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The economic performance of the UK’s motor vehicle manufacturing industry

As new "65" plate registrations are released, we take a look at the economic performance of the UK’s motor vehicle manufacturing industry

How has output in the motor vehicle manufacturing industry changed over time?

The relative size and importance of the motor vehicle manufacturing industry1 can be summarised by its economic output, as measured by gross value added (GVA2): the industry contributed £12.0 billion to the UK economy in current prices in 2014, which accounted for 8% of total manufacturing GVA. This placed the industry as the third largest manufacturing industry in the UK, surpassed only by the manufacture of food products and the manufacture of metal products3 respectively. The number of people employed in the motor vehicle manufacturing industry was 141,5004 in 2013, or 6% of total manufacturing industry employment; potentially indicating the level of automation and technical innovation within this industry.

Despite a small contraction in 2000, output in the motor vehicle manufacturing industry appeared fairly stable between 1997 and 2007, where growth was broadly flat in terms of the volume of output. However, this steady trend was interrupted by the 2008-09 economic downturn, where output contracted by 49% between the industry’s pre-downturn peak in Quarter 1 (Jan to Mar) 2008 and its trough in Quarter 1 (Jan to Mar) 2009. This contraction was notably larger than that experienced by the overall manufacturing industry, which declined by 13% over the same period.

Although the motor vehicle manufacturing industry experienced the largest deterioration in output during the 2008 downturn compared to other manufacturing industry components, the industry experienced a strong recovery shortly afterwards, with output growing by an average quarterly rate of 3.1% between Quarter 1 (Jan to Mar) 2009 and Quarter 2 (Apr to June) 2015 and surpassed its pre-downturn peak by Quarter 4 (Oct to Dec) 2013. This experience contrasts with that of the manufacturing industry overall, where growth has averaged just 0.3% per quarter over the same period and remains below its pre-downturn peak.

Figure 1: Motor vehicle and total manufacturing output since 1997 to 2015 (seasonally adjusted 2011 = 100), UK

Figure 1: Motor vehicle and total manufacturing output since 1997 to 2015 (seasonally adjusted 2011 = 100), UK
Source: Office for National Statistics

Notes:

  1. Quarter 1 is Jan to Mar, Quarter 2 is Apr to June, Quarter 3 is July to Sept and Quarter 4 is Oct to Dec.
  2. Please click on the image to view a larger version.
  3. Data sourced from the ONS Index of Production.

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The healthy recovery in the motor vehicle manufacturing industry may have been partly attributable to the UK Car Scrappage Scheme, which ran in 2009 and 2010; however, the industry has continued to show healthy growth in the years following the scheme’s end. In fact, output within the motor vehicle manufacturing industry reached a record high in Quarter 2 (Apr to June) 2015, 10% above its pre-downturn peak.

How important is the motor vehicle industry to UK manufacturing?

We also collect and publish turnover data by industry in our Annual Business Survey (ABS). These statistics show the motor vehicle manufacturing industry’s turnover5 to have reached £60.6 billion in 2013, which accounted for 12% of the overall manufacturing industry’s turnover.

Turnover data for the motor vehicle manufacturing industry is presented by country and region in Map 16, and shows that, on a turnover basis, the majority of the industry’s activity is concentrated in England, where 93% of the UK’s motor vehicle manufacturing industry turnover was generated in 2013. On a regional basis, the highest turnover was generated in the West Midlands, where turnover was £17.6 billion, or just under a third of the industry’s UK total. This was followed by London and the South East, and the North West of England7.

MAP 1: Motor vehicle manufacturing turnover by UK region, 2013

The highest turnover was generated in the West Midlands, where turnover was £18 billion, or a third of the industry’s UK total
Source: Office for National Statistics

Notes:

  1. Data for the London and South East regions have been combined to avoid disclosing information about an individual business.
  2. Data sourced from ONS Annual Business Survey.

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Does the UK export or import more motor vehicles?

The UK motor vehicle manufacturing industry has become more integrated in the global economy since 1998, with both exports and imports increasing over the period 2008 to 2014. The value of UK motor vehicle8 imports has consistently been higher than the value of exports and therefore runs a trade deficit, which stood at £5.5 billion in 2014, the highest deficit since 2007 (£8.7 billion).

The majority of the UK’s motor vehicle imports are from the EU, consistently accounting for over 85% of total motor vehicle imports each year since 1998. Imports from the EU have grown from £14.3 billion to £31.3 billion between 1998 and 2014, whereas imports from non-EU countries have grown from £2.2 billion to £4.0 billion over the same period.

