Economania

The recent revival of the MG brand has marked a turning point for the motor industry in the UK, backed up by a return to production of the Longbridge plant in Birmingham, now owned by SAIC or Shanghai Automotive. This company has emerged as one of the world's top ten automotive firms and now owns all rights to the MG brand. In a matter of weeks, the new MG6 will be rolling off the production line at Longbridge. This vehicle has been designed completely in the UK by 300 staff all based in Birmingham. The car is being launched in the UK this May and the firm expects to produce 2000 vehicles over the next 12 months. This may not appear to represent a huge volume but at least a formerly redundant plant is now coming back into production as opposed to just sitting idle. Only 40 staff will be employed on the production line, which again does not sound a huge number, but new jobs may be created in the future with other models such as the proposed MGTF or the MG Zero.

It is not recognised in this country that the United Kingdom has the widest production base of any motor industry in the European Union. The motor industry also exports over 80% of its output so is not just an important employer but a major earner for this country too. This country also does very nicely at present in terms of the number of engines being produced and over 70% of total production also goes abroad. To quote a figure, over 210,000 engines were produced by plants within the United Kingdom. Therefore the success of this industry is also crucial to the automotive components sector which also matters particularly in the West Midlands. SAIC has invested 45million of capital into the UK and would not do so unless it was confident of attaining a positive return. The good news for the West Midlands region is that at long last a British brand is on the up, and also financed by a major player. The electronics for the new MG6 will also be sourced in the Midlands and that is another boost for the region. More output generates more wealth which in turn creates more employment. This is the equation that must not be disregarded by us all, particularly those in power. (see www.smmt.co.uk/publications)

The government has to recognise that there is no substitute for this kind of success and must create a business climate that rewards inward investment. It should also be prepared to invest in skills too and not just in tthe motor industry. Firms will not relocate into the UK if they are dissatisfied with the standard of workforce on offer. The motor industry is now a success story to be proud of and the government should encourage more investment.

MIRA, the international vehicle engineering and test business, has announced that it will create an advanced high technology transport facility with a new 300million investment. This will add a new 155000 sq campus at its 850 acre site in the Midlands. This investment is aimed at emerging new technologies such as low carbon transportation. The firm also recruited 70 new staff in the UK in 2010.

The Chancellor of the Exchequer does have an opportunity in the forthcoming budget to assist the manufacturing sector with schemes such as reviving capital allowances for investment and R & D credits. This opportunity cannot be wasted. The government intends to cut the structural deficit over the lifetime of this Parliament. It can only do that by securing growth over the medium term, not just the short term. And manufacturing has a crucial role to play in that.

Mark Sandford - Permission granted to freely distribute this article for non-commercial purposes if attributed to Mark Sandford, unedited and copied in full, including this notice.

Members can discuss this and other articles on the economics forum at International Mensa.