UK Automotive Industry

Iain Wright Excerpts

Tuesday 1st April 2014 Westminster Hall

[Mr Iain Wright (Hartlepool) (Lab)]

It is a pleasure to serve under your chairmanship again, Sir Alan. I thank the hon. Member for South Staffordshire (Gavin Williamson) for securing the debate. It has given us a welcome opportunity to discuss what he rightly said is a hugely important part of the British economy.

I think that the hon. Gentleman began by mentioning Italy; he also mentioned the importance of the west midlands for the UK automotive industry. That is true, but in God’s own country, the north-east of England, a single Nissan plant produces more cars than the entire Italian car industry. That is a remarkable achievement and shows how the British car industry has been transformed. Forty years ago, it was a symbol of industrial decline, inferior products, obsolete manufacturing processes, poor industrial relations and a lack of competitiveness. The sector has undergone a remarkable and welcome transformation in fortunes in the past seven or eight years. As the hon. Gentleman said, the task for all of us is to maintain that competitive edge for the UK automotive sector, with an emphasis on high productivity, high skill levels and innovation, with the aim of raising living standards for all within the industry.

As has been mentioned, there has been great news recently, including the launch of the new Quashqai by Nissan at its plant in Sunderland, the new factory being built by Jaguar Land Rover in Wolverhampton, and the new Mini in Oxford, but there has been bad news too, with the recent announcements at Honda. Anne Snelgrove, whom you will remember from her time in this House, Sir Alan, has been championing the issue in Swindon.

Last month, my hon. Friend the Member for Streatham (Mr Umunna), the shadow Business Secretary, framed the challenge facing the British economy, terming it Agenda 2030. It has four clear pillars: active government investing for the long term; liberating the talents of all; solving tomorrow’s problems today; and an outward-looking, open approach to the world, not isolation. I want to base my discussion of how we can maintain the comparative advantage of the UK automotive industry on those four pillars.

As for an active industrial strategy, it is, as my hon. Friends the Members for Birmingham, Erdington (Jack Dromey) and for Birmingham, Northfield (Richard Burden) said, vital that the Government provide long-term policy certainty and predictability which transcend electoral and political cycles and align more closely with industry’s investment and process cycles. We should be thinking not only about next year or the next five years, but the next 15, 20 or 30. That is why my hon. Friend the Member for Streatham chose the title Agenda 2030. It is five years this month since the Labour Government published “New Industry, New Jobs”, with an emphasis on activism and targeted investment. A grant was provided to Nissan to support a new battery plant and the manufacture in the UK of the Nissan Leaf. The scrappage scheme helped maintain the industry at a time of acute falling demand. More importantly, as we have heard today, the Automotive Council was set up to lay the foundations for a long-term partnership between the industry and the Government and to build long-lasting capabilities and create supportive policies for the automotive industry; it is something that we strongly support. We remain committed to the long-term continuation of the Automotive Council as the key institution for driving strategy, collaboration and innovation in the sector. As we have heard today, we cannot achieve that without the pride, professionalism and commitment of the industry’s work force.

My right hon. Friend the Member for Oxford East (Mr Smith) mentioned Cowley, and my hon. Friend the Member for Birmingham, Erdington mentioned Jaguar Land Rover. As my right hon. Friend the Member for Oxford East said, trade unions often get a raw deal in the media and the House. However, we must give Unite credit for playing a leading and proactive role in the automotive industry in general. I am pleased that it did so much great, proactive work to ensure the next generation Astra will be built at Vauxhall’s Ellesmere Port plant. I hope that the Minister agrees that the collaborative approach of the industry, the work force and the Government is the model we should take forward for the long term.

To ensure the UK’s automotive industry achieves its potential, we must address the issues surrounding the supply chain. The Automotive Council estimated that an additional £3 billion per annum could be provided in the UK’s automotive supply chain—a 40% increase on current levels of UK-based supply chain activity. Reshoring is an exciting opportunity. KPMG estimates in its excellent report from about 18 months ago, “Capturing opportunity”, that supply chain opportunities could result in tens of thousands of additional jobs in the UK automotive supply chain by 2017. The prize of more and better-paid jobs, additional industrial capability and renewed competitiveness is huge, and we must grasp it. That is why the Labour party asked Mike Wright of Jaguar Land Rover to undertake an independent review of the manufacturing supply chain to ensure that it is as collaborative, co-ordinated and competitive as possible.

Will the Minister update the House on what he is doing to bring more of the global supply chain in the sector to the UK? How many firms in the automotive industry have received funding from the advanced manufacturing supply chain initiative? Does he plan to put AMSCI’s funding on a more permanent footing to give industry the long-term ability to plan for the future?

