UK Automotive Industry

Iain McKenzie Excerpts

Tuesday 1st April 2014 Westminster Hall

[Mr Iain McKenzie (Inverclyde) (Lab)]

It is a pleasure to serve under your chairmanship today, Sir Alan. I, too, congratulate the hon. Member for South Staffordshire (Gavin Williamson) on securing the debate.

Today in the UK, we produce more than 0.5 million vehicles and 2.5 million engines each year, of which we export some 80%. That equates to a vehicle rolling off the production line every 20 seconds, making us the 14th largest producer in the world. Of course, as we have heard, the west midlands dominates the car manufacturing industry in terms of employment, but UK manufacturing industry as a whole employs about 2.6 million people, which is 8% of all jobs. Sadly, only 2,000 people now work directly in the automotive industry in Scotland, but I am old enough to remember the heady days of manufacturers such as Rootes and Chrysler just up the road from my constituency in Linwood. What plans do the Government have to encourage vehicle manufacturers to locate elsewhere in the UK and to take advantage of Government help north and south of the border and the skills that still exist in those areas of the country?

We should not forget that there are also jobs in the supply chain. More than 2,000 UK companies regard themselves as automotive suppliers, and they employ about 82,000 people. The UK automotive supply chain generates £4.8 billion of added value annually, with an estimate now of a possible further £3 billion if the opportunities are taken. They should be taken, because about 80% of all components required for vehicle assembly operations can be procured from UK suppliers. I repeat my question to the Minister about how he is encouraging sourcing from UK suppliers.

What will build the future of the automotive industry in the UK? It can probably be summed up in a few words: innovation and quality in design. Innovation means product improvements, and challenging accepted practices, processes and design limitations. This country has been a trailblazer of vehicle innovations that pushed boundaries and showed our competitors a clean pair of heels. In the past those innovations included transverse engines, limited-slip differentials and independent suspension, as well as numerous safety features and a reduction in weight by using new metals to build our engines. I could go on—I am an old mechanic and I could spend hours reciting British vehicle innovations.

Quality in design is what makes products timeless. Anyone who thinks of iconic cars of the past will recognise that British design is there. Hon. Members have spoken fondly today of the forerunners of the small family cars we see so much of today, such as the Mini, whose subframe chassis allowed the first transverse engine, with new positioning of the gearbox. That was a revelation. The Hillman Imp, built in Linwood in Scotland, had a cutting-edge rear-mounted aluminium alloy engine. With its less than 1-litre engine size it produced the same power as a much larger vehicle by cleverly optimising a 9:1 swept volume ratio. That gave sports car performance to a small family saloon. Further up the market range are classics such as the E-Type Jaguar, which is still one of the most iconic sports cars around. With its limited slip differential it was the forerunner of the 4x4. The weight that heavy goods vehicles can now carry is the result of our development of the air braking system.

Unfortunately, we lost our way for a while and stopped pushing at the design boundary and quality mark. The world overtook us. Most significantly, at first, the Japanese took quality to a new level. However, the way of thinking I have described is being revived by manufacturers in the UK, including Jaguar Land Rover and Nissan, not to mention bus and truck builders. The vehicles they are developing and the innovative designs they are offering are the reason why they are winning markets. That is why I firmly believe we need to plan for manufacturing; the resurgence cannot be left to chance, or to peter out. We need to plan for continued success and maximise benefit around the country. The Government need to encourage more research and development and put their foot on the accelerator.

We need small and medium-sized firms to be a critical part of the supply chain. How do the Government intend to promote a fully integrated UK supply chain and green procurement? We need to overcome supply and demand problems in relation to products and skills, and we need to tackle the culture that refuses to take pride in professions such as engineering and prevents good manufacturing firms from coming to schools to talk to young people. We need high-skill jobs; we need to win the race to the top; and we need many more apprenticeships like the one I served. We need to move up the chain of employment and skills.

Any plan should include green jobs in the automotive industry. We need to design cleaner factories and vehicles, along with cutting-edge production flow and quality assurance techniques, to embrace fully the culture of right first time and defect-free manufacturing. We need procurement that sources around the country to create jobs, but we also need to reduce lead times and promote a just-in-time procurement practice that complements a constant-flow production strategy. We need to end the competitive strategies that value low wage costs over a trained work force. For the consumer, price is not the only factor when purchasing.

