SMMT event attempts to unlock funding to grow the British supply base
Last Wednesday, Britain's car industry brought together the country’s biggest lenders and the automotive supply chain in an attempt to boost lending and investment in the sector. Over 100 UK-based automotive suppliers met with lenders from Barclays, HSBC, Lloyds TSB, Royal Bank of Scotland and Santander at a specialist networking event to discuss the financial needs of the GBP4.8bn supply chain industry. Taking place near Solihull in West Midlands, the event was organised by the Society of Motor Manufacturers and Traders' (SMMT), and may prove crucial in the expansion of the UK’s automotive supply base.
Paul Everitt, chief executive of the trade body, said that “ultimately, improving access to finance is vital for the growth of the UK automotive supply and it is encouraging to see the finance sector show a willingness and commitment to build new relationships with the sector from the ground up. “
“SMMT’s 'meet the funder’ event is designed to progress relationships and facilitate discussion between banks, non-bank lenders and industry. This will help to build trust and overcome barriers to successful business development.”
Car manufacturers including Jaguar Land Rover, Nissan, Honda, BMW, Ford, Aston Martin and General Motors were also there to reiterate their commitment to invest in the British automotive industry.
Around GBP6bn of investment in British manufacturing has been pledged by the industry over the past couple of years. The move is key as UK manufacturing attempts to capitalise on its resurgent market and re-establish a supply base with a workforce that costs less than its French or German equivalent, without the need to set up shop further into eastern Europe.
While most of continental Europe’s car markets are currently languishing in the doldrums, demand in the UK is performing relatively well. In October, the UK market posted an extremely healthy growth rate of 12.1% y/y, buoyed by competitive discounting and incentives and the comparative stability that the UK economy is currently exhibiting. Exports of the premium brands Jaguar Land Rover and Mini have excelled alongside the German premium brands setting the premium sector apart from struggling European volume brands.
The recovery in sales and exports has caught the UK industry off guard. Suppliers are struggling to keep up with auto manufacturers, resulting in efforts by industry and government to tackle supply-chain bottlenecks. Prime Minister David Cameron's coalition administration recently set up a supply-chain assistance program to provide grants and loans for industrial suppliers and has doubled the number of government-sponsored apprenticeships to around 900,000.
However a major hurdle for the industry is the need to invest in tooling and the flexibility to get the required financing when necessary. Despite the growth, there are still bottlenecks that are stopping the UK-based car manufacturers from spending the identified GBP3 billion a year (USD4.5 billion) that they have identified as available to local suppliers were it not for a lack of local production capacity.
Frank Wienstroth, a spokesman for BMW, identifies a major issue for UK suppliers, "Not all technologies required to produce components are available in the UK, some simply don't yet exist, others are either not able to support the volume demand or are uncompetitive."UK manufacturers are, therefore, spending mainly with the more traditional European countries but this is more costly in terms of transport, tax and currency. The UK has competitive advantages at the moment with an investor-friendly tax regime, regional incentives and a skilled workforce . Event’s like this should help to take advantage of the current situation and help rebuild the diminished UK supplier industry.
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