Chris Cowin looks at recent developments in UK car production and exports, in the context of industry history since the 1950s.
UK car production in June 2021 was the lowest of any June since 1953 (except for COVID-19-hit 2020). The global shortage of semiconductors led to reduced output, especially at Jaguar Land Rover, and helped produce that dramatic headline which rather exaggerates the recent contraction of Britain’s car manufacturing sector, but contraction there certainly has been.
In 1953 (for the year) Britain manufactured only 595,000 cars – one third of the 2016 figure – so it’s depressing that output has been knocked back to the level of that time, even if temporarily.
Myths of grandeur
It’s sometimes thought the UK was the ‘workshop of the world’ in the 1950s and producing vast numbers of cars. However, as the chart below shows, annual output only passed the 1 million mark at the end of the decade. And (closely related) it’s often stated Britain once exported more cars than any other nation.
That’s technically true, but in 1950 (when it could be said) nobody else was exporting very much. The Americans were focused on pent-up domestic demand and other car-producing countries (there weren’t many) were still rebuilding from the war. We took a big share of a tiny cake, at the cost of making new cars practically unobtainable on the home market.
The actual volume of British exports (coloured red on the graph) was much lower in the early 1950s than in subsequent years, or recent years. (In 2016 the UK exported over 1.35 million cars, more than triple the 1950 figure of 409,000). Today’s industry is heavily export focused (82% of production even in depressed June was for export) which perhaps explains why many people don’t appreciate its scale.
Britain, of course, accounted for a higher percentage of world car production in the 1950s and ’60s than she has recently. The same can be said for Germany. The number of countries manufacturing cars and the global production total has expanded greatly over the years with China, South Korea & others coming from nowhere. So a shrinking percentage share doesn’t mean the British industry has diminished massively in size – despite the colourful graphics on YouTube which create exactly that impression. After all, 3% of a Christmas cake is a lot more filling than 10% of a cupcake.
And employment in car manufacturing has contracted massively, but that’s due to automation. Huge leaps in productivity occurred in the early ’80s with Longbridge for example (re-equipped to build the Austin Metro) catapulting from 8 cars produced per employee (for the year) in 1980 to 17 in 1981. Fewer people were needed, but more cars were built.
A recent peak
So it was possible as recently as 2016 to make a convincing argument for Britain’s car manufacturing sector being as strong as it ever has been, with more production exported and focused on higher value models than in the past. At the all-time peak of production in 1972 (1.92m) the “product mix” was considerably less premium.
But one can’t salute an industry as strong as ever now, as there’s been a dramatic contraction in output since 2016 (as shown on the graph) – even before COVID-19 hit, 2019 output of 1.3 million was 25% down on 2016’s 1.72 million.
The ownership issue
Nearly all the car manufacturing sector is, of course, now ultimately foreign-owned, and some people will tell you we simply “assemble kits of foreign parts”. But that’s very far from being the case.
Jaguar Land Rover rivals Nissan as our biggest producer and, though ultimately Indian owned, the UK is very much their R&D and manufacturing hub. Where would those kits be coming from?
The Mini’s engines and body panels are UK manufactured in Birmingham (Hams Hall) and Swindon respectively, prior to final assembly in Oxford.
Moreover, as described recently by Keith Adams, the new Nissan Qashqai was designed in Cranfield and has a high level of UK content (it’s not even available in Japan). Such cars are export stars, something Global Britain sorely needs.
The Honda factory in Swindon (which sadly closed in July) was one of the most vertically integrated in the world with ingots of raw aluminium (for engines) and sheet steel going in one end and finished cars coming out the other.
All the same, though, people scorn the value of car manufacturing in the UK saying “the profits go abroad” forgetting that three of the big four manufacturers in the 1970s were foreign owned (yet weren’t judged as worthless then).
Profit margins aren’t huge in the car industry anyway (typically less than 10%) and let’s not forget that, when we owned part of the car industry in the form of state-controlled British Leyland, the talk was not of who gets the profits, but how much subsidy had to be pumped in. (Approx. £15 billion in today’s money during 1975-88).
And experience shows that firms like Nissan, BMW-Mini and Jaguar Land Rover tend to plough profits back, rather than cream them off.
Admittedly, a higher proportion of components are imported nowadays than in the past, in an industry that’s become much more international. But by the same token, the UK exports more automotive components than it used to. It’s wrong to think of the component sector as “hollowed out”.
Look no further than engines, high value-added items which the UK produces in considerably bigger volumes (2.5 million in 2016) than it does cars, which rather proves the point. Ford exports big quantities of engines from Dagenham, while engines are sent from Birmingham to Bavaria to be fitted into BMWs there. A “coals to Newcastle” story it’s hard to imagine happening in the 1970s, but which nobody talks about – ever.
People choose to focus on the two JLR models assembled abroad forgetting most aren’t, and forgetting (or unaware) the French car industry has totally “offshored” assembly of many models. Not just niche products like DS9 and Renault Arkana, but the popular models. Twingo, Clio, Megane, Captur, 208, 2008, C3 and C4 are no longer assembled in France, French ownership or no. Indeed, if there was some kind of EU plot to destroy manufacturing, as some believe, it seems France was the big loser. They once built 3.5 million cars annually, but this year it’s forecast to be around 1.3 million.
There seems to be a lack of understanding of all the economic benefits a car industry can deliver including employment, tax revenue for the Treasury from companies and employees, business for suppliers in Britain, R&D investment and a boost to the trade balance. Interestingly, the terrible UK trade deficit on cars of the 1980s was briefly transformed into a trade surplus in 2012.
All of those benefits apply irrespective of whether the firms concerned are ultimately UK or foreign owned. When the British Government decided it had no choice but to rescue British Leyland in the 1970s, it wasn’t because they were worried about British shareholders missing out on their dividend payments. It was because they recognized the motor industry was an engine of the economy, supporting a supply chain, supporting thousands of jobs and contributing positively to the trade balance.
It still is.
But you’ll find people saying (and I quote) that the Range Rover is ‘as British as an onion bhaji’. And hoping that BMW-Mini will fail (bringing job losses and hurting the trade balance) just to prove some kind of point. I’d simply say ‘Think again’.
The Australian car industry was essentially foreign owned. But now that it’s disappeared, the Australians (some of them anyway) don’t half miss it.
You don’t know what you’ve got ’til it’s gone.