Manufacturing Matters: Ineos move into UK car production is welcome news to a manufacturing nation

In the first of our ‘Manufacturing Matters’ series, Jonathan Burke, Head of our Manufacturing and Engineering Practice discusses the latest announcement by Ineos, who are set to create up to 1,000 jobs at two new facilities in the UK and Portugal. The move, which will bring car production into the UK, is welcome news to a manufacturing nation. The sites will assemble a four-wheel drive vehicle billed as the ‘spiritual successor’ to the Land Rover Defender – the iconic off-roader whose production ended in 2016 after 68 years of relatively little change in style or capability.

With Jaguar Land Rover having decided to launch a new Defender since then, which will be available before the Ineos Grenadier model, it will be fascinating to see if either version manages to carry the flame for the original Defender, and which model customers will prefer. Time will tell.

Whilst the number of jobs in question is relatively small, this announcement is at least a modest vote of confidence in British manufacturing – whatever the outcome of Brexit happens to be. The manufacturing sector is certainly in need of some good news now, not least within automotive, which is experiencing a global downturn and a seismic shift in its technology adoption.

Boost for the community

What interests me most in this news is how important this decision is for the communities where these facilities will be based, and for the local supply chains that will benefit from their presence. Ineos has confirmed it will build its new UK plant in Bridgend, next to the Ford engine operation which is due to shut down in 2020 with the loss of 1,700 jobs. Hopefully, many of these individuals will find themselves in new roles with Ineos, and the local suppliers to Ford will also be able to benefit from the arrival of the Grenadier.

Manufacturing jobs are important – they are typically skilled roles that are well-paid – paying taxes and supporting local communities. They are often communities in their own right, particularly in small towns where factories are amongst the biggest employers in their area.

The decline in our nation’s industrial output – from a peak of 25% of the UK’s GDP in the 1970s – has had a material effect in many cities and towns, in some cases taking many years to recover. This has led to a decline in apprenticeships and the once thriving flow of school leavers into the factories of our major manufacturing centres, in Birmingham, Manchester, Glasgow, Newcastle and Leeds. As a result, we pay less attention to the skills needed for a career in manufacturing and fewer children grow up in households where one of their parents works in a manufacturing environment.

Other Western economies such as the US have experienced similar, if not more dramatic, declines. Here, manufacturing generated almost 30% of the country’s GDP in the 1950s, gradually declining to today’s contribution of 12%. The economies of the US and the UK have lost ground to China, South Korea and Germany, where manufacturing has thrived – due in part to more effective industrial strategies developed by their governments, and their success in exporting their products across the globe.

Making IT

In his 2017 publication, ‘Making IT’, the eminent North American journalist, Louis Uchitelle, explains in vivid fashion the reasons behind the decline in output in the world’s greatest industrial nation, and the possible solutions to reduce or even reverse this trend.

Despite its decline in the UK, manufacturing is still very much part of our heritage and DNA. Now generating 10% of the UK’s GDP, and accounting for 2% of global manufacturing output, the UK is still one of the world’s ten largest manufacturing nations by manufacturing output (and as high as number 6 in some lists).

It employs over 3 million people – just under 10% of the UK workforce – earning an average salary typically above the national average wage. Manufacturing accounts for 45% of total exports – totalling £275bn – placing the UK in the top ten of the world’s leading exporting nations.

In short, manufacturing jobs – whether they are in the assembly plant, R&D lab, back office or front office – are important, and their presence and future development are essential to the UK economy.

In a 2018 report by The Brookings Institution in North America, the UK came joint top with Switzerland in global rankings for a country’s overall manufacturing environment. The report analysed a range of factors, including: policies and regulations; tax policy; energy, transportation and health costs; workforce quality; and infrastructure and innovation.

The fact that the UK ranks as highly as it does across these areas explains, in part, why it has established, attracted and retained the manufacturing base that it has. Crucially, maintaining this attractiveness will ensure the same performance is likely in the future, although we are now beginning to see signs that some international employers feel less confident about the UK as a European base for their plants.

With Brexit still to be finalised, the future for UK manufacturing is less certain now than it has been for some time. And whilst the environment and desire for manufacturing jobs remain as positive as they always have, let us hope Ineos is not the only company that believes the UK is the ideal place to create and invest in manufacturing opportunities.

For more information please contact Jonathan Burke, Head of the Manufacturing and Engineering practice at Berwick Partners.