What is the secret of this manufacturing ‘comeback’ story, in a country whose economy is often characterized as ‘post-industrial’?
During the 1950s, the UK was the second-largest global manufacturer of cars (after the United States). Spearheaded by companies such as Leyland, Triumph, Rover and Jaguar, Britain’s car exports were then the world’s largest.
However, rising production costs and strong German and Japanese competition led to dwindling mass car production under UK domestic ownership during the 1970s and 1980s. Yet despite the disappearance of big names like Leyland, UK car manufacturing has since rebounded, albeit largely under foreign ownership.
Since 2000, total output has generally exceeded one million cars per year (and twice as many car engines). What is the secret of this manufacturing ‘comeback’ story, in a country whose economy is often characterized as ‘post-industrial’? As this article explains, the answer involves a range of factors that include global interactions with foreign TNCs, growth of the EU common market and on-going support for the car industry from successive UK governments.
Bouncing back: the story of UK cars
Going global: profiling the new players
After the 1960s, many manufacturing firms and assembly industries left the UK and relocated overseas where wages, land and other production costs can be much lower. However, it is an over-generalisation to say that manufacturing deserted Britain’s shores entirely! Plenty of examples can be found in the UK today that counter the general narrative of manufacturing decline. Many of these "success stories" belong to the car (automotive) industry.
Despite the disappearance of mass producers of cars directly under British ownership, the automotive industry remains a vital, thriving part of the UK economy. According to the Society of Motor Manufacturers and Traders (an organisation that exists to support and promote the interests of the UK automotive industry at home and abroad), around one million cars, half a million commercial vehicles and three million engines are now produced annually in the UK. With an annual turnover of £40 billion, the automotive sector is "a key global player ...and significant contributor to the UK’s economy."
Table 1 Two well-known UK car-making success stories
Automotive growth has been helped by three important factors:
FDI (foreign direct investment) Most car production in the UK is now under foreign ownership (see Table 1). In some cases, foreign firms such as Nissan have built new branch plants in the UK. In other cases, non-domestic TNCs have acquired famous UK brands as a way of building up their own global businesses (such as India’s Tata, which acquired Jaguar and Land-Rover in 2008).
UK government grand aid This has been a vital catalyst for the growth of foreign-owned car manufacturing in the UK: The current government has made it a priority to have meetings with Nissan and Toyota in Japan, for instance, as it "aims to make car producers central to the UK’s manufacturing renaissance" (Financial Times, 08 June 2011). Although regional development funding has been slashed since 2010, car makers such as Nissan and Jaguar were successful in attracting fresh grants in 2011 to help them expand their operations further.
Springboard to Europe In a tariff-free European Union, cars made in the UK can be exported for sale in mainland Europe with few additional costs (other than transport). Since 1993, non-European TNCS have viewed the UK as a manufacturing base for sales not just in Britain but in the entire EU - home to nearly half a billion people, most of them in car-owning households!
The most recent UK car production data (courtesy of the Society of Motor Manufacturers and Traders) give a very positive impression:
The UK produces over one million cars and commercial vehicles and over two million engines annually.
The automotive sector contributes nearly 10% of total UK exports, delivering an average annual export value of more than £25 billion between 2005-2010 (Figure 1).
The UK automotive sector exports to over 100 markets worldwide (in 2010, the UK exported 75% of the vehicles it manufactured).
The UK is home to seven volume car manufacturers and eight Formula One teams (supported by 300 specialist motorsport companies, employing nearly 50,000 people).
The automotive industry employs over 700,000 people in the UK - from manufacturing to retailing and show-rooms - and generates an £8.5 billion multiplier effect.
The automobile industry has also been busy taking action to help mitigate climate change. Due to cleaner, safer and more fuel-efficient cars, the average new car carbon emissions have fallen by one-fifth in the last 10 years (to 144.2g/km CO2).
Source: Motor Industry Facts 2011
Figure 1 UK domestically-produced car production and sales trends, 2000-2010
Transnational corporation (TNC) This is a business with operations in more than one country. Large global manufacturing firms such as Nissan and General Motors have expanded their businesses globally over time either by building branch plants overseas, or through mergers and acquisitions (buying up shares and ownership of foreign or rival firms).
Assembly industries These are manufacturing industries that take the products of many different industries and fit them together to make finished goods. Car manufacturing is a good example (the Mini car is made up of 2,500 previously manufactured parts, for instance).
Branch plant A factory built in a foreign country by a TNC that is headquartered elsewhere. One well-known example is Japan’s Nissan plant in Sunderland.
