£3 billion of supply chain opportunities for UK automotive sector

27 September 2012

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27 September 2012 | Anna Reynolds

International automotive companies are chosing UK manufacturing in greater numbers with the sector forecast to grow by 9 per cent per year to 2.2 million vehicles by 2016, according to a study commissioned by The Society of Motor Manufacturers and Traders (SMMT).

The report by KPMG, Driving the Motor Industry, is based on feedback from vehicle manufacturers, suppliers and industry bodies including the Automotive Council and the Department for Business, Innovation and Skills.

The Automotive Council has identified £3 billion of supply chain opportunities for UK-based businesses from working alongside purchasing departments of original equipment manufacturers (OEMs). Evidence that OEM production in the UK is set to increase by 9 per cent per year follows recent investments by Jaguar Land Rover, BMW and Nissan as well as a rise in demand experienced by supply chains that serve OEMs.

The report highlights the UK’s key strengths lie in its varied mix of manufacturers with a reputation for quality engineering. Further, the UK exports to more than 150 countries globally, with a higher proportion of vehicles going to high-growth, non-EU countries than any other EU nation (approximately 55 per cent).

Government support in the UK and a focus on low carbon production were other factors behind increased supplier numbers. UK grants are available to automotive suppliers, such as the Regional Growth Fund and the Advanced Manufacturing Supply Chain Initiative.

Labour costs in the UK are also significantly lower than those in Germany and France, which has contributed to making it particularly attractive to suppliers. But the report warned while 80 per cent of automotive parts can be sourced in the UK, the capacity of these suppliers to meet demand is not yet at the required levels.

With the benefits of local sourcing being much greater, the study called for sustained government help to develop a long-term supply chain fund that boosts access to finance and takes account of longer return on investment periods.

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