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British Car Manufacturing

Rebecca Harris MP

The outlook for the UK motor manufacturing industry is increasingly positive. In the last year alone the sector has grown by over 5% and we produced 1.4 million vehicles. The sector is now at an all time cash high having reached a turnover of £30 billion.  It is the UK’s biggest manufacturing sector and will unquestionably be instrumental in driving the economic growth and rebalancing our economy. For the first time in a generation it looks like this year we will export more cars than we import.

I will focus throughout on what the Government can do to help and assist the motor industry. I believe the Government’s focus should be (and I believe is) on making it easier and cheaper for existing manufacturers to operate and expand by reducing the Governments burden on the industry, through both tax and regulation. And in addition to this, just as importantly, is the Government’s international role, to help open up markets and bring investment to the UK though international agreements and supporting our manufacturers in selling abroad.

The UK Manufacturing industry is incredibly diverse. We have 7 volume car manufacturers in this country including Vauxhall, Nissan, Honda and Jaguar Land Rover. Supporting this huge industry we have over two thousand parts manufacturers these include very large companies, such as Ford who produce all their diesel engines in the UK and the very small companies producing incredibly specialised parts to serve the industry. We are a key worldwide base for research and development including at the very pinnacle of motorsport, Formula One. Britain has eight out of the twelve Formula One teams manufacturing facilities including Mercedes, Renault, Red Bull and Force India. We should be proud of our current position and of our heritage. The motor sport industry is a key driver of the wider motor manufacture in the UK.

Recent positive announcements are, however, a breath of fresh air to an industry which over the last two decades has been dogged by bad news.  Some examples of recent positive news are, Nissan investing £192 million to build the new Qashqai in the UK, safeguarding 6,000 jobs, Jaguar Land Rover is investing £355 million in a new factory site in Wolverhampton, creating 750 jobs, Ford has unveiled a £240 million expansion plan at its engine plant in Bridgend, South Wales, creating up to 600 jobs  and Vauxhall has announcing that its new Vectra model will be built in Ellesmere Port in a £200 million investment, safeguarding more than 1,200 jobs.

This has not always been the case, the UK car industry has over the past 30 years overcome some of the worst challenges any sector in the UK has faced. Jaguar Land Rover’s heritage as a part of British Leyland meant that the company has had many different owners since its independence in 1986. Other members of the group, however, have not survived including the sad demise of MG Rover in April 2005 with the loss of 6,500 jobs. One must also recognise the role of the unions in troubles the industry has faced in the past, with industrial strife being a real set back to productivity, however, it would seem that we have turned a corner and the unions are currently making a positive impact on the industry.

This history should remind us not to be complacent about the position we are in. This is why I am pleased with the key announcement in this year’s budget that there will be a consultation on the Government’s intention to introduce a research and development tax credit. This credit has the potential to drive innovation in both car and parts production. This credit should be introduced as soon as possible to incentivise the development of new technology in the UK but also to ensure that our manufacturing sector continues to be as attractive a proposition as possible to worldwide business.

Low carbon cars have the potential to enable the UK car industry to innovate and add real value to the UK car industry. By creating products which are not yet being sold in the rest of the world we can have a leading advantage on our global competitors. The Research and Development tax credit will help with this kind of innovation; however, the current composition of the Carbon Reduction Commitment (the previous Government’s cap and trade scheme) is very bureaucratic and does not incentivise the use of Green technology that could reduce the running costs of factories. The Government should make the Carbon Reduction Commitment less bureaucratic making it easier for manufacturers to positively engage in the process and reduce their emissions rather than be penalised by the scheme.

Growth will not be created by politicians but by the men and women working to develop new technology, in places like Ford Dunton and Jaguar’s Coventry product development base. Frequently these innovations lead to positive spin offs in different industries, such as the use of high efficiency diesel engines developed for the car industry to drive drones in the defence sector current under development at Cosworth. Research and Development enables us to use innovations to produce products which are better and more efficiently produced than our competitors.

The major headline grabbing contracts of the seven volume car makers are vitally important to drive growth; however, in terms of jobs and the competitive nature of the industry we must drive forward our smaller manufacturers. They are different from the major manufacturers because they do not have large compliance and legal departments and are affected in a far greater way by the red tape which affects all small and medium enterprises. The Cabinet Office Red Tape Challenge is incredibly important in dealing with this by pushing regulation reduction to the top of the agenda. At the same time the Regulation Policy Commission, the Government’s independent better regulation committee, should be beefed up and given more powers to advocate for small and medium sized businesses. Bad regulation is just as problematic as too much regulation. A reduction in red tape and further focus on fixing bad regulation could drastically increase the number of man hours available to our smaller manufacturers. Red tape should continue to be a key priority for the Government and is especially important in making the UK a more competitive place to do business.  

