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No full recovery until 2013 says industry expert

Any UK Government plans to help the British automotive sector must focus on manufacturing and not retailing, believes Professor Garel Rhys, president of the Institute of the Motor Industry.

Prof. Rhys believes it could be 2013 before full recovery is attained.

"Nurturing of the UK auto sector in these conditions becomes an economic imperative," he said.

He said: " At the start of 2008 my estimate was that the UK economy would enter recession that year and the UK car market would fall from the 2.4 million of 2007 to just under 2.2 million, but that UK car production would fall relatively modestly.

"As the year progressed I mapped out the period 2009-2013. This year the UK car market will fall to around 1.6 million, remain there in 2010 and start to recover in 2011.

"However, as 86% of all cars sold in the UK are imported and 78% of UK car production is exported, the link between any recovery in the UK car market and the British motor industry is relatively weak.

"That is why any attempt to reflate the UK car market will not help the British car plants very much, and action to help the motor industry must be focussed on the manufacturers and not the market."

The SMMT puts forward a figure of over 800,000 as the employment in the automotive sector, but in fact only 200,000 of these are in vehicle and component production; the majority are in vehicle sales, service and repair.

The UK market is of limited support to the vehicle industry in the UK as over 70% of new cars bought in Britain are made abroad and it is this wider European market which takes over 70% of models made here that keeps car production alive in the UK.

Since the end of the early 1990's recession in Western Europe, the EU and EFTA car market as presently constituted as being over 15 million units, sometimes over 16 million a year.

In 2007 the market was 15.4 million units but in 2008 this slipped to about 14.7 million.

This year it is likely to fall to around 13 million and remain there next year.

He added: "Full recovery to the 2007 level may not occur until 2012/13. Hence the UK motor industry is facing a long, difficult period.

"As the industry is efficient and therefore sustainable, an economic case can be made for retaining it at its present capacity, as the demand for its products will recur to the 2007 level.

"It is worth remembering that the absolute volume of exports in recent years have been a record, and proves that UK-made cars are internationally competitive in every sense.

"The fall in demand in 2008-2010 is not of the industry's making but the result of market failure at the macroeconomic level."

Prof. Rhys said it was reasonable for the UK Government to consider further manufacturing support, adding, "Under these circumstances Government would be justified in looking again at the job support schemes that exist on the continent, with the Germans in the process of extending the period of support to 18 months reflecting the long-term nature of the evaporation of car demand for German cars.

"It is heartening that government is now appreciative of manufacturing in general, and the sustainability and viability of the new UK motor industry.

"This appreciation is partly due, of course, to the major collapse in the international competitiveness of UK financial services which leaves a major hole in the economy which must be filled by other sectors with manufacturing to the fore.

"The nurturing of the UK auto sector in these conditions becomes an economic imperative.

"The job support schemes allow firms to hit the ground running when recovery occurs. If the UK does not have such conditions then UK manufacturing will not be able to do its job fully in support of the UK economy in the post financial services era."

 

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