Automotive sector set for further acceleration

Automotive sector set for further acceleration

Closer endeavour and heavy investment will equip the North East automotives sector to ride out any economic storm 2016 may bring. Up to 800 new jobs are already expected in addition to those recently created yet again by Nissan. BQ's Brian Nicholls reports

A report called Driving Innovation says that despite the ongoing global economic slowdown, a check through the supply chains of England and Wales indicates that 60% of respondents plan to bring in new opportunities.

The report by Lloyds Bank Commercial Banking says job creation ambitions detectable are also underpinned by manufacturers’ reshoring activity across England and Wales. While a fifth (20%) plan to bring some part of their manufacturing back to the UK in the next two years, 40% have already done so. The reasons: a wish to control production better, a wish to counter rising labour costs overseas – and just wanting to support the UK economy.

As 78% of all vehicles made in the UK last year were exported, global instability could adversely affect the future for an industry that otherwise has outperformed the broader manufacturing sector substantially since the recession.

Local firms see a possible exit from the EU as their prevailing challenge; 40% of respondents cited it as their top worry, along with material price volatility. They propose, however, to enter new markets (40%), develop new products (40%) and invest in their existing products (40%).

Despite fears of a ‘Brexit’, 50% still aim to win new customers in Western Europe, with 50% targeting new business in Russia. Much of the optimism is attributable to Nissan, now turning out at Sunderland the new Infiniti Q30 hatchback model.

This, the Daily Telegraph considers, a massive £250m triumph for British industry. It has even been called elsewhere ‘one of the most significant new arrivals in British carmaking this century’.  It is, after all, the first time a Japanese car maker has chosen to build an upmarket model in Europe.

It marks yet further progress for Sunderland, whose plant for some years has been Europe’s most productive in the industry, and whose output of 500,000 cars a year - bigger than all of Italy’s – accounts for about a third of Britain’s output also. Employment there is now almost 6,800, with every Sunderland worker making an average of 118 cars a year.

Up to 4,000 workers have been retrained for the job and 1,000 more jobs have been created within the local supply chain. To reach all these pinnacles of success, Nissan since 1984 has invested £3bn at the site, previously a disused wartime airfield.

With the vehicle industry generally buoyant during 2015, many other firms in the region have enjoyed success. At Eaglescliffe, Nifco UK won its biggest contract yet, worth £50m, to produce plastic parts for Ford. Managing director Mike Matthews, said: “The scope and size of this deal is made even more significant by our having displaced competitors from right around the world.” It will enable Nifco to build a third plant and almost double the workforce.

Car chassis parts manufacturer Gestamp Tallent, serving Jaguar, Land Rover, Volvo, Ford, BMW, Nissan and Honda from Newton Aycliffe, now employs 1,300 people. Nearby another automotives firm, ADM Pressings - already in Gateshead and Newcastle – proposed expansion and 28 more jobs with an opening in Spennymoor.

Sevcon at Gateshead is enjoying record sales in the growing demand for electric vehicles, while Komatsu the offroad vehicle builder at Birtley is picking up pace now that construction and civil engineering are recovering in this country and abroad. Meanwhile the American inward investment Cummins has celebrated 50 years in Darlington, making lorry exhausts and engines now from two sites.

In the North East, commitment to innovation remains strong, with investment goals into research and development at an average 18% of current turnover over the next two years, 1% higher than across the UK as a whole.

The closer co-operation of all players in the North East has been assured by the formation of a cluster, the North East Automotive Alliance (NEAA). Set up in 2014, it has more than 100 companies in membership, and it unveiled an Innovation and Technology Group at a Westminster launch event.

 Kevin Fitzpatrick, chairman of the NEAA and Nissan vice-president for manufacturing in the UK, introduced the event, which Paul Butler, chief executive of NEAA, said was about letting the Government know how North East industry is driving the region’s competitiveness.

Fitzpatrick explained: “The launch of NEAA’s innovation and technology group means it now offers support and strategic direction across skills, business excellence and innovation.”

The group is working with key players of the North East to form an innovation hub. This will highlight and develop emerging technology, and also support process innovation working with vehicle manufacturers such as Nissan and Komatsu and their suppliers, to make products more quickly and cost effectively.

A new International Advanced Manufacturing Park, a joint venture between the councils of Sunderland City and South Tyneside is being built on land north of the Nissan site and will provide space for new and expanding innovative businesses to grow. Butler says SMEs with new technology will have the chance to showcase it and network with the supply chain.

Earlier, the NEAA held its first Automotive Expo. That attracted more than 330 delegates from over 200 companies, and brought together regional suppliers and buyers from global carmakers at Sunderland’s Stadium of Light. Amid the networking more than 150 one-to-one meetings took place.  

James Wharton the Local Growth and Northern Powerhouse Minister, who attended, finds the region’s sector as one “with a track record of huge potential for growth” and an important role in rebalancing the economy.

Feedback from the Lloyds survey suggests many businesses are awaiting breakthroughs in the fields of lightweight, electric and driverless vehicles by bigger and better resourced players before committing further spend to these areas. However, once this technology starts to be more widespread, the supply chain looks set to benefit.

The UK is home to 13 R&D centres, seven of the world’s 10 Formula One teams and 16 of the top 20 global automotive suppliers. “We also have a unique opportunity to lead the development of connected and autonomous vehicles” Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, predicts.

The Sunderland based NEAA is part funded by the European Regional Development Fund.