Hot wax for UK car companies

As the latest figures show a fall in car sales within the EU, Coface remains optimistic about the prospects for UK companies supplying the domestic and export automotive markets.

A report on the UK automotive sector produced by Coface says that UK companies that 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 he believes companies in the UK automotive sector are in a stronger position than their European competitors: “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.”

Meanwhile, Coface’s experts in France have warned suppliers that the automotive sector in France is at significant risk of bad debt. In a separate analysis the company reported that insolvencies in the French automotive and transport industry increased by 6.7 percent in the year to August 2012 and that the insolvency rate as a proportion of the number of companies within the sector was two percent, the highest of the 11 sectors analysed.

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.

Grant adds that 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 and we urge them to tighten their credit management procedures and protect their cash flow.”