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Looking to the future of the North West automotive sector

Looking to the future of the North West automotive sector

It’s one of the most important industries in the North West and a huge source of employment – Move Commercial takes a look at what the future holds for the automotive sector.

Words by Christine Toner

The North West is the second largest region for automotive within the UK, behind the West Midlands. When one considers the motor behemoths located in the region this is not surprising. The North West is home to four major vehicle manufacturers; Jaguar Land Rover (based in Halewood, Knowsley), Vauxhall Motors (based in Ellesmere Port, Cheshire), Bentley Motors, (based in Crewe, Cheshire) and Leyland Trucks (based in Leyland, Lancashire).

But our links to the automotive world don’t end there. The region is also home to multiple niche vehicle manufacturers such as Briggs Automotive Company (BAC), manufacturer of the Mono in Liverpool; CCM Motorcycles in Bolton and M-Sport in Cumbria. Meanwhile key parts of the local supply chain for the vehicle manufacturers, such as tyre maker Pirelli in Carlisle and Plastic Omnium in Warrington, call the North West home.

“Within the North West the automotive industry is larger than the aerospace sector”.

“Within the North West the automotive industry is larger than the aerospace sector,” says Carol Holden OBE, chief executive of Northern Automotive Alliance (NAA). “[From a car manufacturer point of view] it employs around 19,000 people, but when you add in the range of multinationals and SMEs that are not solely automotive it is estimated that the number of employees is closer to 29,000. Both the Vauxhall and Jaguar Land Rover facilities are focused on manufacturing and assembly; Bentley Motors and Leyland Trucks also have research and development facilities and, in fact, Bentley has all operations for the company based in the Crewe area.”

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Understandably then, any threats to the success of the industry are a cause for concern.

Holden says the sector’s primary challenges at present include “maintaining manufacturing excellence to compete with lower cost countries” and “minimising operational costs to be competitive to sister facilities based elsewhere around the globe,” but opportunities are arising too.

“The automotive industry is changing at a faster rate than at any previous time in its history,” she says. “This offers opportunities for existing automotive supply chain companies but also for companies that currently don’t supply into automotive, from sectors such as energy and technology.

Driving force

“Businesses introducing innovative disruptive technologies, as Tesla has proven, have a real chance to break through into the mainstream. And small technology companies have greater opportunities to work with the big original equipment manufacturers (OEMs) as car manufacturers can no longer have all the expertise needed in-house.”

Of course, one can’t talk about the challenges facing any industry right now without talking about Brexit. While negotiations are still taking place following the UK’s decision to leave the European Union, and we won’t actually make our exit until 2019, many sectors are already feeling an impact.

Holden says the key areas for Brexit in the automotive world are the same locally as they are on a national basis. The NAA says the industry is asking for:

● Single market: Ensuring that the UK automotive industry is able to operate without tariff or non-tariff barriers on its exports and imports to and from the EU

● Customs: Secure a customs agreement which provides frictionless trade and recognises the integrated nature of supply chains across Europe

● Talent: A guarantee the automotive sector will have unrestricted access to talent across Europe

● Regulations: The creation of regulatory certainty through harmonisation and future influence

● Trade: Securing the UK’s position in current EU trade deals and clarifying the status of UK trade relationships.

“The impact of Brexit will depend upon the final solution, the further away it is from the items above the greater the challenge and the greater the operational cost that will be added onto each facility,” she says. “Clearly companies know that they need to plan, but they are in preparation mode at this time as there is no point getting into detailed planning until they know the status of each of the above items. That is true for all companies from the largest down to the smallest.”

“Our UK automotive industry competes globally. We have delivered an export-led renaissance. A hard Brexit would undermine all that we have collectively achieved.”

According to the industry’s national trade body, the Society of Motor Manufacturers and Traders (SMMT), Brexit presents a ‘real threat’.

During his speech at the society’s annual dinner, president Tony Walker said: “As an industry we are strong, resilient, and innovative. Not fearful of the future but keen to grasp the opportunities we are creating together.

“I am very proud that today our UK automotive industry competes globally on quality, productivity, flexibility and cost. We have delivered an export-led renaissance. But we are not complacent. Competitiveness comes hard-won. It can be easily lost.

“A hard Brexit would undermine all that we have collectively achieved. It is a real threat – a hurdle we cannot ignore.”

And there are certainly signs that negative repercussions of the vote are being felt. According to the latest SMMT figures, in November the industry saw a 28% fall in the number of cars produced for the UK market compared to the same month in 2016. The figures represent the biggest monthly fall in domestic demand for over six years.

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“Brexit uncertainty, coupled with confusion over diesel taxation and air quality plans, continues to impact domestic demand for new cars and, with it, production output,” says SMMT chief executive Mike Hawes of the figures.

However Holden says there are other areas in which the government could help the industry to prosper away from the EU issues – something it has begun to do with the release of the Industrial Strategy white paper which was published late last year.

“While the launch of the white paper is a good start, we need to understand the ‘meat on the bones’ or even ‘the bones’; what is the vision across a timeline for the Industrial Strategy and what areas of support would be considered to be available; be it by sector or other approach?” she says. “It also needs to be ‘joined-up’ and not piecemeal.

“One element that has the support of our members is that there is no one solution that fits all, and what is needed is a flexible solution that is right for each company at the right time.”

Holden says to enable companies to make significant change and investment to cope with new technologies both from a manufacturing and product level they need access to a fund that provides them with the capability to blend research and development expense, skills and training and capital expenditure together, and is not restricted to a specific size of company.

“Access to a fund that enables these three to be blended, together with varying interventions dependent upon company size and reason for the funding, with outputs such as increased revenues and jobs at an appropriate return rate, would be the ideal,” she says. “This really needs to be on a regional (Northern Powerhouse) or national basis as restricting it to within an LEP area is too restrictive.”