UK Car Industry Boom Gives Startups Something to Smile About

August 11, 2014 Yoav Farbey

British Manufacturing: Dead or Alive?

It’s an oft-repeated cliché that the UK simply doesn’t make anything anymore. We’re just a nation of call-centres, retail parks and high-street coffee chains, so the story goes. The reality, however, is somewhat more nuanced.

Chancellor George Osborne is targeting a 100% increase in the value of UK exports by 2020 – that means the UK needs to be generating £1 trillion a year through exports in 6 years’ time, and manufacturing will be central to this. But critics have questioned the feasibility of this plan, citing issues with the power infrastructure needed for manufacturing growth, as well as the rising price of energy.

Whilst the £1 trillion/year target may or may not be achievable, the idea that manufacturing in Britain is dead holds little water. Currently, the UK manufacturing industry employs 2.6 million people, and accounts for just under half of our exports.

Having said that, the impressive recovery of British manufacturing slowed last month, and there are fears that skills are being eroded, and that we risk not fostering the broad spread of skills we need for the manufacturing sector to continue growing and evolving. With that in mind, Campaigns like Make it British have been setup in an effort to support UK manufacturing.

UK Car Industry: Driving Economic Growth?

The British automotive industry in particular is a great example of a sector that was once in decline, but is now one of the strongest parts of the economy.

Car production in the UK in 2013 rose to its best level since 2007, and new car sales are currently enjoying an unprecedented period of growth; total new car registrations have grown continuously for the last 29 months, and the total market is up more than 10% year-on-year.

The recovery of the UK automotive industry was kick-started by the Government’s scrappage incentive scheme, and has been further fuelled by increasing demand, with consumers spending more and saving less. In addition, recent data has also shown that the number of people selling their cars for ‘financial reasons’ is in decline. Ideally, consumers would be spending more and saving more, but we haven’t reached that point just yet.

How Can Start-ups and Small Businesses Benefit from the Car Industry Boom?

There are numerous indirect benefits – the resurgence of car production in the UK will fuel the growth of specialist research, technology and engineering companies, especially with additional funding for R&D from the EU, whilst independent car dealers, mechanics, and other service businesses linked to the car production industry will all benefit from a strong auto manufacturing sector.

Expansion of car production in Britain by firms like Nissan, Toyota, Honda, BMW, General Motors and Jaguar Land Roveris alsogood news for the network of small local businesses such as cafes and cleaning companies in the locations where production facilities and manufacturers’ corporate offices are based.

On top of this, the Government’s plans for driverless cars to take to UK roads from January 2015 will help “establish new design and manufacturing supply chains, driving forward UK economic growth,” according to Iain Gray CEO of the UK’s innovation agency, the Technology Strategy Board.

All of this is indicative of a wider climate of opportunity that entrepreneurs and small businesses should be ready to exploit. In principle, banks should be more willing to lend, and larger firms should be more ready to invest in projects that may involve smaller suppliers.

Do you feel that the impressive performance of the car industry signals a long-term economic recovery? Are you optimistic about opportunities for start-ups and small businesses in the UK in the short-term? Share your thoughts with us in the comments section below…

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Yoav Farbey