Automotive Industry

UK Automotive Industry – an investment opportunity

With eleven major vehicle manufacturers and eighteen of the world’s top 20 automotive suppliers having a presence in the UK, there are big investment opportunities for overseas investors and a wealth of assistance available at both a national and regional level.

The UK automotive industry is worth £59.3 billion annually. With £6 billion of investment in the UK during 2011 and 2012, 1.58 million vehicles produced in 2012, and four out of five vehicles exported to 100 countries, it is a real UK success story.

The UK Automotive Industrial Strategy recently set out the actions that government and industry will take collaboratively to secure the next stage of automotive sector growth in the UK.

UK automotive supply chain

The growth of OEMs has created an unprecedented opportunity for investors in the supply chain. Total spending on components by UK vehicle and engine manufacturers is estimated at £31 billion. OEMs would like to source around £3 billion more of this in the UK and forecast growth in vehicle and engine volumes will drive further demand for UK-sourced components creating new opportunities for companies in the supply chain (Source: Automotive Council).

R&D

The UK has world class universities and centres of excellence for R&D, attracting total automotive R&D spending of £1.7bn in 2012. (Source: SMMT)

The UK is pursuing co-ordinated, high-value programmes in low-carbon technologies including:

Labour costs, industrial relations and tax

The UK is the best major location for ‘ease of doing business’ in Europe according to an independent assessment by the World Bank. The UK’s business-friendly labour regulations, combined with the skills, commitment and flexibility of the country’s workforce, are recognised as proven commercial assets by the thousands of international companies that have already invested in the UK.

The UK offers:

  • One of the lowest industrial labour costs (€23.4) of any Western European nation. This is significantly lower than in Germany (€35.4) and France (€36.7), and is comparable to that in Italy (€27.5). (Source: Eurostat)
  • Stable wage rates, with levels of wage inflation amongst the lowest in Western Europe. Investors in the UK achieve more reliable returns, and companies buying from the UK benefit from consistent prices.
  • The UK has the lowest rate of corporation tax amongst the major European economies. KPMG’s 2012 Competitive Alternatives report shows that the effective tax rate for a typical automotive component supplier in the UK was 18.4%, compared to France (24.4%), Germany (29.8%), Italy (34.9%) and the Netherlands (20.5%). Further tax advantages are available through targeted initiatives to encourage R&D and innovation.

Exporting from the UK

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There is a growing global demand for UK automotive products, in addition to the £3bn in unfulfilled domestic demand for UK-made components, making it an ideal business location to export from.

The UK exported 81% of the vehicles it produced in 2012 and 49% of these were exported outside Europe. The fast-growing markets of China, Russia and the US make up 28% of UK vehicle exports. (Source: SMMT, OICA)

Assistance for companies

There is long-term support for the automotive sector at local and national levels, and in terms of both funding and technical support.

  • The Government has committed over £316 million to automotive sector projects through the Regional Growth Fund (RGF), almost £80 million of public and private investment through the Advanced Manufacturing Supply Chain Initiative (AMSCI) and over £180 million to support collaborative R&D through the Technology Strategy Board.
  • The Patent Box scheme provides an effective corporation tax rate of 10% on profits from patents registered in the UK or European patent offices. In April 2013 the government introduced an “above the line” R&D tax credit, with a minimum rate of 9.1% before tax, making investments more affordable.

Automotive Investment Organisation (AIO)

The creation of the Automotive Investment Organisation (AIO) is part of an innovative approach which will help further accelerate investment in the UK automotive sector. Led by Joe Greenwell, formerly Chairman of Ford of Britain and Chairman and CEO of Jaguar Land Rover, the AIO brings senior automotive industry expertise into government.

The Automotive Council is the platform for partnership between industry and government. The Automotive Council’s members include all of the major OEMs operating in the UK, more than a dozen suppliers, key government departments and other stakeholders.