As we have heard, one of the most important issues for the industry and the country is the debate about the UK’s membership of the EU. Ahead of the European election, the Society of Motor Manufacturers and Traders wants to ensure that its voice is heard in the automotive sector. Given that we are a significant part of a global industry, and that 80% of all cars manufactured in the UK are exported, the SMMT has commissioned a report, to be published tomorrow, that will provide an economic assessment of the value of the EU to the UK automotive industry.

Labour is clear that business is the solution, not the problem. A plan for manufacturing, with business working in partnership with the Government, is central to building an economy that works for everyday working people, resolving the cost-of-living crisis, delivering jobs that pay a wage people can live on and ensuring that we can pay our way in the world. All that can be made in Great Britain.

--- Later in debate ---

[Michael Fallon]

I am certainly happy to write to the hon. Gentleman about that. The Government have committed our side of the £500 million funding, but we cannot commit expenditure through and beyond the next Parliament. Perhaps the hon. Gentleman will allow me to write to him about that specific point.

Although there has been recent growth and expansion in the centre, and a lot of positive news, we should not become complacent. There is much more to be done to ensure that the growth we have seen in recent years is sustainable, particularly in building the capability and capacity of the supply chain, and I will turn to that now.

My hon. Friend the Member for South Staffordshire is right in saying that there is much more to do to strengthen the supply chain. Currently, only about 40% of the components of a UK-built vehicle come from a UK supplier, so there is clearly an opportunity for us to capture more of the supply chain. Through the strategy and the council, the Government and industry are working together to boost the competitiveness of the UK’s supply chain growth. We are investing some £129 million to strengthen advanced manufacturing supply chains that will create around 1,400 jobs, and we are supporting a Society of Motor Manufacturers and Traders-led project with £13.4 million of funding to help to improve the competitiveness and capability of 38 automotive supply chain companies.

The sector is also benefiting from Government funding worth more than £56 million for a total of nine AMSCI bids across four rounds of the competition. Between them, the projects aim to create more than 3,700 jobs and to safeguard a further 3,800 jobs. The Automotive Council has identified a potential £3 billion of opportunities for UK-based vehicle and engine manufacturers, where components are currently sourced from overseas.

The sector has also been successful in gaining funding from the regional growth fund, and has secured some £236 million in awards from that funding in rounds 1 to 4. To marry the opportunity with investor appetite, the automotive investment organisation, to which several hon. Members referred, aims to double the number of jobs created or secured in the automotive supply chain through foreign direct investments over the next three years to 15,000, and is currently on target to achieve that. It has had some early wins and has many investment opportunities in the pipeline.

The hon. Member for Inverclyde (Mr McKenzie) asked about the supply chain and what I have been doing to help to promote supply chain events. I have attended and spoken at events in London, Detroit and Milan for suppliers in the Po valley, and I have done the same in Tokyo and Nagoya, where tier 1 and 2 component suppliers already have some interest in the UK. I have been working very hard with UK Trade and Investment, and now the automotive investment organisation, to persuade suppliers to increase their presence in the UK and to do more closer to the prime producers.

[Mr McKenzie]

Does the Minister agree that encouraging a green supply chain would enable more manufacturers to source in the UK, and to get round what is always put up as an excuse—the idea that EU procurement legislation does not allow them to source as close to home as they would like?

[Michael Fallon]

I will certainly consider that and draw it to the attention of the Automotive Investment Organisation. It is an intriguing thought. We are obviously working closely on procurement issues in preparing to help manufacturers here with negotiations under the transatlantic trade and investment partnership with the United States, and we are looking at EU procurement rules in that context.

We know that the industry has concerns about the skills levels in the supply chain, and we share those concerns. To capitalise on the growth of the major manufacturers in the UK, we must tackle those skills gaps, so that we can build a strong UK supplier network. We are providing significant support through the employer ownership pilot. In the west midlands, for example, £1 million will support the Telford manufacturing partnership, led by DENSO, in assisting in pre-employment activities and in upskilling employees. We are working with the industry through the Automotive Council to ensure that we target the next phase of support where it is most needed.

Apprenticeships are at the heart of our approach to improving work force skills. In 2012-13, we supported over 66,000 apprenticeship starts in the engineering and manufacturing technologies sector subject area. Trailblazers are leading the way in implementing new apprenticeships and in helping to design the first apprenticeship standards.