2015 SMMT Sustainability Report

7 reasons the British car industry is booming

2015 SMMT Sustainability ReportThe £70 billion UK automotive industry has never generated more cash and, in a few years’ time, will never have employed so many Brits – those are the latest glowing statistics from the SMMT’s annual Sustainability Report.

Industry trade body the Society of Motor Manufacturers says this has put the UK car industry back on the global stage, with almost 800,000 jobs contributing a massive £15.5 billion to the UK economy. 27,000 new jobs were created in 2014 alone.

Those workers have never been more productive, and have never been safer while at work. And not only are the cars they’re building greener than ever, the manufacturing process is also more environmentally friendly: energy use per car has almost halved since 2000.

“The UK automotive industry can be proud of its achievements as it continues to set new records,” said SMMT chief executive Mike Hawes.

It’s now an industry with a £70 billion turnover – growing over 6% in 2014 alone – and “the sector is delivering growth in volumes, turnover and employment while reducing its environmental impact”.

The British automotive industry is not without its challenges, as we’ll see, but first, here’s seven ways in which it’s in better shape than ever.

1. We’re on track to make more cars than ever before

2015 SMMT Sustainability Report

With 1.6 million vehicles produced and 1.53 million cars (that’s a 1.2% rise in 2014), UK production is the highest since 2007.

Britain also makes engines, almost 2.5 million of them in 2014. This is slightly down on the year before but will grow again in 2015 now Jaguar Land Rover’s brand new Wolverhampton factory is on stream.

Van production has been hit by the closure of Ford’s Southampton plant, but Vauxhall has invested big in the new Vivaro at Luton, so the SMMT expects commercial vehicle production to start recovering.

UK car production on track to hit 1.95 million in 2017 – a record bettering 1972’s 1.92 million all-time high. Britain really will never have made as many cars.

2. 4 in 5 new cars is sent abroad

2015 SMMT Sustainability Report

The vast majority of the cars built in Britain are sent abroad. This means the industry doesn’t only boost UK employment, but it also brings tens of billions of pounds back into the UK.

Total export value in 2014 rose 1.8% to £34.6 billion. That’s up more than 100% since 2000. Such an inward flow of cash is a key reason why the industry was able to add more than £15 billion to the UK economy last year, growth of over 6%

Over half the cars made in the UK are sent to Europe, and this actually rose 10% in 2014 as the European new car market continued to grow. It helped offset the decline in the Russian car market, which until recently accounted for 10% of British exports.

The other half of UK-built cars go to the U.S., China and Asia Pacific region, all of which grew. China alone was up 10%; 137,000 British-built cars found homes in China last year – most of them high-value cars such as Land Rovers and Bentleys.

The world is back in love with British-built cars.

3. The cars are more premium than ever

2015 SMMT Sustainability Report

Britain used to make budget Minis, Metros and Micras in volume. Now it makes hundreds of thousands of Jaguars, Land Rovers and Bentleys. These sell for far more money and generate even more cash for the UK economy.

Even the mainstream makers are building posher cars: Nissan in Sunderland now makes the Qashqai in huge volumes – a car selling for well over 50% more than the average Micra. It also made 17,000 high-tech all-electric Leafs.

Nissan will soon start building BMW-rivalling Infinitis; it’s the first new brand to start production in the UK in more than two decades.

Britain also males super-exclusive McLarens, Aston Martins, Rolls-Royce, Lotus and a multitude of specialist low volume cars, alongside high-efficiency volume cars from Honda, Toyota and Vauxhall.

Even MINI is now a premium brand, not a budget brand: Plant Oxford is growing once again, making MINIs that commonly sell for more than £20,000. A far cry from the dark days of British Leyland.

4. It’s becoming a high tech industry

2015 SMMT Sustainability Report

The SMMT wants to reposition the UK automotive industry as a high-tech business, moving away from the outdated metal-bashing image of old. Car makers are reflecting this: in 2014, the average number of industry training days for new skills grew 35%.

“We want to get young people excited by the modern, high-tech automotive industry so they’ll see it as a career option in the future,” said Hawes.

A growing number of suppliers to the industry (who annually add £4.3 billion to the UK economy) are starting to produce in the UK again. Output rose 7% in 2014 and continuing to grow the number of parts built here for the cars made here remains a priority.

The SMMT reckons there’s still £4 billion of business for UK companies there for the taking, too: if it wanted to, Britain could also make 80% of the bits used to build home-grown cars in the UK…

5. The workers are on side

2015 SMMT Sustainability Report

The government sees the automotive industry as one that’s working. New Conservative Secretary of State for Business Sajid Javid has already praised the industry, considering it a good example of how to do things right.

The turnaround in employee relations from the dark days of the 1970s is a key part of this. Industry and unions, for example, now work together to secure business and jobs, with 2015’s Sustainability Report showing the success of this continued partnership.

Staff turnover fell from 10% in 2000 to 5.6% in 2014. That’s a record low and indicates that Brits are happy to work in and remain within the car industry.

Lost time incidents per 1,000 employees fell by nearly 29% in 2014 alone – a record low. They are down almost 85% on 2002, to just 2.2 safety incidents per 1,000 employees.

Safety schemes are now firmly embedded within automotive plants and they’re being enhanced all the time, to ensure industry workers are safer than ever.

6. It’s a green industry

2015 SMMT Sustainability Report

The UK car industry accounts for around 4% of all the energy by all UK industry. It’s falling all the time, and will get better still when car plant heavy consumers such as paint shops, boiler houses and heating systems are replaced.

Production used 10.4% less energy in 2014, 10.7% less water and sent a staggering 26.3% less waste to landfill. This alone is down over 90% compared to 2002.

Car makers are also making their own energy: 11 SMMT members have renewable energy facilities on site, making an average of 3.1% of energy consumed by the industry.

Jaguar Land Rover says its solar facility at its new Wolverhampton plant will eventually produce almost a third of its energy needs.

Oh, and the new cars now buy are also greener than ever. Over two in three had already met the 2015 EU CO2 target of 130g/km a year early.

7. Productivity is up

2015 SMMT Sustainability Report

Britain is a good place to build cars. Firms aren’t investing here unwillingly: productivity of British workers has improved 20% in the past five years alone.

Billions of pounds of investment in new plants and manufacturing processes means that for the past few years, 11.5 new cars were made by every single person in the industry. Back in 2005, this was down at 9.3 cars per person.

Compared to 2000, the number of jobs dependent on the industry is down 11.9%, but a big part of that is the loss of MG Rover in 2005. More productive workers are making more cars, and there’s more demand for them, so even more staff has to be employed.

Global giants are diverting investment cash to Britain because we’re now so good at making cars compared to the rest of the world – and continued improvements will further enhance this and secure yet more investment.

But there are challenges…

2015 SMMT Sustainability Report

The SMMT says that, despite the glowing Sustainability Report for 2015, UK automotive does face issues. The need to continue reducing CO2 emissions while improving air quality is one, as is the importance of capitalising on opportunities from connected cars and self-driving cars.

One of the biggest challenges is skills: making sure the industry has enough young people with high-tech training to feed the industry’s growth. We’re currently lagging here, so government and car makers are playing catch-up. Will we catch up fast enough?

“Continuing to expand in a fiercely competitive global market is a major challenge,” said Hawes, “and will depend on a supportive economic and regulatory environment which promotes investment to foster innovation and continuing productivity improvements.”

Plenty of work ahead then. But Britain’s £70 billion car industry is now better placed to capitalise on new opportunities than ever before.

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