Auto firms embrace re-shoring to increase ratio of British parts in UK vehicles
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Efforts made to increase the proportion of British-made parts used in the manufacture of cars in the UK appear to be paying off.
A new report by the Automotive Council – Growing the Automotive Supply Chain – Local Vehicle Content Analysis, shows that 44% of all components used by UK car makers now come from domestic suppliers, compared with 41% in 2015 when the study was last carried out.
The figures suggest more suppliers – many of them based in the West Midlands – are embracing re-shoring and producing parts in British factories rather than in the Far East or Eastern Europe.
With Brexit threatening to force up the cost of parts produced outside the UK then the reshoring is considered a prudent step, although the UK still has some way to go before it matches the ratios seen in mainland Europe.
Nevertheless, in 2011 local vehicle content stood at just 36%, which itself was an improvement following years of decline in UK automotive manufacturing.
British car manufacturing hit a 17-year high in 2016 with more than 1.7 million vehicles made and, since 2009 when the Automotive Council was formed, production has risen more than 72%. Another measure of success is the amount of locally-sourced parts and components used in vehicle manufacturing, because much of the sector’s value added is created at the start of the production process.
In pure financial terms, with regard to output of the UK automotive parts sector, turnover has increased from £9bn at the start of 2011 to £12.7bn today – a 41% uplift.
Exhausts, large pressings, small pressings and plastics have all enjoyed growth, although the AC said opportunities to increase production capacity in these commodities, and others, remained.
When combined with the increase in the proportion of parts sourced locally, it means domestic suppliers have increased their output by 60% since 2011.
The AC said increasing the British supply base in this way offered benefits to the UK’s vehicle manufacturers. Operating on a ‘just in time’ delivery basis, sourcing from UK suppliers reduces time and cost of supply chains, reducing the risk of delays which can halt production.
Growing local content – and thus the domestic supply chain – also helps increase the attractiveness of the UK as an inward investment destination as a healthy supply chain is a pre-requisite of vehicle production location decisions.
Furthermore, if the industry is to take advantage of beneficial trading terms included in free trade deals, originating content must meet minimum rules of origin thresholds else reduced tariffs may not apply.
Mike Hawes, SMMT chief executive, said, “The domestic supply chain is the backbone of UK Automotive and its health is crucial to the success of the whole sector. While it is good news that British cars are becoming more British and re-shoring efforts are enjoying success, the process takes considerable time.
“To grow our supply chain further, the long term competitiveness of the UK must be maintained. Collaboration with government has been an undoubted factor in the recent success and we hope to continue this approach to ensure the economic and trading conditions we currently enjoy are maintained.”