Opportunities for UK businesses in the automotive sector to shine

A report on the UK automotive sector produced by Coface, says that UK companies which supply automotive manufacturers are well-placed to survive the weak economic climate in the Eurozone which is having a serious impact on continental competitors.

Grant Williams, Coface UK’s Risk Underwriting Director says the combination of a weak economic climate and overcapacity on the continent means car manufacturers are trying to shift production to lower cost areas: “This has led to the announcement by Ford that three of its facilities are to close, including two in Dagenham and Southampton, as well as the proposed closure of the PSA Peugeot Citroën plant outside Paris.

“However, we believe companies in the UK automotive sector are in a stronger position than their European competitors,” he says. “Most significantly, the efficiency of UK car plants and the availability of technical expertise have encouraged manufacturers such as Jaguar Land Rover, BMW and Honda to invest in UK production facilities while Ford has said it still plans to invest in development and production in Essex and South Wales.

“Many UK plants are now the sole locations for global production to emerging markets such as China and India and this should have knock-on benefits for UK engineering companies and other specialist component suppliers.”

Coface’s findings reflect the latest figures from the European Automobile Manufacturers Association (ACEA) which show that the number of new car registrations in Europe declined by 10.8 percent in September 2012, a downward trend which has lasted twelve consecutive months. The ACEA reports that while the market in France contracted by nearly 14 percent, the UK was the only major market to expand, posting growth of 4.3 percent.

“Late payments within the automotive sector for the first half of 2012 were down by just under nine percent on the same period in 2011, but there remains a significant risk of bad debt for UK component manufacturers with trading partners in the Eurozone,” Grant adds. “We urge them to tighten their credit management procedures and protect their cash flow.”