As efforts continue to boost localisation in Britain, automotive supply chain companies in the UK will invest £225m ($325m) in the next three years, figures released by the Society of Motor Manufacturers and Traders (SMMT) show.
The SMMT surveyed more than 100 of its supply chain member companies, with 94% saying that they would invest in their businesses in the next three years. Of that figure, four in five intend to invest in plant, machinery or tooling, 73% in skills and apprentices and 66% in new product development.
Half of the respondents said they felt the state of the UK automotive supply chain sector had improved over the past three years, echoing the sentiment of those in Europe, and only 6% said that they thought conditions had worsened. More than three quarters (78%) said they felt positive about the prospects for their business over the coming three years.
There are currently 78,000 people employed in the UK automotive supply sector, and 68% said they planned to expand their workforce over the next three years. More than nine in ten SMMT members (93%) said that increasing the volume of business they did with UK-based OEMs and suppliers was important to their company's future, and 77% of the respondents who are looking to invest said they would actively look to new contracts with British-based customers in the next three years.
However, potential investment will depend on continued political and economic stability and the long-term growth of the UK automotive sector. That, of course, includes the upcoming EU referendum vote.
Despite the positivity, there are challenges. As in other markets, a skills shortage is a key concern – 41% of respondents said the availability of skilled workers, apprentices and graduates could limit company growth over the next three years. Other concerns included exchange rate inconsistencies (62% of respondents said this was a worry); competition from overseas (58%); a lack of visibility among purchasers (31%); fluctuations in the price of materials (33%); energy costs (25%); and difficulty in securing funding or finance (21%).
Although there have been difficult times for the UK's automotive supply chain in the past few decades, the last few years have seen a significant turnaround. In the average British-built car, 41% of the components are now sourced locally. This is up from 36% in 2011. Support is there from the government and industry, and new business opportunities in the UK automotive supply chain are now worth up to £6 billion, according to a report by the UK Automotive Council last year.
Taking it abroadSMMT members are also keen to increase automotive exports. Currently, 68% of respondents send 40% or less of their production overseas. This is likely to increase in the coming years, with 46% (of those looking to invest in business) looking to expand into export markets in the next three years: 44% are looking to western Europe, 29% to eastern Europe and 27% to North America.
Western Europe is perhaps unsurprisingly the top destination for UK exports, with 88% of respondents saying they export automotive goods there. More than 50% of respondents export to North America, 53% to eastern Europe, 26% to China, 21% to India, 18% to South America and Oceania, 15% to the Middle East and Japan, 14% to Russia, 13% to South East Asia, 12% to Africa, and 4% elsewhere.
Mike Hawes, SMMT chief executive said: “Britain's car industry is booming, exporting more than ever, and it's encouraging to see this opening up huge opportunities for the UK supply sector. A strong domestic supply chain is critical to a successful automotive sector and we are confident that, with the right political and economic conditions, significant supply chain investment can be secured, delivering more jobs and growth.
"Many of the UK's competitors have far larger and stronger supply sectors, however, so continued government collaboration through organisations such as the Automotive Council will be critical as we strive to re-shore more supply chain work.”
