Recovery hinges on supply chain stability

6 March 2013 | By Jon Excell

Given the sense of gloom pervading much of the European car industry the comparatively buoyant state of the UK sector - itself seen as a bit of a dead duck a couple of decades ago - is something of a curiosity.

And while many visitors to this week’s Geneva motorshow are busy obsessing over Europe’s declining car sales, the UK sector has continued to present a more upbeat face, partly thanks to the announcement that Jaguar Land Rover (JLR) is to create a further 700 new engineering jobs at its new West Midlands engine plant.

JLR  - which is owned by the Indian Tata Motors group - has become something of a standard bearer for the UK’s resurgent car industry. And yesterday’s announcement is the latest bit of positive news from a firm which over the last two years has invested almost £10bn in the UK supply chain, created more than 9,000 new jobs, and which last year, saw a 30 per cent increase in global sales.

But while this is obviously great for the UK we perhaps shouldn’t become too complacent about the enthusiasm of companies like JLR to contribute to this domestic success story.

Whilst JLR’s sales in the UK and Europe are performing well - it enjoyed a 19 per cent rise in European sales last year - the general picture is more worrying. Indeed, Nissan boss Carlos Ghosn this week apocalyptically warned  of an impending “collapse” in the European car market.

In contrast the rapidly growing markets in China and India - which now account for almost a quarter of JLR’s sales - are seen as increasingly vital and attractive.

Inevitably,  the changing shape of the global car industry has prompted speculation that JLR might be tempted to shift its production closer to its most buoyant markets. Indeed, a number of reports this week have suggested that the firm is considering turning it’s Indian assembly facilities - which rely on components produced in the UK - into fully fledged production plants. And although the firm is always quick to dismiss such rumours, it seems likely that a point will come where - despite the huge brand importance of the brand’s perceived “Englishness” - the attractions become harder to resist.

It is now critically important that the UK government does everything it can to maintain and build on the conditions that have fuelled JLRs success: to help ensure a constant pipeline of skilled engineers, to back innovation, and to create an economic climate that supports R&D and improves access to finance.

Talking at the recent BIS Manufacturing Summit, JLR’s executive director Mike Wright, called on ministers to support these conditions, claiming, ‘If our suppliers cannot access the right skills, technology and finance, then they may not be able to invest as much in the UK as we would all like.’

It’s a gentle reminder that whilst the UK’s most prominent car maker may be a very long way from turning its back on the UK, its presence here should no longer be taken for granted.