Related News

Banks to face greater scrutiny as PRA fines ex-Wyelands chief

UK govt sets sights on reshoring manufacturing with £4.5bn funding plan

Professional body urges UK government to up export targets

Phoenix created ‘sub-ledger’ of unverified trades to raise financing, liquidators say

UK post-Brexit trade plan has “run out of road”, report claims

Amid a market slowdown and political disruption, a new survey of the UK’s mid-sized automotive manufacturers shows that as many as 96% of them are being held back because of insufficient access to financing.

The survey was carried out by Wyelands Bank, a new UK bank for SMEs, which quizzed 305 mid-sized manufacturers – those with a turnover of between £10mn and £300mn – involved in auto exporting.

The research reveals that 63% of those surveyed are restricted from entering new markets due to insufficient financial support. Moreover, 82% reported that difficulties in raising finance is also preventing them from investing in new equipment or technology, while 53% are unable to move to a new site or premises.

Respondents’ estimates of missed opportunities due to a lack of financing mean that the average firm has lost £24.8mn in revenue and an average of 24 new contracts in the past, the survey says.

In a statement on the survey, CEO of Wyelands Bank Iain Hunter explains that firms in this bracket are often too big to benefit from the attention given by policymakers to small businesses but are also generally not big enough to benefit from the economies of scale enjoyed by their larger peers.

“Our research shows that UK mid-sized automotive manufacturers are not able to grow to their full potential without greater access to finance. But that finance has not been available as traditional banks are too often unable to help,” Hunter says.

 

Slow! Disruption ahead

Challenges in securing financing only compound other critical issues facing the UK’s automotive industry, including falling demand and the potential of significant supply chain disruption caused by Brexit.

Industry data captured by the Society of Motor Manufacturers and Traders (SMMT) shows that car and engine manufacturing for exports in the UK fell by 18.9% and 3.7% respectively in the first two months of 2019, compared to the same period in 2018.

The UK exported 81.5% of the cars it built last year, with just over half (52.6%) going to the EU, compared to 17.9% going to the US as the second biggest destination.

Moreover, demand from Europe has fallen alarmingly in recent years, with concerns around Brexit widely believed to be the cause. Data from the European Automotive Manufacturers Association shows that registrations of UK-made cars in the EU fell by 6.8% between 2017 and 2018.

The implications of Brexit on tariffs, customs charges and procedures, exchange rates, the free movement of people and supply chains has resulted in much uncertainty for an industry that is heavily reliant on cross-border trade in both components and final products.

Brexit is also jeopardising the UK’s chance to become a market leader in the booming connected and autonomous vehicles (CAVs), or self-driving cars, industry. The UK is home to four major CAV test beds and three additional sites focused on highways, rural and parking, with more than 80 collaborative projects underway.

A recent report by SMMT and law firm Frost & Sullivan suggests that the UK is currently leading the pack in this fast-growing market sector and could benefit from a £62bn boost to the economy by 2030, but only if Brexit conditions are right.

The report argues that the sector’s continued success requires an orderly exit from the EU with a deal that supports both the industry and technological collaboration, with a specific focus on data.

“The major issue of our time – Brexit – is still unresolved. The UK is in a prime position to be a global leader in future mobility – but only if the conditions are right and crucially that we leave the EU in an orderly fashion,” says SMMT chief executive Mike Hawes.

“Clearly a ‘no deal’ Brexit would have a significant impact on the UK’s competitiveness and ability to attract future investment and skilled labour to support CAV development and deployment with further negative effects due to regulatory divergence.”