Bullish Midlands automotive firms hold plans to create thousands of new jobs, develop new products and enter new markets overseas, according to a new research report released today by Lloyds Bank Commercial banking.
Driving Innovation, the second report on the English and Welsh automotive manufacturing sector, analyses the state of the industry today, and the opportunities and challenges it faces in the future.
The report, part of a series that looks at the role of key manufacturing sectors in Britain’s economy, gathered views from across the region’s automotive supply chain.
It found Midlands firms believe overseas competition is the prevailing challenge to the industry, with 42 per cent of respondents citing it as their top worry. But they seem happy to take on the competition, with 59 per cent of firms expecting to achieve business growth by developing new products and 45 per cent planning to enter new markets.
Reshoring and jobs
Despite the challenges of the global economy, the overwhelming majority (94 per cent) of Midlands respondents plan to create on average 31 new jobs each over the next two years. If fulfilled, their plans will generate 22,521* new jobs in the region.
These job creation plans are underpinned by manufacturers’ reshoring activity. While more than half (54 per cent) plan to bring some part of their manufacturing operations back to the Midlands in the next two years, the same proportion (54 per cent) have already done so.
Anecdotal evidence of their motivation for this shift included wanting to support the UK economy and create jobs, seeking better control over production, and rising labour costs overseas.
China and the international slowdown
Midlands automotive firms hold stronger growth forecasts for the next two years than the broader UK industry, forecasting 17.5 per cent growth, as opposed to 14 per cent across England and Wales.
More than half (53 per cent) will target new markets in Western Europe and North America, while just 35 per cent have their eyes on the Far East and Asia, perhaps reflecting the slowdown in the Chinese economy.
Innovation and the cars of the future
Midlands manufacturers’ commitment to innovation remained with firms planning to invest an average of 14.5 per cent of current turnover into research and development over the next two years.
Survey feedback suggests many businesses are waiting for breakthroughs in the fields of lightweight, electric and driverless vehicles by bigger players with greater resources, before committing further spend to these areas. However, once this technology starts to become more widespread, the supply chain looks set to benefit.
Three fifths (59 per cent) of Midlands businesses now say they plan to grow by developing new products, with innovation being a tried-and-tested route for UK car makers.
Midlands manufacturers are keeping a close eye on technological innovations in the field. More than half (54 per cent) are planning to upskill their workforce or change their business model to develop low carbon or electric vehicle technology, while 42 per cent plan to upskill or change their business model to develop driverless vehicle technology.
Report co-author, James Walton, manufacturing director, mid-markets, Lloyds Bank, said: “While the automotive industry is forecasting healthy growth, it’s clear that global instability and uncertainty threatens manufacturers’ confidence. In particular, the slowdown in China is a concern given that it is the biggest market for British-made cars outside the EU.
“However the sector is resilient and one of the most dynamic, innovative and exciting industries in the world, with Midlands firms at its forefront. The increase in reshoring activity to the UK is creating more jobs and Lloyds Bank is committed to supporting its growth and success.”
Mike Hawes, chief executive, Society of Motor Manufacturers and Traders, said: “Lloyds Bank’s second survey of the UK automotive manufacturing industry highlights some of the significant opportunities ahead – not only in terms of economic prosperity, technological innovation and employment potential in Britain, but the prospect for growth across the globe.
“The UK is seen internationally as a centre of innovation. It is home to 13 R&D centres, seven of the world’s 10 Formula One teams and 16 of the top 20 global automotive suppliers. We also have a unique opportunity to lead the development of connected and autonomous vehicles.
“To maintain this position of innovative excellence, industry must grasp the opportunities presented by these breakthrough technologies and secure the benefits for the UK economy and society.”
David Atkinson, head of SME manufacturing, Lloyds Bank and report co-author, said: “This report shines a light on the industry that has dominated the global news agenda in 2015, from controversy over emissions tests to futuristic innovations in the field of driverless cars.
“The industry is going through a period of intense innovation and we need to ensure that the Midlands has the right level of skills, and is adept at using the latest technologies, to keep our automotive industry competitive. To help tackle the skills agenda we are contributing £5m over five years to the Lloyds Bank Advanced Manufacturing Technology Centre in Coventry, which will support the next generation of engineers.”