Britain’s contemporary car-making success stories are an outcome of global interactions. Some of the most successful operations are branch plants of transnational corporations (TNCS) like Nissan. They have located in the UK in order to secure a production base within the European Union (importing cars into the EU is not a cost-effective strategy, due to import restrictions such as tariffs and quotas). Other plants can be described as ‘remnants’ of domestic industries but in most cases have since been acquired by foreign TNCs. For instance, the Mini factory in Oxford is German-owned.
Although the global recession of 2008 hit car manufacturers hard (sales plummeted globally as buyers deferred purchasing a new car for a year or two), the last 12 months have seen renewed buoyancy (Figure 2).
Figure 2 The UK’s top five car producers in 2010
(Source: Financial Times, 08 June 2011)
Fresh investment into the UK automotive sector increasingly comes from rising global players such as India (Tata) and Malaysia (Proton). New research and development in Britain’s automotive sector is running at more than £1.5 billion a year, and rose by 9% during the recession. Elsewhere in the world, other major markets have stayed pretty buoyant too (Figure 3).
Figure 3 Changing trends in overseas car markets
The following case studies all demonstrate the continuing importance of global interactions for UK manufacturing. Although some of the brands may at first glance seem to be long-established UK ‘household names’, there has been, in all cases, a significant change of ownership. None of the main mass producers of cars are domestically-owned any more, in contrast to many of the small sports car makers that continue to be truly British brands (Table 2).
Table 2 Automotive manufacturing in the UK and its global pattern of ownership
Jaguar and Land Rover: classic British brands now under Indian ownership
The recently-formed Jaguar Land Rover (JLR) company combines two of the UK’s greatest motoring legacies under the foreign ownership of India’s Tata Motors. In 2011, Tata committed £5 billion of FDI for its new UK acquisition over the following five years. JLR currently employs almost 20,000 people in the UK. Parent company Tata, which also make steel in the Britain, is now the UK’s largest manufacturing employer.
Acquiring the names Jaguar and Land Rover (from Ford) cost Tata about £1.6 billion in 2008. This coincided with the 2008 global credit crunch - and during the early months of the financial crisis, Tata cut production by more than 100,000 units, froze pay and made 2,500 workers redundant.
However, the outlook has since improved. Production of the Range Rover Evoque has begun in Merseyside.
The JLR company reported a profit after tax in 2010 of £1 billion on sales of £10 billion (Financial Times, 04 July 2011).
In October 2011, Tata announced the creation of several hundred jobs at a new £350 million low-emissions engine factory in Wolverhampton (BBC News, 19 September 2011).
Mini: a British motoring icon that’s under German ownership
The rebirth of the Mini has been a success story for German owners BMW. With the UK set to remain as the base for Mini manufacturing, BMW hopes to drive growth further by investing another £500 million in its Oxford operation over the next three years.
The latest generation of Mini cars is set to leave BMW’s Oxford plant at the production capacity limit of 240,000 cars a year. BMW executives say that Mini’s British heritage makes it a priority to keep the production hub in the UK for now: "If you interfere with the authenticity of the brand, you lose the brand," says Ian Robertson, BMW’s global head of sales (Financial Times, 10 June 2011).
BMW’s total investment in the UK, (its biggest production centre in Europe after Germany) is now £1.5 billion. Mini provides more than 5,000 jobs in Oxford (and at the engine plant at Warwickshire).
Rolls-Royce: another British classic attracting German buyers
Rolls-Royce motor car manufacturing has been run by Germany’s BMW since 2003. With its iconic ‘Spirit of Ecstasy’ bonnet ornament, Rolls-Royce is a premium brand of car (with prices starting at around £200,000).
Between 1,000 and 3,000 luxury Rolls-Royce cars are sold worldwide each year. Manufacturing is based at the Goodwood plant in West Sussex.
The related Bentley brand is now also produced by another German TNC, Volkswagen, in Crewe.
MG: a British brand-name brought back by Chinese funding
MG Motor UK Ltd is headquartered in Birmingham but owned by Shanghai Automotive Industry Corporation (SAIC). It designs, develops, assembles and markets sports cars at the famous century-old Longbridge plant (with parts built in China before being shipped to Longbridge for final assembly).
The MG6, on sale since May 2011, was the first all-new car to be branded as an MG for 16 years.
The MG brand was previously under the same ownership as Rover until the company collapsed in 2005 and the MG name became available to buy.
China’s SAIC, which bought the brand-name, is now the world's eighth largest car maker (Daily Telegraph, 21 April 2011).
Lotus: a British sports classic that’s backed by Malaysian money
Lotus is currently expanding operations at its Norfolk home base in Hethel.
Known mainly as a niche sports car maker, Lotus plans to build its first city car, the Ethos, from 2014 as part of a £500 million expansion plan (the car will be developed in partnership with Proton, the Malaysian carmaker which also owns Lotus).
