Toyota's investment signals a vote of confidence in Britain's auto sector © Toyota
Toyota's investment signals a vote of confidence in Britain's auto sector © Toyota

Toyota invests £240m in UK supply chain

16 March 2017

Toyota will invest £240m in its Burnaston plant near Derby, the manufacturer announced, in a show of commitment to manufacturing in the UK after the country’s departure from the EU.

The move is supported by an investment of £21.3m from the UK government, which has pledged to do all it can to maintain the competitiveness of the automotive sector after Brexit.

The Japanese automaker said its investment would allow it to build vehicles on a new platform and promote the use of locally-built components, while the government’s grant would go towards researching, developing and enhancing the plant’s environmental performance.

The firm added the facility would be upgraded with new equipment, technologies and systems enabling future production of vehicles on the Toyota New Global Architecture (TNGA) platform, which underpins the fourth-generation Prius and the Toyota C-HR crossover, currently built in Turkey.

UK business and energy secretary Greg Clarke said he welcomed Toyota’s plan to add the TNGA into the UK supply chain.

“Our automotive sector is one the most productive in the world and Toyota’s decision to invest in upgrading its Burnaston plant is a further boost to the UK auto sector,” he said.

“Toyota is one of the world’s largest car producers and this inward investment underlines the company’s faith in its employees and will help ensure the plant is well positioned for future Toyota models to be made in the UK.”

According to the Financial Times, around three quarters of the cars Toyota produces at its Burnaston plant—currently, the Auris hatchback and family Avensis car—are exported to the EU, while the company is also heavily dependent on the single market for components that go into its vehicles. 

Johan van Zyl, president and CEO of Toyota Motor Europe, told the Economic Times that the investment was a sign of confidence in the UK’s auto sector but warned that tariff-free access to the European single market would be crucial after it leaves the EU.

“Our investment demonstrates that, as a company, we are doing all we can to raise the competitiveness of our Burnaston plant in Derbyshire,” he said.

“Continued tariff-and-barrier-free market access between the UK and Europe that is predictable and uncomplicated will be vital for future success.”

The UK car industry warned that losing access to the single market and customs union would hurt its competitiveness as the outcome of a “hard Brexit” would see the UK fall back on World Trade Organization rules.

In this event, exported cars would face a tariff of 10%, while imported car parts would face a 2-4.5% levy.

Nigel Driffield, professor of international business at Warwick Business School said the move signalled UK government willingness to back its car industry but it would need to protect manufacturers’ supply chains post-Brexit.

“At the moment the main UK producers have supply chains which cross the channel a number of times, and this is especially true of the Japanese car manufacturers,” he said.

“These are particularly vulnerable to a hard Brexit, as both the tariff and non-tariff barriers that may arise will make co-ordinating such supply chains problematic.

“The government, as well as local agencies, need to give careful thought to where local supply chains can be strengthened, and where the vulnerabilities to a hard Brexit are.”

Driffield added that although the announcement has given a minor boost to the UK’s auto industry, the government needed to make sure it remained competitive with other countries that would also be receiving investment.

“The £240m investment is dwarfed by the proposed $10bn that the company intends to invest in the US over the next five years, and is an amount that is not much more than ticking over,” he said. 

Earlier this month, SM reported that Nissan had called on the UK government to invest millions in attracting car part manufacturers or risk a "house of cards" collapse in the industry post-Brexit as the UK supply base was not globally competitive.

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