‘Industry has potential to create thousands of jobs’
Thousands of new jobs could be created in the automotive sector in Wales if the 300 business in the supply chain here fulfil their plans to develop new products and enter new markets overseas, according to a new report.
Driving Innovation, the second report on the English and Welsh automotive manufacturing sector released today by Lloyds Bank Commercial banking, analyses the state of the industry and the opportunities and challenges it faces in the future.
The report, part of a series that looks at the role of key manufacturing sectors in Britain’s economy, gathered views from across the region’s automotive supply chain.
Report co-author James Walton, manufacturing director, mid-markets at Lloyds Bank, said: “While the automotive industry is forecasting healthy growth, it’s clear that global instability and uncertainty threatens manufacturers’ confidence.
“In particular, the slowdown in China is a concern given that it is the biggest market for British-made cars outside the EU.
“However the sector is resilient and one of the most dynamic, innovative and exciting industries in the world, with Welsh firms at its forefront. The increase in reshoring activity to the UK is creating more jobs and Lloyds Bank is committed to supporting its growth and success.”
Despite the challenges of the global economy, the overwhelming majority (87%) of respondents plan to create on average 33 new jobs each over the next two years.
If fulfilled, their plans will generate 8,715 new jobs in Wales.
These job creation plans are underpinned by manufacturers’ reshoring activity. While almost nine in 10 (87%) plan to bring some part of their manufacturing operations back to Wales in the next two years, six out of 10 (60%) have already done so.
Anecdotal evidence of their motivation for this shift included wanting to support the Welsh economy and create jobs, seeking better control over production, and rising labour costs overseas.
The report found that Welsh firms believe that instability in the global economy is the prevailing challenge to the industry, with 67% of respondents citing it as their top worry.
But they seem happy to take on the competition, with 73% planning to enter new markets and the same proportion planning mergers and acquisitions as they seek to build more robust businesses.
More than eight out of 10 (82%) will target new markets in Western Europe and 45% in North America, while just 9% have their eyes on the Far East and Asia, perhaps reflecting the slowdown in the Chinese economy.
Welsh manufacturers’ commitment to innovation remained with firms planning to invest an average of 16% of current turnover into research and development over the next two years.
Survey feedback suggests many businesses are waiting for breakthroughs in the fields of lightweight, electric and driverless vehicles by bigger players with greater resources, before committing further spend to these areas.
However, once this technology starts to become more widespread, the supply chain looks set to benefit.
Two fifths (40 per cent) of Welsh businesses now say they plan to grow by developing new products, with innovation being a tried-and- tested route for UK car makers.
Welsh manufacturers are keeping a close eye on technological innovations in the field. More than a third (40%) are planning to upskill their workforce or change their business model to develop low carbon or electric vehicle technology, while 60 per cent plan to upskill or change their business model to develop driverless vehicle technology.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said: “Lloyds Bank’s second survey of the UK automotive manufacturing industry highlights some of the significant opportunities ahead, not only in terms of economic prosperity, technological innovation and employment potential in Britain, but the prospect for growth across the globe.
“The UK is seen internationally as a centre of innovation. It is home to 13 R&D centres, seven of the world’s 10 Formula One teams and 16 of the top 20 global automotive suppliers. We also have a unique opportunity to lead the development of connected and autonomous vehicles.
“To maintain this position of innovative excellence, industry must grasp the opportunities presented by these breakthrough technologies and secure the benefits for the UK economy and society.”
David Atkinson, head of SME manufacturing at Lloyds Bank and report co-author, added: “This report shines a light on the industry that has dominated the global news agenda in 2015, from controversy over emissions tests to futuristic innovations in the field of driverless cars. The industry is going through a period of intense innovation and we need to ensure that Wales has the right level of skills, and is adept at using the latest technologies, to keep our automotive industry competitive.
“To help tackle the skills agenda we are contributing £5m over five years to the Lloyds Bank Advanced Manufacturing Technology Centre in Coventry, which will support the next generation of engineers.”