Economy Q&A

How significant is the automotive industry to the UK economy?

The automotive industry is a vital part of the UK economy with £52 billion turnover and £10 billion value added. With over 800,000 jobs dependent on the industry, it accounts for 10% of total UK exports and invests £1 billion each year in R&D. Not only does it contribute to the economic well being of the country, but it also employs a huge amount of staff, from component and vehicle production to aftersales and servicing.

What does the motor industry want from the Chancellor at Budget time?

The motor industry, like any other, thrives in a stable economic climate. Constant changes and unexpected alterations to the rules and regulations are likely to have a negative impact on the sector.

Why does the industry refer to registrations rather than sales figures?

The simplest way to record when a vehicle has been sold to a customer is the point in time when it is registered at the Driver and Vehicle Licensing Agency (DVLA) in Swansea, UK. In this way it is possible to identify real sales of vehicles, rather than ‘orders’.

Why are there peaks and troughs in the registration figures throughout the year?

The figures reflect the twice-yearly change in registration number on the vehicle in March and September, and also the slight peak at the start of the year.

How many new cars are registered each year?

The economic downturn meant industry faced unprecedented reductions in the number of new cars being bought. The introduction of the scrappage scheme has had a positive impact and means that in 2009, registrations should reach 1.9 million. The record registration year was 2003, when 2,579,050 vehicles were registered.

Year and registrations

1995 = 1,945,366

1996 = 2,025,450

1997 = 2,170,725

1998 = 2,247,402

1999 = 2,197,615

2000 = 2,221,647

2001 = 2,458,769

2002 = 2,563,631

2003 = 2,579,050

2004 = 2,567,269

2005 = 2,439,717

2006 = 2,344,864

2007 = 2,404,007

2008 = 2,131,795

The majority of cars bought under the scrappage scheme were imported so the scheme really only benefitted foreign companies.

It’s not just about the cars built in the UK – over three million engines are built in the UK each year, many of which are exported for use in vehicles assembled abroad. It is not simply a case of looking at the models produced in the UK but considering the full impact of a car’s major components. The scheme has boosted the new car market, supporting the 600,000 plus people employed in the automotive retail and repair sector as well as those in manufacturing. Automotive is a truly global industry – the UK has benefited from international scrappage schemes creating demand for UK-built vehicles too.

Why has the £2.3bn Automotive Assistance Programme failed to help the industry?

Both industry and government are frustrated that the AAP has failed to deliver its intended support to the UK motor industry. It is essential that a more flexible approach is adopted so that viable businesses can access the working capital they need in the short-term and support investment in future technologies for the long-term. Industry remains concerned that the reluctance of banks to provide direct support to the automotive sector is limiting the effectiveness of AAP and its benefit to companies in the supply chain.

What more can be done to support the motor industry?

The availability of affordable finance and credit remains the number one priority for companies at all levels of the supply chain. Vehicle manufacturer finance arms need access to the wholesale credit guarantees currently only available to the larger banks – Extending the eligibility criteria of the credit guarantee scheme to all motor finance providers would improve availability and reduce the cost of funding (particularly long-term), with an immediate beneficial effect on consumers.

Do you think we have seen the worst of this recession? What is the outlook for the economy?

We are in the very early days of a long recovery and government action is needed to sustain this by continuing to build consumer confidence and resolve the credit issues which are still hampering the recovery of companies throughout the supply chain. The automotive industry remains in a fragile state and action is needed to sustain recovery and build consumer confidence. A lack of available credit is still hampering the recovery of companies throughout the supply chain, making this a key priority which industry is urging government to address. The commercial vehicle market is still suffering and specific action, such as increased Annual Investment Allowances, is needed to support businesses.

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