Car manufacturers are major employers; they employ thousands of people across different tiers of their organisations from skilled engineers making sure factories are running smoothly to the people designing the next car model or part. We need a workforce which is able to take up engineering and manufacturing jobs, to do this we need to get more young people interested in working in manufacturing. Regrettably the perception of our young people is too often that engineering is the same things as being a mechanic or a gas ‘engineer’.

We need to push the top deciles of every class to have a high level of Science, Technology, Engineering and Maths (STEM) education whilst they are still at secondary school level and then get them excited about doing engineering when compared with pure science or other STEM subjects.  We can do this by raising the profile of engineering in this country and dispelling the myths which surround it, including the idea that we don’t make anything anymore and show our young people the career opportunities in the sector. I strongly believe that a major part of the battle is raising the profile of our engineers as part of this I think we should have a Chief Engineering Advisor on the same level as a Chief Scientific Adviser. The Chief Scientific Advisor currently has responsibility for engineering; however, I feel there should be particular focus on the engineering sector within Government, both to highlight how we can help engineering, but also to show the level of importance the British Government places it.  The Government should appoint a Chief Engineer and task them specifically with raising the profile of engineering inside and outside of Government. 

The Government’s ‘See Inside Manufacturing’ initiative which takes school children to see inside manufacturing firms is another way which we can raise the profile of engineering in the minds of our young people. By showing them the potential career pathways and getting them excited about making cars in the UK.  This scheme has real potential to change young people’s views about making cars and if properly implemented it will get young people excited about their production and design. As part of the scheme young people will be able to talk to apprentices and learn more about modern high-value manufacturing and the wide range of rewarding jobs available in the exciting and diverse motor industry sector. It must not just be about a nice school trip, but about showing off the apprenticeships and other career opportunities that the firm offers and what they can expect to be doing. The Government should expand the See Inside Manufacturing programme and if possible make it available to all schools.

The Government’s flagship apprenticeship programme is also vitally important to the future of the car manufacturing sector, we need to provide a workforce with the required level of skills to the car industry.  The Government’s apprenticeship drive will prove to be the single most effective thing this Government has done.  Through apprenticeships we can keep skills alive and by making it easier and indeed cheaper and easier for companies to hire young people who are not yet equipped for a job in the industry but who will be at the end of their apprenticeship.

Case for British Car Manufacturing and Comparatively Low levels of Tax

As a member of the common market we have the potential to position ourselves as the European hub of motor manufacturing for the rest of the world. This is not a new idea, the Thatcher Government succeeded in bringing in companies like Honda to produce cars within the UK in the 1980’s. This was done by making Britain look more attractive to companies compared to the rest of Europe. This is particularly successful given the low level of international opinion of Britain generally which existed given the industrial strife of the 1970’s and early 1980’s.

The task which faces this Government, however, is far greater, the growth of countries like Brazil, India  and China and the strife in the Eurozone mean we need to cast the net wider and aim to be the best placed in the world to compete for business and help our manufacturers to sell to countries all over the world. The Society for Motor Manufacturers report that the changes to tax rates helped the motor industry to be successful. Many of the car companies that have made large manufacturing commitments (including Nissan, BMW and Ford) have cited the importance of the competitiveness of the UK tax regime and the allowances the Treasury afford the industry as key reasons for their renewed commitment in the production of vehicles in the UK. This is in no small part due to the UK’s comparatively low corporation tax rate. The Chairman of Vauxhall recently stated that the fact that the Government have put their current tax regime in place is a key factor in making Britain a great place to build cars. It should be said, however, that the current comparatively low level of the pound is also assisting the industry.

In addition, it is vitally important that the UK Government step forward and is prepared to go out and sell Britain to the rest of the world. In some cases this will be by taking the delegations to markets which we have previously not had large amounts of trade with and in others it will be about making sure that our teams on the ground are effective at both pointing our companies towards effective contacts and making sure they are aware of any market sensitivities in a region.

This Government has begun to rapidly refocus UK Government assistance to our companies who want to trade overseas and is actively making it easier for our companies to trade with the rest of the world, but too often we are already playing catch-up after years of neglect. The Government needs to continue with this agenda.

Since it came to power this Government created a far more hospitable environment for Car Manufacturing to operate within, the challenge we face, however, should not be underestimated. There is less money to go around than at any time since the 1930’s and at the same time instability in the Euro zone has made investment far more perilous. In light of this car manufacturing has done staggeringly well on the back of the attractive investment environment created by this Government. I call for the Government to finish its work on the Research and Development Tax Credit and to fulfil its promise to reduce the bureaucratic burden of the Carbon Reduction Commitment. In addition to this it is vital that we set the foundation for the future and support our young people though apprentices and STEM education. My argument for a Chief Engineering Advisor is, I believe, incredibly important in raising the profile of engineering in this country, however, I do recognise that the current Chief Scientific Advisor is and engineer!