By Liz Nickels. Recent news from the Office for National Statistics shows UK factory output fell 1.3% in October – far worse than the 0.2% dip analysts had been expecting – has not been the best Christmas present to UK manufacturers. But reports suggest that UK automotive is rising above the doldrums experienced by other industries.

Currently, the UK is home to seven volume car manufacturers, seven commercial vehicle manufacturers and 10 bus and coach manufacturers. More than one million vehicles and two million engines are produced in the UK each year, and more than 75% of vehicles manufactured in the UK are exported. At present, about 80% of all component types required for vehicle assembly operations can be procured from UK suppliers, and around 2,350 UK companies regard themselves as automotive suppliers. UK automotive typically generates around £50 billion in annual turnover.

The government has certainly done its best to give automotive a much-needed boost. In October 2012, the Prime Minister David Cameron formed an agreement with leading UK companies, including leading UK-based automotive firms, to discuss how best to support supply chains.

 

The scheme put in place, Supply Chain Finance, or SCF, notifies a bank that an invoice has been approved for payment; the bank then offers a 100% immediate advance to the supplier at lower interest rates, knowing the invoice will ultimately be paid by the large company. It is intended to allow large companies to help their supply chain access credit and improve cash-flow at a much lower cost. It has already been implemented by Rolls -Royce and Jaguar Land Rover.
 
Meanwhile, in November 2012, the UK government put in place funding of up to £16.5 million for new R&D in the reduction of CO2 emissions and low carbon vehicle technology.
In 2013 grants will be awarded to UK businesses through a open competition for collaborative R&D funding and will be managed by the UK’s innovation agency, the Technology Strategy Board.
 
“The investment will strengthen the UK’s position at the cutting edge of low carbon vehicle technology, help create new high technology jobs and increase global opportunities for UK businesses,” said Norman Baker MP, transport minister. “Investment like this will deliver long-term benefits for both the environment and the UK economy. Helping the environment and boosting the economy go hand in hand.” However, since the competition opens in February 2013, the results of the grants will take a while to be commercially viable.
 
Companies received other investments as well. Recently Aston Martin received a £150m investment from Italian private equity firm Investindustrial in exchange for a 37.5% stake in the business. The carmaker said it itended to put the money towards £500m it plans to spend on new models over the next five years.
 
In September, Japanese carmaker Honda invested £267 million at its UK plant in Swindon and said it planned to ramp up production. The money will support the introduction of its new Civic and CR-V car models and a new 1.6-litre diesel engine.
 
The site is expected to produce 183,000 cars this year, with output forecast to rise to 250,000 within three years.
 
According to the SMMT, UK auto manufacturing regained strength in October 2012. Car manufacturing rose 6.5% in October and was up 9.7% over the year-to-date, while CV output rose 5.0% in October. UK engine production was up 1.2%.
 
Will 2013 be a Happy New Year for the UK automotive industry? Statistics suggest a promising start. For 2013 the SMMT forecasts new car registrations of 2.015 million units, up 0.1% on 2012, diesel penetration of 50.2% and new LCV registrations: 250,900 units, up 3.2% on the 2012 forecast. The SMMT also reports that automotive manufacturing levels will grow to pre-recession levels by 2014.
 
 “The UK automotive industry got back on track in October with vehicle manufacturing up 6.4% and a 1.2% increase in engine output,” said Paul Everitt, SMMT chief executive. “Sustained, high-value investment in R&D, facilities and new products is paving the way to a prosperous future for UK automotive, but significant challenges remain as European market demand remains weak.”
 
However, these forecasts, as we understand it, were put in place before the bad news from theOffice of National Statistics and UK business secretary Vince Cable.

What do you think? Will UK automotive win through?