Automotive businesses well placed to bounce back

4 min read

Automotive

This is the latest weekly update from Santander’s automotive team on how the coronavirus pandemic is affecting our clients and the sector as a whole.

Automotive

With uncertainty in the automotive industry remaining high, the Society of Motor Manufacturers and Traders (SMMT) has published its annual trade report, Risks and Opportunities: UK Automotive Trade In A Post-Covid World. The report shows that the sector is agile, flexible and fundamentally competitive, with world-leading levels of efficiency. In 2019 the sector generated more than £100bn in total trade for the third consecutive year, highlighting its role as a global trading powerhouse. It was also Britain’s biggest exporter of goods by a considerable margin. 

Exporting vehicles, engines and components to more than 150 countries worldwide, the sector is key to the UK’s international trade agenda and supports thousands of highly skilled, high-value jobs nationwide. A more detailed analysis of this report will be published on Chatter this week.

In June, Santander hosted a webinar on automotive supply chains in collaboration with the SMMT and South African trade body NACAAM. The session was extremely well attended and can be listened to again here.

We also held a virtual round table event last month with the SMMT and the Department for International Trade looking at automotive sector opportunities in eastern Europe. Information from the event can be found here.

 

Manufacturing sector news

With concern growing around the world about possible second waves of coronavirus infections, it’s timely that we published a major new report in collaboration with MakeUK this week.

The report, Responding, Resetting, Reinventing UK Manufacturing Post Covid-19, sets out a new industrial vision for the UK, with manufacturing at the centre of a new digital and sustainable economy. A copy can be found through the Santander Corporate and Commercial LinkedIn page.

The report suggests it will take British manufacturers until 2022 to recover to pre-coronavirus levels, at a cost of £35.7bn in gross value added (GVA) this year alone. The automotive sector expects the biggest decline (34%) in GVA as a result of a slump in demand, supply chain bottlenecks and mass factory shutdowns.

Our study also highlights how quickly manufacturing businesses were able to respond to the crisis. For example, by shifting production to personal protection equipment (PPE), as well as the importance of diversifying customer bases.

We make four recommendations to the UK Government:

  • it should recognise UK manufacturing as a critical sector
  • it should power a digital future through date
  • it should encourage and reward investment in the green economy
  • it should develop a National Skills Taskforce.

The report finds that so far during the pandemic the sub-sectors that have performed best have been food and drink, pharmaceuticals and chemicals. While motor vehicles, mechanical equipment and other transport, including aerospace, have fared worst.

The report reveals that 85% of manufacturers are taking steps to enhance supply chain resilience to limit the impact of future crises. It also examines the steps that fellow manufacturers in the likes of Germany, China, USA and the Association of Southeast Asian Nations (ASEAN) are taking and looks at what UK businesses can learn from their experiences.

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