Lotus has been less successful than Nissan or Jaguar in securing UK regional aid during a time of major government spending cutbacks. (Financial Times, 21 June 2011).
Nissan: a Japanese TNC with a long-established UK base
Nissan’s new Leaf vehicle will be the world's first mass-produced zero-emission car (running up to 100 miles between charges). About 50,000 will be made in Sunderland each year (as well as an extra 60,000 lithium-ion batteries), creating more than 550 new jobs. Production begins in March 2012.
This represents £420 million of foreign direct investment by the Japanese TNC in its UK operations.
Nissan's Sunderland factory opened in 1984 and now employs about 4,000 people. It has a history of government support (an attractive location factor for Nissan). On this occasion, there is a £20.7 million grant from the UK government and a proposed finance package from the European Investment Bank (EIB) of up to £197.3 million (Guardian, 18 March 2010).
Nissan also recently announced that it would build the next version of its Qashqai small sport utility vehicle in Sunderland too. A further £192m of FDI supports this additional move (Financial Times, 08 June 2011a).
Ford - an American TNC with long ties to the UK (now ‘going green’)
Ford is bringing an enormous new £1.5 billion investment to the UK to develop a new generation of environmentally-friendly car engines. This is a big project that has attracted government backing - the UK will provide more than £350 million in loan guarantees alongside a proposed loan of £450 million from the European Investment Bank (EIB).
The plans focus on the development of low-carbon-emission diesel and petrol engines.
This new investment provides long-term security for 2,800 highly-skilled jobs in the UK, at factories at Dagenham in Essex, Southampton in Hampshire and Bridgend in Glamorgan and also at Ford’s research and development centre at Dunton in Essex (Guardian, 18 March 2010).
Vauxhall: an American-owned British brand (for almost a century - and also ‘going green’)
General Motors (GM) bought Vauxhall back in 1925! Since then, the massive US TNC has continued to invest in production in the UK, initially for UK sales then, in more recent decades, for the enlarged European market. Now, GM has plans to develop and electric car celled the Ampera.
The UK government hopes that the new Ampera car will be built at the Vauxall plant in Ellesmere Port, Cheshire, where the company makes its Astra model.
GM recently announced plans to make its next-generation Vivaro van at Vauxhall’s factory in Luton, securing that plant’s future at least until 2020 (Financial Times, 08 June 2011b).
No domestically-owned mass producers of cars remain in the UK. The largest outputs come from plants owned by foreign firms such as Nissan and Tata.
The foreign-owned mass production of cars in the UK comprises a mix of (i) TNC branch plants where foreign-designed cars are manufactured for the EU market and (ii) factories making ‘classic’ British brands, such as Mini and Jaguar, following their revival as subsidiary companies of overseas-based TNCs.
British-owned firms typically are smaller manufacturers producing expensive and innovative sports cars for a niche market, such as McLaren.
Government assistance has often been vital in helping to secure foreign direct investment.
The renaissance of the British car industry is an outcome of globalisation, global interactions and the development of supra-national organisation such as the EU. The fact that so many foreign firms have to date chosen to base their overseas operations in the UK, rather than in mainland Europe, owes much to the powerful legacy left by British car manufacturers in the 1950s and 1960s. This legacy includes (i) the engineering skills of local people and (ii) iconic brands. These are two very important - and very different - kinds of resource that help explain the geography of car manufacturing in the UK.
"Nissan's Sunderland factory to build new electric car" (Guardian, 18 March 2011)
"Nissan's Sunderland factory to build new electric car" (Guardian, 25 March 2011)
"Shanghai Motor Show: MG Concept" (Daily Telegraph, 21 April 2011)
"Cable goes to Detroit to woo car chiefs" (Financial Times, 08 June 2011)
"Reversal of fortune at Tata’s Jaguar" (Financial Times, 04 July 2011)
"Mini investment drives revival in car-making" (Financial Times, 10 June 2011)
"Nissan to build updated Qashqai in the UK" (Financial Times, 08 June 2011)
"Talks with GM likely to focus on producing Ampera in Cheshire" (Financial Times, 08 June 2011b)
"Lotus bids for £10m grant to build Norfolk factory for new models" (Financial Times, 21 June 2011)
"Jaguar Land Rover car plant confirmed in West Midlands" (BBC News, 19 September 2011)
Written by Dr Simon Oakes, who is a senior A-level and IB examiner who teaches at Bancroft’s School, Essex
By placing a booking, you are permitting us to store and use your (and any other attendees) details in order to fulfil the booking.
We will not use your details for marketing purposes without your explicit consent.
You must be a member holding a valid Society membership to view the content you are trying to access. Please login to continue.
Join us today, Society membership is open to anyone with a passion for geography
Cookies on the RGS website