In 1998, a broadly similar composition to imports existed for UK exports; exports of motors vehicles to the EU accounted for three quarters of total motor vehicle exports. This has changed noticeably, with exports to non-EU countries growing at a faster rate than exports to EU countries. Consequently, the share of total motor vehicle manufacturing exports to the EU has fallen to 40%. Exports to non-EU countries have grown from £2.9 billion to £17.9 billion from 1998 to 2014, whereas exports to EU countries have grown from £8.0 billion to £11.9 billion over the same period. The strong demand for exported UK cars is widely reported by car manufacturing trade body the Society of Motor Manufacturers and Traders (SMMT).

Figure 2: Imports, exports and balance of the motor vehicle product group, 1998 to 2014, UK

Figure 2: Imports, exports and balance of the motor vehicle product group, 1998 to 2014, UK
Source: Office for National Statistics

Notes:

  1. Data sourced from ONS UK Trade.

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How much is spent on research and development on motor vehicles and parts products and how has this changed in recent years?

Expenditure on research and development (R&D) performed in the motor vehicles and parts product group9 has more than doubled since 2002, with particularly strong growth since 2009. In 2013, R&D expenditure performed on the motor vehicles and parts product group accounted for 11.2% of the UK total, compared with 6.7% in 2009 and 7.3% in 2002.

Figure 3: Research and Development expenditure on motor vehicles and parts in the UK, 2002 to 2013

Figure 3: Research and Development expenditure on motor vehicles and parts in the UK, 2002 to 2013
Source: Office for National Statistics

Notes:

  1. Data sourced from ONS Business Enterprise Research and Development.

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In 2013, 91% of R&D expenditure on motor vehicles and parts in the UK was undertaken by foreign-owned businesses, highlighting the importance of foreign direct investment in the UK motor vehicle industry. Foreign-owned businesses also contributed 84% of value added in the motor vehicle manufacturing industry, compared with 28% for the economy as a whole. 

Figure 4: UK and foreign-owned businesses' expenditure on motor vehicles and parts Research and Development, 2013

Figure 4: UK and foreign-owned businesses' expenditure on motor vehicles and parts Research and Development, 2013
Source: Office for National Statistics

Notes:

  1. Data sourced from ONS Business Enterprise Research and Development.

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In the motor vehicles and parts product group, 84% of R&D expenditure was on experimental development10 (£1.6 billion) in 2013. This is a much higher proportion than most other manufactured product groups, for example aerospace (30%), machinery and equipment (50%), and pharmaceutical (52%) product groups.

Figure 5: UK R&D expenditure by type of research for a range of product groups, 2013

Figure 5: UK R&D expenditure by type of research for a range of product groups, 2013
Source: Office for National Statistics

Notes:

  1. Data sourced from ONS Business Enterprise Research and Development.

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Where can I find out more about these statistics?

The analysis is based on data from the: Annual Business Survey, Quarterly National Accounts, Index of Production, UK Trade in Goods Analysed in Terms of Industry and Business Expenditure on Research and Development.

If you would like to find out more about these statistics, you can read any of the releases in the related links above. If you have any comments or suggestions, we would like to hear them. Please email us at: business.stats@ons.gsi.gov.uk

Notes:

  1. Standard Industrial Classification Division 29 ‘Manufacture of motor vehicles, trailers and semi-trailers.

  2. GVA measures the total of output less the inputs used in production.

  3. Formally referred to as ‘manufacture of fabricated metal products, except machinery and equipment’. For example, this would contain metal structures used in buildings.

  4. Business Register and Employment Survey, 2013 provisional estimate.

  5. Turnover measures the total value of goods sold, but unlike GVA does not take off the value of inputs used in production.

  6. Data for London and South East regions have been combined to avoid disclosing information about individual businesses.

  7. ONS Annual Business Survey, 2013.

  8. Classification of Product by Activity Group 29.1: Manufacture of motor vehicles.

  9. Classification of Product by Activity (CPA) group 29: Motor vehicles, trailers, semi-trailers and caravans (excluding repairs).

  10. Basic research is work undertaken primarily to acquire new knowledge without a specific application in mind. Applied research is work undertaken to acquire new knowledge with a specific application in mind. Experimental development is work using the results from basic and/or applied research for creating new or improved products or processes.
     

Categories: Business and Energy, Production Industries, Manufacturing, Manufactured Goods
Content from the Office for National Statistics.
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