UK car makers are calling on the Chancellor to give a clear indication in next Wednesday’s pre-election Budget speech of the government’s commitment to join the European single currency.
After years of upheaval, during which the euro exchange rate has hit Rover, Vauxhall, Ford and Nissan, the Society of Motor Manufacturers and Traders (SMMT) this week warned of more cutbacks unless Gordon Brown settles the issue soon.
Christopher Macgowan, chief executive of the SMMT, said: ‘The motor industry is responsible for 800,000 jobs and generates £46bn for the UK economy. As we await a decision on the single currency, companies are sinking under tax and currency pressures.’
He said with sterling remaining strong, fewer parts sourced from UK suppliers, and 80% of vehicle exports going to Europe, jobs are at risk.
Brown is expected to announce tax cuts of up to £4bn next week, but industry will be listening for any further hints about the euro during what will also be a keynote general election speech.
Further pressure on the government to settle the euro issue sooner rather than later came from the Engineering Employers’ Federation and leading inventor and entrepreneur James Dyson this week.
The Economist Intelligence Unit’s report World Investment Prospects, published this week, claimed the UK’s refusal to adopt the euro risked driving car makers abroad. Manufacturers may move to countries that have adopted the euro to cut exchange rate uncertainty, the report said.
This week, Ford said it was considering moving Land Rover production from the Midlands to the Euro-zone or the US, to cut production costs. A decision on the future of its Solihull plant, which employs 8,500 people, will be made in the next six months.Marin Burela, Land Rover’s director of manufacturing, said: ‘We have tough questions to face. The decision is wide open and we rule nothing out.’ Land Rover will also be reducing its level of UK sourced parts, now 70–80%.
Martin Temple, director-general of the EEF, said a survey of manufacturers, to be published next week, shows a quarter of companies are considering moving production overseas. The survey, conducted by MORI, asks companies about their views on the European Union and the single market, as well as the euro.
Temple also highlighted concerns about falling levels of investment and profitability, now at their lowest since 1993, largely because of pressure on profit margins caused by the euro.
Dyson, whose company sells 70% of its products in mainland Europe, put forward the pro-euro message this week at a meeting with Labour party officials and trade secretary Stephen Byers.
He also said there was a need for a minister for manufacturing and criticised the UK’s ‘fast buck’ culture that eschewes research and development.
A spokesman for the Treasury repeated the promise that a decision on whether to hold a referendum on joining the Euro would be made within two years of the next Parliament.
‘Our policy is clear: [entry depends on] the five economic tests announced in September 1997. Businesses and the country know that,’ he added.Some back-bench Labour MPs said they recognised the problems faced by UK manufacturing, but they backed the government’s stance on the euro.