UK Automotive Industry

Richard Burden Excerpts

Tuesday 1st April 2014 Westminster Hall

[Richard Burden (Birmingham, Northfield) (Lab)]

It is a pleasure to follow my fellow Birmingham Member of Parliament and hon. Friend the Member for Birmingham, Erdington (Jack Dromey) and the hon. Member for Warwick and Leamington (Chris White), whom I have known for many years—I remember well that first debate. I also congratulate the hon. Member for South Staffordshire (Gavin Williamson) on securing the debate. He started off his remarks by talking about “Top Gear”, and I think I may be the only Member in this debate who has actually been on the programme. I appeared on a feature looking for the fastest political party, and the good news, at least for the Opposition, is that I soundly beat the Conservative candidate, but the rather bad news is that I was beaten by the Legalise Cannabis Alliance, so I do not necessarily talk about that too much.

[Sir Alan Meale (in the Chair)]

Order. As a result of Members kindly keeping their contributions short, we have the opportunity to allow a little more time to subsequent speakers. The hon. Gentleman can now speak for reasonably longer than he was planning.

[Richard Burden]

Thank you, Sir Alan; it is much appreciated.

As my hon. Friend the Member for Birmingham, Erdington said, ask anyone in the automotive industry what they want from Government and two words will come up time and time again: continuity and predictability. It is not always exciting for politicians, because we all love to blame everything that goes wrong on the other side and to corner the market in everything that goes right for our side, but the automotive sector does not work that way. The reality is that all major political parties underestimated the importance of manufacturing for too long, but that has now turned around.

The automotive industry has been a trailblazer, with great partnerships within the industry, which my hon. Friend the Member for Birmingham, Erdington and my right hon. Friend the Member for Oxford East (Mr Smith) discussed, but also with the Government and with Parliament. The industry forum that thrived under the previous Government was a building block of that success, as was the creation of the Automotive Council, which creates road maps for future issues facing the industry, such as skills and the low-carbon agenda. Other hon. Members have referred to the figures that highlight the automotive industry’s success story. Despite your offer that I can speak for longer, Sir Alan, I will not repeat them, but suffice it to say that some of the figures are startling.

I want to discuss something that the hon. Member for South Staffordshire mentioned, namely the role of the motorsport and performance engineering industries in the automotive sector. Eight of the 11 Formula 1 teams are based in the UK. Lewis Hamilton won the Malaysian grand prix on Sunday, which was very good, and the results state that he was driving a Mercedes, which he was, but that Mercedes was built in Brackley. The factory in Brackley has been Honda, Brawn and Mercedes, but it has always been British. Motorsport companies are involved in so much more than what many people usually think of as motorsport, such as the fantastic work being done in a range of areas at the McLaren Technology Centre by McLaren Applied Technologies. How many people know that the skeleton sled on which Lizzy Yarnold did so well at the winter Olympics was designed by McLaren here in the UK? Williams Advanced Engineering’s centre is also doing much great work, and companies such as Prodrive and Cosworth are also involved in state-of-the-art work.

The UK, however, is the home of motorsport not only in Formula 1, but in so many other ways. The national and grassroots series are among the building blocks that make our motorsport and performance engineering industries as world-class as they are. The premier national racing series is the British Touring Car championship, the opening round of which was on Sunday. The main sponsor of the series is Dunlop Motorsport. Why therefore is Dunlop Motorsport, as part of that cluster, turning its back on the home of motorsport? When the Minister responds, will he update the House? I know that approaches have been made on the matter from both sides of the House. My hon. Friend the Member for Birmingham, Erdington and I have worked hard on the issue, and it needs to be said to Dunlop that it has still not answered satisfactorily the questions that have been put to it, and that the reasons it has given for doing what it seems intent on doing have not been convincing. It will be bad for motorsport, for the cluster and for Dunlop if it goes ahead with what it is doing.

I mentioned the British Touring Car championship. Two of the races on Sunday were won by Hondas built in the UK. The road car, the Civic, is also built in the UK. Despite the success of the automotive industry, we sometimes find things that are not great, and it is worth pausing for a moment to reflect on the fact that just in the past week Honda has had to cut back on some shift working at Swindon, which is something to be mourned by all of us. If we ask the people at Honda why that is, they say that it is about the market for their cars, and crucially the European market. Europe is still the largest export market for UK vehicles.

In my constituency, Shanghai Automotive still produces MGs and has its European technical centre there as a base, a foothold and a bridge into Europe. The hon. Member for South Staffordshire was right that the automotive industry needs reassurance, but it needs reassurance that we will not play fast and loose with our membership of the European Union. That is important not only to the motor companies exporting into Europe. Jaguar Land Rover, for example, has fantastic export achievements in other parts of the world, but ask it and those who want to export to the United States about the European Union and they will also say that continued membership is vital to them, apart from anything else because of the free trade agreements and other ongoing negotiations. I accept that the Conservative party might have one or two problems, looking at its flank with the UK Independence party, but frankly the interests of Britain are more important. Continued membership of the EU and reducing the uncertainty about our membership are very important.

