UK Automotive Market Set to Improve In 2014

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No matter what sector you work in, emerging from a recession is never an easy task. For those in the automotive industry, the future is riddled with uncertainties – the recession claimed more than 120,000 jobs in the United Kingdom, not to mention one of its major manufacturers, and stunted a lot of opportunity for growth. Across the United Kingdom and Europe, questions are constantly being asked about the future of the vehicle industry.

Fortunately, the answers are becoming increasingly more positive. The automotive industry remains Britain’s largest sector in terms of exports, accounting for a total of 11% of the UK’s total overseas trade and reaching more than 100 markets across the globe. 2013 saw a monumental increase in this sector of the market, and now experts are tipping continued growth through 2014.

Throughout the UK, new pockets of investment are beginning to provide growth: Jaguar have boosted the funding of their Ellesmere Port factory by £1 billion, BMW have invested £250 million in their Oxford & Swindon plants, and McLaren have created a new Formula One facility in their Woking headquarters with the promise of 400 new jobs.

Elsewhere, graduate schemes and advances into new areas of technology are helping to create thousands of new jobs. In the past five years, more than 75,000 young people have worked as apprentices in the engineering and manufacturing sectors – an increase of 85% since the middle of the recession. A move towards more flexible finance options for businesses such as factoring is also breathing new life into a once stagnant industry.

At a recent commercial finance roundtable hosted by ABN AMRO Commercial Finance, industry leaders discussed the state of finance in the automotive industry, attempting to clarify the strength of the economy in the UK. John Leech, Head of Automotive for KPMG, was among the first to tip the United Kingdom for upcoming success. "UK car production is certainly moving forward," he said. "Today there are just over 1.5 million cars being built in the UK, getting to two million in 2017."

But it won’t be easy for Britain to re-establish itself, says Leech, noting that 2014 will be a year of modest growth for the automotive sector as the industry works to re-align itself with its previous average. "A lot of manufacturers
are consolidating now – we are confident that the UK market can grow through 2017" says Leech.

Meeting manufacturing targets shall prove to be the most significant challenge. New vehicle registrations in the UK have fallen by more than half a million over the last decade, leading to a significant drop-off in production. Many believe that recapturing consumer interest will be the first step for generating growth in this sector.

But many retailers believe that consumer interest is not the highest priority and are looking instead towards the government and private investors to address their finance shortages.

"Attitudes to lending have thawed somewhat," says Guy Walsh, a Director for ABN AMRO Commercial Finance, "but the problems for smaller suppliers is access to money, and investment." He notes that, without investment, finance options for consumers are becoming much more limited.

Walsh went on to state that the changing face of the automotive market was a threat to manufacturers who had suffered under the recession. "From 2014 onwards, purely petrol or diesel vehicles won’t really exist anymore. It’s going to be growth through innovation and technology that will need to be supported," he says.

"What you need is personalised advice about what’s best for you and your business, and that sadly costs a lot to get."

His sentiments are echoed by Mark Orton, a partner at KPMG, who believes that the problem boils down to a lack of information. He states: "One of the issues facing us is giving funders the appetite to support the automotive sector. There are many funders out there who don’t like the sector – it’s an historical thing…The funders need to have experts in the sector to educate the company and free up the funding."

But despite these difficulties, the general outlook seems positive.

Signing off, Andy Povey of Finance Birmingham offered a vote of confidence for the sector. "Manufacturers have made progress and they need to continue down that road…The answer is there – we just need to work together to find it."

"The bigger message is that growth can only be sustained if the manufacturers and supply chain work a lot closer with each other."

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