Trade and Industry Press Notice PN44



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PN 44 of Session 2003-04


Not to be publishedin full, or in part, in any form before 11.00 am on Thursday 9 September 2004

Publication of Report

The UK Automotive Industry in 2004

The Trade and Industry Select Committee publishes its Eighth Report of Session 2003-04, The UK Automotive Industry in 2004, HC 437, on Thursday 9 September.

It concludes that, despite a number of high profile closures in recent years, the UK remains a competitive place to make vehicles. Most of the world's largest car manufacturers and components suppliers have production facilities of some kind here and it has an established reputation for specialist engineering and design. However, in a highly globalised industry where competition is fierce, continued success cannot be taken for granted. Furthermore, the future of individual plants can never be guaranteed: production decisions are made on an international basis so plants may still close.

UK production is highly integrated into the European car market; most of the vehicles produced here are exported, and most of those purchased here are imported. Consequently the expansion of the European Union to include countries such as Poland and the Czech Republic, which have significant industrial capacity but lower costs, presents a significant challenge to continued UK success. And whilst the exchange rate has improved matters, the uncertainty created by the threat of future fluctuations, has created difficulties for almost all companies involved in the industry.

For the UK automotive industry to succeed in the future, investment in both skills and R&D are essential, but both are areas where investment has been inadequate in the past, particularly in the components sector. Continued collaboration between Government and industry to address these failings is taking place and needs to this continue. In this context, the Committee applauds the establishment of the Automotive Academy.

In the light of press speculation about the future of MG Rover, the last British-owned, volume car producer, we questioned representatives of its parent company, Phoenix Venture Holdings (PVH). The Committee heard no evidence to substantiate the allegations that they had little interest in continuing car production. PVH also assured the Committee that their overseas activities will not threaten Longbridge's future.

Despite the falling price of cars in the UK, it seems that there is still scope for prices to fall further. It appears that the generous discounts offered to fleet vehicle purchasers have not been extended to other bulk buyers such as large retailers. Under the circumstances, the Committee recommends that the Office of Fair Trading re-examine this area.

Individual consumers also appear to be paying too much for having their vehicles serviced or repaired. In particular, many of the criteria for independent garages to achieve 'Authorised Repairer' status appear to be barriers to entry rather than driven by a genuine concern for the quality of service offered.

The Chairman of the Committee, Mr Martin O'Neill MP, said: "In 2000 our predecessors looked at vehicle manufacturing in the UK following the announcement that two of our largest car plants, GM's factory at Luton and Ford's at Dagenham, were to end vehicle production. At that time, there was a sense that the UK faced a crisis that could lead to the meltdown of a significant part of the UK's manufacturing base. We decided this year to revisit this sector to discover how it had fared.

Although competition in the automotive industry is very fierce - there is significant global over-capacity - the UK is reasonably fit overall, though this does not mean that individual plants will not close.

However - as in so many sectors - there are problems with skills and with ensuring that enough research and innovation take place here. However, if the Government and industry follow the course they have already set, the UK will remain competitive".