On the supply chain, the hon. Member for South Staffordshire was right that one way in which we can and should do more is by ensuring that its component sections—the original equipment manufacturers—in the UK are firmed up and developed. About two years ago, KPMG produced an important report for the Society of Motor Manufacturers and Traders which showed that about £3 billion-worth of opportunities are being missed in the supply chain. That is why it is important for us to do more.

Some good things are going on: the Automotive Investment Organisation, headed by Joe Greenwell, formerly of Ford of Britain, has been set up to attract vital foreign investment, which is good news; the advanced manufacturing supply chain initiative has been established, which is good news; and the advanced propulsion centre is being established, which is important to ensure that there are opportunities for small and medium—and not so small and not so medium—companies in the development of ultra-low-emission vehicles and so on.

We need a sustainable framework, however, which is why the hon. Member for South Staffordshire was right to stress the importance of predictability and speed of action by things such as the regional growth fund. I believe that it was a mistake to get rid of the regional development agencies. We may disagree about that, but they at least provided a framework for making decisions and ensuring that those decisions were carried through. All too often, things are too hand-to-mouth at the moment. I hope that the Minister will address that issue, because the automotive industry is very much the jewel in our industrial crown.

Many other sectors in the UK and beyond are asking, “How did you do it in automotive?” They want to copy things such as the Automotive Council or the partnership. That is good news, but we must not rest on our laurels. There is a huge skills agenda to be developed and so much more yet to be done with the supply chain to ensure that we achieve our potential.

In conclusion, I hope that the Minister will say a few words about Dunlop, because that is still not a done deal and we still need to apply pressure. I hope that he will join me in applauding the work of the Automotive Council. I also hope that he will say a little more about the advanced propulsion centre; about how the UK will accelerate on the ultra-low-emission vehicle agenda, because we are lagging behind other countries in the take-up of such vehicles; and about what we can do to better address the concerns expressed by the industry about skills and the supply chain.

--- Later in debate ---

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

Thank you for the way you have chaired the debate, Sir Alan, and for allowing me a reasonably generous time to respond to the points that have been made. I congratulate my hon. Friend the Member for South Staffordshire (Gavin Williamson) on securing this debate on a subject about which he feels passionately. He made an excellent speech, and I want to echo his comments about the Jaguar Land Rover decision to invest £500 million in a new engine plant in his constituency. That is very welcome news indeed and will bring a massive boost to the area and the supply chain, creating some 1,400 jobs. I am pleased that JLR is already making good progress in recruiting to fill those positions. I am also pleased that the Government are able to support that investment with a £10 million grant.

Various points were made by several hon. Members in excellent speeches. I will touch on as many as I can in addressing the three themes that have emerged today: the supply chain and the need to continue to strengthen it; skills and the need to continue to attract people, including women, into the industry; and what we are doing to advance our enormous strengths in innovation, technology and design.

Our economy is growing now, and the automotive sector is contributing hugely to that growth. Last year, turnover in the automotive industry reached an all-time record, exceeding £60 billion, and was up 9% on the previous year. We have overtaken France, and the UK is now the third largest car producer in Europe, just behind Germany and Spain, producing more than 1.5 million vehicles in the UK in 2013. We have the most productive automotive workers in Europe.

Last July, with the industry we set out a long-term strategy—some hon. Members today reinforced the need for that strategy—for growth and sustainability for the automotive sector in our automotive industrial strategy, which will help to keep Britain at the forefront of the global auto market. We are working closely with the industry, through the Automotive Council and the strategy, to remove barriers to growth when we find them, and to create opportunities across the sector.

An excellent example is the co-operation between the Government and industry on an advanced propulsion centre over the next 10 years and investment of £1 billion from both the Government and the industry to help to research, develop and commercialise the next generation of low-carbon technologies, ensuring that the UK stays at the forefront of the design, development, manufacture and use of ultra-low emission vehicles and in so doing helping to secure up to 30,000 jobs.

The Automotive Council met last week to review developments since the publication of the industrial strategy last year. The advanced propulsion centre is progressing ahead of schedule with a senior team in place and two funding competitions well under way, covering innovation and the centre’s location. The council heard that the first successful collaborative research and development projects will be announced later this month with significant public support. A decision on the location of the centre will be made by the executive in the summer.

On the supply chain, the automotive investment organisation reported good progress with early wins and numerous investment opportunities in the pipeline. On skills, the council noted a successful skills bid to the advanced manufacturing supply chain initiative, and continuing progress on the industry employer ownership pilot bid.

[Richard Burden]

Will the Minister clarify a couple of points about the advanced propulsion centre, particularly the competition around the development of ultra-low emission vehicles? I understand that the budget for that development is £500 million, but it is projected that only £230 million will be spent in this Parliament and there is a question mark about whether any roll-over is anticipated. Will he clarify exactly how much of that £500 million will be spent and how?

[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.