Key points in the Lloyds Bank Automotive Report: 2017Uncategorized
Made in the Midlands Patrons, Lloyds Bank have conducted their third annual survey of the UK automotive manufacturing sector, part of a series of reports that look to examine the main opportunities and issues affecting Britains key industries.
Challenges and opportunities
26% say increased costs due to weak sterling is a challenge
77% are investing in or planning to engage new international customers in the next two years
62% this the 2015 emissions issue negatively impacted consumer confidence in the industry
Productivity, pay and growth
19% of current business turnover is the average planned investment over the next two years
50% say automation is the biggest investment priority for their business
15% average forecasted growth in turnover over the next two years
57% have started work to develop driverless vehicle technology
64% plan to develop low carbon or electric vehicle technology
24% of turnover is the average planned investment in R&D
Growth & Investment
2016 was the UK automotive industrys most productive period this century.
More than 1.7 million cars rolled off UK production lines in 2016, which is an 8.5% uplift on 2015 and the highest output since 1999.
But with around eight out of every ten cars manufactured in the UK now exported, bound for one of 160 markets worldwide, and more than half of all UK car exports going to the EU, plenty rests on the future overseas trading relationships that Britain develops.
When it comes to achieving growth, the focus this year remains on new product development (39%) which is likely to be driven by firms seeking to capitalise on the shift towards low emission, electric and driverless cars.
Plans to invest in infrastructure (22 per cent) and to pursue mergers and acquisitions (20 per cent) fell back significantly on last year, from 43 per cent and 35 per cent, respectively. Firms are also prioritising existing product development (36 per cent) and entering new markets (31 per cent), likely in a move to seek out alternatives to EU markets.
The top three biggest priorities in businesses are data identification and analysis (27%), digital technology (45%) and automation (50%).
The British automotive sector employs some 169,000 people directly in manufacturing, including some of the worlds most-skilled engineers, with more than 30 manufacturers building more than 70 different models.
A key focus for the industry has been to secure a pipeline of skilled engineers by providing apprenticeships and training, which is a strategy that Lloyds Bank is supporting as part of its Helping Britain Prosper plan.
Lloyds Banking Group has committed to supporting the Advanced Manufacturing Training Centre in Coventry, investing £1 million a year to develop more than 1,000 manufacturing apprentices, graduates, and engineers by 2020.
If their job creation plans come to pass, the sectors job forecast growth is stable, with 84,909 jobs set to be created across the automotive supply chain by 2019 very similar to the 84,975 in 2015. However, much depends on securing the conditions which maintain UK automotive competitiveness, to safeguard jobs in the future.
Last year 58 per cent of firms said they planned to bring some manufacturing back to the UK within two years, which has grown to 64 per cent in 2016.
In the same period, the proportion of manufacturing operations that firms planned to reshore also grew from 26 per cent to 31 per cent. Anecdotally, employers arent onshoring purely to secure supply or quality, with many demonstrating a desire to support the economy in the UK and their local area too.
The British automotive sector is a global institution.
But decades of consolidation in the sector mean that most British car makers even quintessentially English brands like Rolls Royce, Aston Martin and Land Rover are largely overseas-owned and their biggest markets are all abroad.
Weve also seen that investment in infrastructure and mergers and acquisitions was a strong focus for the industry in 2015. This appears to have paid dividends as 75 per cent of firms said they had the capacity to increase production if the opportunity arose to expand into a new market.
Only five per cent said this would require additional investment, down from 14 per cent last year.
Of the few customers not planning to engage new customers overseas, the main barrier was the same as last year a lack of knowledge of international markets (60 per cent) followed by a focus on the domestic market (47 per cent) and the weakening of the pound (40 per cent) which has impacted the cost of overseas investment.
Challenges & opportunities: From emission to electric cars
The automotive industry is experiencing a period of intense technological innovation that will help shape the sector for many years to come.
The drive to create cleaner, lighter, more efficient vehicles is behind much of the new product development we are seeing, though driverless cars are also a key focus for investment.
Almost half (46 per cent) of firms told us they were investing in R&D to address the current opportunities around innovation. While 38 per cent were collaborating with other firms, 34 per cent were hiring new staff, presumably to upskill their workforce, and 28 per cent were looking to acquire other businesses to maximise innovation opportunities.
And firms told us they increased planned R&D investment from 17 per cent of turnover in 2015 survey, to 24 per cent in 2016, although in future this may change as the implications of Britains exit from the EU become clearer. They also reinforced plans to upskill their staff or change their processes or business model to develop low carbon or electric vehicle technology, which is being pursued by 64 per cent of firms, up from 52 per cent last year.
57 per cent said they had already made moves to develop driverless vehicle technology, a further 18 per cent hold plans to do so. Such investment, alongside the impact of the referendum on sterling exchange rates, are likely to have influenced respondents views on the price of cars going forward.While a fifth (20 per cent) predicted they would increase significantly in the next two years, 39 per cent forecast a marginal increase and 29 per cent anticipated they would stay the same. Just 12 per cent foresaw a marginal decrease in car prices with no respondents thinking they would decrease significantly.