UK car industry ‘back in the game’ after £24bn investment pledged in single year

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The UK car industry is “back in the game” after securing £24bn of new investment pledges last year, the motor trade body said on Thursday, more than the combined total for the previous seven years.

After years of curtailed spending owing to Brexit uncertainty and instability at the top of government, the auto sector became “investible” again, with Nissan, Jaguar Land Rover, Tata and BMW all making big announcements, the Society of Motor Manufacturers and Traders said.

The upbeat assessment comes as figures, released by the SMMT on Thursday, showed UK vehicle production rose above 1mn for the first time since 2019. This represented a 17 per cent rise, buoyed by a wider recovery in the car market and strong exports to Europe.

“We are back in the game,” said Mike Hawes, chief executive of the SMMT. 

Over the past year, manufacturers with UK plants felt able to make significant spending decisions as relative political stability returned to the UK, following a tumultuous period between 2016 and 2022, Hawes said.

“There were so many years when the UK was nigh-on un-investible [with] Brexit negotiations . . . political instability, economic uncertainty, it was hard to attract the investment,” said Hawes. “That has now been relieved.”

Between 2016 and 2022, a total of £17bn of new investments into the UK auto industry were announced, SMMT calculations show, while last year’s figure reached £23.7bn, boosted by £15bn from JLR and £2bn from Nissan.

Even though the investments came largely from existing factory owners, rather than new entrants, the UK still did well to win the work because of fierce competition from countries in Europe such as Spain, he added. 

“We have shored up what we have got and that is no mean feat,” Hawes said. “Had we lost those, it would have made our ability to claw back [production] volume that much harder.”

He warned the UK still needed to “catch up” with European rivals, which remain ahead in critical areas such as the development of battery factories, and needed to improve its energy costs to make the country more attractive to new, particularly Chinese, investors.

Forging closer trading links with Europe, which the Labour party has pledged to do should it win the general election this year, would improve the competitiveness of UK manufacturers, Hawes said.

The highest cost for carmakers after wages remained energy, he added, which the industry has consistently asked ministers to assist with.

Several car factories have made efforts to produce their own energy on-site, through wind turbines or other generators, but these had been held up to problems with securing national grid connections.

The number of cars produced in UK factories last year rose to 905,000, while van output climbed to 120,000.

For the coming year, an independent forecast for the SMMT predicted that total output would rise again from 1.02mn to 1.04mn, though car production would fall marginally as older models were phased out. 

More than a third of all UK vehicles made last year were hybrid or electric models, marking a record high. Nissan makes the electric Leaf, while BMW manufactures an electric Mini.

Almost all the cars made by Toyota at Burnaston in Derbyshire are hybrids, while Vauxhall-owner Stellantis started making electric vans at Ellesmere Port last year. JLR also offers car models with plug-in hybrid technology. 

While UK car production peaked at more than 1.6mn before the Brexit vote in 2016, the closure of Honda’s Swindon plant in 2021 and JLR’s downsizing strategy mean the country can make up to 1.1mn cars a year. The total is unlikely to pass the historic record without new investment, the SMMT said.