As the Minister knows, access to finance remains a problem in the supply chain. Firms often require funding to purchase tooling to complete an order, but they are not paid by the customer until the products are shipped, which puts immense pressure on their cash flow and undermines the potential of the UK automotive supply chain. We need the banking system to work with and for British industry, especially the excellent and promising automotive industry. Far too often it does not. The automotive industrial strategy states:

“The Automotive Council will…work with the financial services industry to develop long-term investment finance products that meet the needs of the automotive industry”.

Will the Minister update the House on progress with that? What has been the flow of finance to the automotive supply chain, and what else will be done?

I mentioned the potential to create tens of thousands of additional jobs, which brings me to the second pillar of Agenda 2030: skills. Every right hon. and hon. Member mentioned skills in their contribution, and they are a massive issue in the automotive industry, and in manufacturing in general. It will make or break the potential of our country’s automotive industry in the next 20 or 30 years. The automotive industrial strategy states that the pipeline for new entrants into the industry narrows too early, with too much leakage at important points. In addition, I am struck that in several of the automotive industry’s bright spots, such as my region of the north-east, as well as the west midlands, unemployment is appallingly high. The unemployment rate in Birmingham, Erdington is the 53rd worst in the country and in Birmingham, Northfield it is the 59th worst. My hon. Friend the Member for Birmingham, Erdington said that one in four young people in his constituency are jobless. We need to marry up skills and potential with the potential work force of the future.

My hon. Friend the Member for Inverclyde (Mr McKenzie) talked about the cost-of-living crisis. It is more fundamental than simply prices versus wages; it is about how our kids get decent jobs, a high standard of living and a good career. A co-ordinated industrial strategy should link education policy and curriculum content with the automotive industry’s needs. Will the Minister update the House on how the skills road map for the sector is progressing? How will it improve skills and ensure there are more opportunities and fewer vacancies in the industry? The strategy states that 7,600 apprentices and 1,700 graduates will be recruited in the period 2013-18—the hon. Member for South Staffordshire mentioned those numbers. How is that progressing? What are the Government doing to promote better collaboration between firms in the industry to address the sector-wide problem of skills?

The third pillar of Agenda 2030 is solving tomorrow’s problems today, or the importance of innovation, which my hon. Friend the Member for Inverclyde discussed in his strong contribution. In a debate last month on the automotive industry in the other place, it was said that the chief executive of Jaguar Land Rover expressed the view that the most important thing to his company was innovation. We have a lot of so-called “sticky” technologies and comparative strengths that we need to enhance. This country is particularly strong in designing, producing and manufacturing engines. I am pleased to see the hon. Member for Romsey and Southampton North (Caroline Nokes) in the Chamber. She mentioned Ford. It should be a source of enormous pride to us that one in three engines produced by Ford globally are produced in the UK. We must continue to be strong in engine technology. Will the Minister tell us what progress is being made in setting up the advanced propulsion centre?

This morning, I met Air Products, a firm that is a leading player in the hydrogen industry. It is normally a business-to-business firm in the chemicals industry. What is the Minister doing with the Automotive Council to develop capability and infrastructure for hydrogen fuel cell technology in cars? How successful has the planned collaboration been between the Automotive Council and the Engineering and Physical Sciences Research Council? Will the Minister update us on the work that the Automotive Council has done to identify evolutionary and disruptive technologies that will have an impact on the UK automotive industry and which could hinder progress or provide benefits to our comparative advantage?

The fourth pillar of Agenda 2030 is being outward-looking and open. It is clear from today’s debate that the House wants to encourage inward investment, so original equipment manufacturers and tier 1 and tier 2 automotive manufacturers base their European operations in the UK. The domestic market is important, but that springboard to a European marketplace of half a billion customers is the key selling point for reshoring and encouraging inward investment. As my hon. Friend the Member for Birmingham, Northfield said, internal wrangling and navel gazing will not help potential investment into the UK. We may lose our competitive edge if we do not address the policy certainty issue about European issues.

Will the Minister address directly the point made by the head of Nissan late last year, when he said bluntly that the car maker may have to evaluate its UK operations if Britain pulls out of the EU? Does that not concern him? Has he seen the report on UK jobs supported by exports to the EU published this week by the Centre for Economics and Business Research, which shows that 4.2 million jobs—particularly those in the north and in the motor trade—are associated with the demand in exports to the EU? It is vital that we remain part of the EU to ensure that manufacturers can base their operations in the UK.

I congratulate all hon. Members who have spoken today. It is clear that the automotive industry is a massive success for British manufacturing. It is a great case study in how industry, the work force and the Government can work together for the long term, with an emphasis on innovation, productivity, competitiveness and exports. We cannot be complacent in the fiercely competitive world in which we live. We must work together for the long term to maintain and strengthen the enviable comparative advantage of the automotive industry in the UK. I look forward to working with all hon. Members to meet that challenge.