This article was originally published on the Birmingham Post website,23.11.12.
Automotive supply chain firms have a “golden opportunity” – but they must work with manufacturers and financiers to address a lack of capacity, experts have warned.
Those were some of the messages that emerged at a special event organised by the Society of Motor Manufacturers and Traders in Solihull where more than 125 UK-based suppliers were told car manufacturing in Britain was flourishing thanks to companies like Jaguar Land Rover, Nissan, BMW, Toyota, Honda and General Motors.
There is a chance for companies in the supply chain to cash in on the UK’s booming automotive industry but they need to be supported by lenders and investment in tooling is an issue that needs to be tackled.
Around 25 lenders – including Barclays, HSBC, Lloyds TSB, Royal Bank of Scotland and Santander – were also present at the SMMT’s Meet the Funder event which aimed to provide a form to discuss the financial needs of the UK’s £4.8 billion supply chain and improve dialogue.
Mark Orton, a partner at KPMG’s Birmingham office, said UK component suppliers offered real advantages compared to both eurozone and Eastern European countries and highlighted major investment in UK manufacturing operations by Honda, BMW, Nissan, Toyota and General Motors.
“This is fantastic investment that supports and bolsters the supply chain going forward,” he added. “Compared to the eurozone the UK is a very friendly and stable economy, with low tax rates and a government that is supportive of the UK manufacturing sector.
“The weakness of sterling is also beneficial in terms of investment from the Far East.
“All are good reasons for inward investment. There is also a favourable labour pool and one that is attractive to the automotive sector, real investment in the skills base and a reputation for innovation and research.”
He said there was real expectation that over the next four to five years the UK automotive sector would grow by nine per cent per annum, peaking at 2.2 million units, but said there were real challenges in terms of coping with that growth, one of which was funding.
Also highlighted was “the tooling debate” regarding the investment difficulties in developing new tooling lines though he added he believed this was now close to being solved.
Simon Moger, head of government programmes at Jaguar Land Rover, echoed some of the issues over tooling with questions over who funds and takes risks over investment in it. “I can’t reiterate enough the great opportunities the UK has for growth at the moment,” he said. “If we are going to make these opportunities happen there is so much we need to do. Everyone wants this to be a success but we are not underestimating the challenge it is going to take to get there.”
Mr Moger said although JLR would spend £5 billion on UK suppliers this year under capacity continued to be a problem.
“Significant supply chain capacity has been removed to Europe since the last recession and the growth of JLR and Nissan has filled remaining UK capacity,” he added.
“There needs to be significant extra capacity put into the UK and we need to work with banks, government and local partners to maximise opportunity.”
Irene Graham, managing director for business finance and strategy for the British Bankers’ Association, said: “The banks are open for business and want to work in partnership with the automotive industry. How we work together will drive forward how we are fit for purpose to meet the challenge for the automotive sector in this country.”