On-shoring to create almost 50,000 UK automotive jobs

Posted on 5 Dec 2014 by Victoria Fitzgerald

The automotive industry is poised to create an estimated 49,635 new jobs over the next two years as manufacturers bring production back to Britain, according to a new study by Lloyds Bank.

The bank’s report, Fuelling Growth, which surveyed English and Welsh manufacturers from across the automotive supply chain, found that nearly three-quarters (70%) of respondents are looking to ‘on-shore’ some of their operations by the end of 2016.

Almost half (45%) of manufacturers surveyed said they had already repatriated, on average, a fifth (20%) of their production. Businesses cited cost and time reduction, improving UK economic conditions and the desire to support local communities as reasons behind their decision.

Just over three-quarters (76%) of manufacturers in the sector expect to grow by up to 25 per cent over the next two years, with an average of 18 per cent expansion predicted. On average, each business plans to create 27 jobs over this time period, which equates to nearly 50,000 jobs*.

While production is being brought back to Britain, the automotive sector is also looking beyond domestic markets to achieve growth. More than two-thirds (68%) stated that entering new markets is key to achieving their growth ambitions. Almost three-quarters (74%) are looking to invest in or engage new international customers over the next two years, with Western Europe and North America the most popular targets.

David Atkinson, head of manufacturing, SME, Lloyds Banking Group, said: “Britain remains one of the leading players in automotive manufacturing, with a complex supply chain of high value engineering that is attracting significant inward investment. The sector’s growth in recent years has made the automotive industry the ‘jewel in the crown’ of the nation’s economy, and this looks set to continue with thousands of new jobs predicted to be created.

“It is particularly encouraging to see the commitment of many firms to bring their manufacturing processes back onshore as a way of helping to support both local communities and the wider economic recovery of the UK.”

High on the agenda for automotive manufacturers appears to be the emerging carbon and electric vehicle technology markets. Nearly two-thirds (63%) of businesses in the sector intend to upskill or change processes to develop products for these ‘green’ industries, and just over three-quarters of those respondents plan to invest in this area over the next two years.

The sector also appears ready to move from defensive corporate strategy with those surveyed planning to invest, on average, as much as 38 per cent of their annual turnover into their businesses over two years. On average, firms will dedicate more than a fifth (21%) of their annual turnover to R&D spend by the end of 2016.

Atkinson continued: “It is clear that automotive manufacturers are looking to the future with confidence with so many having earmarked funds to reinvest into their businesses. Replenishing R&D budgets to maintain Britain’s competitive edge in the global market, particularly in the development of electric and low emission technology, will be at the top of their agenda, while on-shoring is a trend that clearly has further to go.

“There is no denying that the industry faces some challenges. Most respondents feel the global economy is the greatest concern for the automotive sector. But the industry has emerged from tough economic times in remarkably good condition, putting many businesses in a strong position to overcome hurdles in the future.”

Mike Hawes, chief executive, The Society of Motor Manufacturers and Traders, said: “We welcome the findings from the report, which is further evidence of the renaissance in UK automotive manufacturing seen over recent years.

“The UK has some of the most productive vehicle manufacturing operations in the world and a supply chain with the potential to compete anywhere. We want to see this recent domestic success develop further, to help encourage the re-shoring of the supply chain and the growth of UK based companies’ international markets. To ensure this growth continues, we must maximise the UK’s structural advantages; flexible labour, design and engineering expertise and a globally competitive business environment.”