Automotive Sector Set To Create 14,000 New Jobs In Region, But Brexit Remains A Threat

The Government’s aim of creating a ‘Midlands Engine’ could be boosted by the creation of 14,000 new automotive manufacturing jobs in the region over the next decade - but only if a suitable post Brexit export trade deal is negotiated and the crucial skills issue is tackled, according to new report.

First announced last year, the Midlands Engine is a key part of Prime Minister Theresa May’s industrial strategy and similar to the ‘Northern Powerhouse’ plan, it aims to rebalance the UK’s economy by supporting regions outside of London through infrastructure investment and political devolution.

The latest UK Powerhouse report by law firm Irwin Mitchell says that although the Midlands’ economy will continue to be outpaced by London over the next 10 years, the value of its output will increase by £29.3bn with 176,000 new jobs being created.

The report, produced by leading think-tank, Cebr, states that automotive manufacturing will be key to this growth and expects 14,000 new jobs in the sector to be created in the Midlands region.

Currently the automotive sector represents 3.8% of output across the West Midlands compared to a national 1.3% share. In 2015, motor manufacturing made up 8.2% of UK manufacturing compared to 6.2% in 2006.

Painting a positive outlook for the sector, the report says the recent EU referendum result will help to boost exports within the sector due to the fall in value of the pound.  Future trade deals with the EU in this sector are also likely given 700,000 cars produced in the UK are exported to Europe whilst the UK is also Germany’s biggest export market for vehicles.

Despite this optimism and prediction that over 14,000 new vehicle manufacturing jobs could be created in the Midlands before 2026, it says Brexit could still pose a number of threats for the outlook of cities such as Birmingham and Coventry, including the potential loss of the EU talent pool which could exacerbate the current skills crisis.

Expert Opinion

“The automotive sector is at the heart of the Midland Engine and if the Government is keen for it to flourish, it’s vital that they take the necessary steps during Brexit negotiations to ensure it can thrive.

“Whilst the industry has had much success in forging trading ties with emerging economies such as China, Europe remains a key market and access to the continent has provided a key support for investment into the UK from overseas car manufacturers. Even premium manufacturers such as JLR derive around 40% of sales from the EU.

“Negotiations on the future trading relationship following the referendum result will be an important determinant in the outlook for the automotive industry across the UK. Fortunately, given the importance of the UK market to vehicle producers in mainland Europe, there will be some considerable desire to get a deal of sorts done in this area.

“Assuming a deal on automotive exports is reached with the EU, the outlook for the automotive industry across the Midlands looks positive.

“Still, the sector and region could see some fallout from the UK’s decision to leave the EU. There is already a serious issue of skills shortages with one in five vacancies in the West Midlands unfulfilled because of a lack of available skills in the labour market. Whilst cooperation with local colleges and universities will help to support the supply of skilled school leavers and graduates, the loss of an EU-wide talent pool, should negotiations take this route, could be of detriment to the continued expansion of the sector in the region.”
Chris Rawstron - Partner

According to the UK Powerhouse report, the economic output gap between the West Midlands and London will grow by £47bn over the next 10 years.

Highlighting the need for the Midlands Engine initiative to be successful, the report said that the West Midlands economy would grow by 13% over the next decade whilst London’s economy would grow by 17% during the same period.