I am writing on behalf of the UK’s automotive supply industry in general, and the toolmakingsector in particular, to request government action to address the growing problems that are leading to the demise of a once strong manufacturing industry.
I recognise that free market forces will result in companies such as General Motors evaluating their global production. After all, the only good plant is one that makes money, and while GM is making more cars in Europe than are required by the buying public, its action to bring its plants into profitability are understandable.
But the closure of Luton rather than a plant on the European mainland has seen GM ‘giving up’ on this government joining the euro.
The euro debate notwithstanding, Honda at Swindon, BMW at Cowley and Ford (with Jaguar and Land Rover) are adding to capacity for 150,000 more cars a year, substantially offsetting the 235,000 units that will disappear with the closure of Luton and Dagenham.
But this merely masks the true problem facing the toolmaking and subcontract precision engineering companies supplying this sector.
Thousands under threat
I would remind you that toolmaking is an essential part of all manufacturing industry. Every automotive OEM and first-tier supplier relies on good quality tooling to manufacture the end product successfully. Car plants employ over 15,800 people, but it is the many hundreds of thousands that supply this sector that are threatened each time a plant closes that your government should be concerned about.If they are to change when affected by global business decisions then they must be able to supply a tool or component anywhere in the world.
For those that have been supplying Vauxhall at Luton, they now look to the government to help them make the transition to finding new customers, at home or abroad. Yet their predicament has been ignored by trade secretary Stephen Byers and his colleagues. The minister probably feels McDonalds will step in to hire the 20,000 or so skilled engineers who risk losing their jobs — thereby saving him from having to explain his neglect.
Members of your government have repeatedly spoken of the need to support small and medium-sized enterprises, and indeed you yourself gave an election pledge to ‘create the right economic environment in which companies and entrepreneurs can thrive’. Virtually all toolmaking companies fall within that definition, yet they see little action to back up your words.
It has become popular in government to talk about improving productivity in the UK in order to improve the nation’s sustainable level of GDP growth. But that requires investment, and unlike the US example, Gordon Brown has done nothing to stimulate investment — particularly in manufacturing.
Yet all the major trade associations have called for positive action to stimulate investment through the most effective and direct route — capital allowances.
For the third year running, the DTI’s Capex Report has revealed many years of under-investment resulting in UK industry and its workers with a capital stock 40–50% below that of its major competitors. Of course this is not surprising. It has been difficult to justify capital investment with such an uncompetitive exchange rate.As a consequence, UK manufacturing and its supply base accept substantially reduced margins on both home and export business, leaving neither profits nor borrowing facilities available for investment.
While you might be powerless to affect the global decisions taken by GM and Renault, I urge you to increase your support for our industry.
Losing out on productivity
When the Chancellor is sitting on accumulated wealth from excessive taxation, but is not prepared to invest in future wealth-creating investment measures, he can hardly be surprised that we continue to lose out on both productivity and competitiveness in the global marketplace.
While the workers at Vauxhall, Luton will be ‘taken care of’ by both GM and Mr Byers, the toolmakers and supply industry to the automotive sector in the UK depends on this government setting the agenda for the ever-changing face of UK Industry plc.
I urge you to become personally involved in driving wealth creation back into the UK and spearheading manufacturing as an essential element of a successful UK plc.
Steve Eyles is chief executive of the Gauge and Toolmakers Association