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Booming car industry bolsters the UK’s economy

The UK’s car industry posted its highest car production figures since 1999. But can these be sustained post-Brexit?

Rising domestic and international demand is propelling production in the UK’s car industry – providing a boost to the economy.

The latest numbers show almost 170,000 vehicles were manufactured in November 2016 alone. Year-on-year figures at the end of that month also showed a significant increase in annual production, with 9.6 percent more cars produced over the same period than in 2015. Indeed, 1.61 million cars were made in the UK in the year to 30 November 2016, versus 1.47 million produced the previous year.

The news came as a welcome close to 2016 and a far cry from the slowdown in 2013. By the end of November, factories in the UK had already made nearly 56,000 more cars than produced in 2015 as a whole. The last time the UK produced as many cars in the first 11 months of a year was back in 1999.

Car manufacturing and the UK economy

Car manufacturing plays an important role in the UK economy. According to the Society of Motor Manufacturers & Traders (SMMT), the automotive industry accounts for 4 percent of GDP, totalling £60.5 billion, and represents 12 percent of total UK exports.

The industry also contributes significantly to UK employment volumes. Around 169,000 people are employed directly in manufacturing, and a total of 814,000 people are employed across the wider automotive industry. With such positive news coming out of the UK’s car production industry, this may help provide a vital boost to the UK’s economy. However, much of this depends on the automotive industry’s ability to export successfully.

The importance of exporting

In the first 11 months of 2016, nearly 80 percent of cars produced in this country were exported abroad – showing the vital role exports play in the automotive industry’s health. Indeed, the UK exports vehicles to more than 100 countries across the globe – many of which are in the EU.

According to the SMMT, in 2014 the EU accounted for more than half of UK-built vehicle exports. With exports playing such a key role, industry figures have concerns as to whether the UK will be able to retain its competitiveness, once Britain exits the EU. Mike Hawes, Chief Executive of the SMMT, said:

“Made in Britain is a badge coveted by car buyers worldwide and these latest figures highlight not just that international appeal but the fact that the UK is a globally competitive place to make cars.”

“These results . . . will continue only if we can maintain the competitive trading conditions that have enabled the UK to become an automotive success story.”

In December last year, David Davis, Secretary of State for Exiting the European Union, joined other ministers at a roundtable with SMMT and other automotive leaders to discuss the automotive industry’s needs. At the end of the meeting, Hawes highlighted the challenges that lie ahead and the connected approach to help support an important area of the economy:

“Being part of the single market has helped make the UK automotive sector amongst the most competitive in the world and a critical part of the UK economy. It is essential that we maintain those benefits and we will work with government and our partners in Europe to ensure the global success of our sector continues in the future.”

With the automotive industry facing uncertainty in the coming years, credit insight is crucial. Find out how Graydon’s credit risk management solutions can support your business.

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