Asia is the fastest growing market for British-made cars. But the EU is still the top export market for the British automotive sector.
The value of UK automotive exports to Asia rose by 21% in 2017 making the region responsible for a fifth of all automotive exports, according to a report by EEF.
The report, which is co-authored by Santander, shows that £40bn in goods was exported last year, up 26% from 2015, with Asia being the fastest growing region for exports. China is the largest market for the British automotive sector’s exports in Asia and the second largest in the world. In total, 11.3% of all British automotive exports went to the East Asian giant. Only America saw a bigger share.
The EU remains the most important market for automotive exports though. The economic bloc made up 45% of all exports in 2017. Also, eight in ten of the top import markets are located in the union, which signed an exit deal with the UK government yesterday.
Paul Brooks, Head of Manufacturing at Santander UK, said the report highlighted the central role the automotive sector plays in UK manufacturing: “The UK automotive sector continues to be a highly important, strategic industry at the centre of the UK economy. It is also a major UK export success story. Growing demand from countries such as China, along with established strong sales in the US and Europe, represents an incredibly exciting opportunity for UK automotive businesses – and helping UK manufacturers to capitalise on exporting opportunities is a key focus for Santander.”
The automotive sector has been enjoying major growth in the UK in the last few years. Alongside the rise in exports, the number of people employed in automotive manufacturing was 3.9% higher than in 2015. 159,000 people in total work in the sector. Spending on research and development has also increased considerably. In 2016, £3.4bn was spent in that division, 20% more than in 2015.
The report notes the vast improvements in productivity in the industry since the financial crisis. Between 2008 and 2015, productivity increased by 61%, stronger than any other sector. But says Francesco Arcangeli, economist at EEF, productivity in the UK automotive sector is still relatively weak: “Despite the impressive growth, the UK is still lagging behind some international competitors in terms of productivity, particularly our German counterparts.
“Nevertheless, it is clear that the UK is home to world-leading automotive manufacturers, which are helping to boost productivity in local areas, and supporting these businesses as they invest for growth and expand further is absolutely key to the ongoing success of this vital UK industry.”
The report says the reliance on the EU for exports and imports, both of cars and of car parts mean that Brexit is creating worries for the sector. Yesterday, the EU and the UK government agreed to an exit deal. A spokesman for the BMW Group says the EU summit is “a further step in the right direction to avoid a no-deal Brexit, which would have a disruptive and detrimental effect on our business. However, the political situation remains uncertain.
But the deal is not finalised as it must be voted on by Parliament. Should it be voted down, a no-deal Brexit is more likely. BMW have stated that “as a responsible employer, we must therefore continue to prepare for the worst-case scenario, which is what a no-deal Brexit would represent. We call on all sides to work towards ratification of the withdrawal agreement, in order to maintain the truly frictionless trade on which our international production network is based.”
The report also calls for the government to strongly commit to the Automotive Sector Deal. The deal promised among other things to improve supply chain competitiveness, reduce the sector’s environmental impact, and boost investment in emerging technology. The report states the “government must ensure that they deliver on these promises, as well as outlining how other important sectors in the UK economy can receive similar support.”
Reporting by Harry Wise