Conference blog: Securing a Future for the UK Auto Industry

Unite is holding an emergency conference today (March 25), bringing together representatives of its 95,000 auto members with industry leaders to press for determined government action to secure barrier-free trading access to markets in the European Union.

With now daily reminders that a ‘hard’ Brexit will prove extremely challenging for the UK’s car manufacturing industry, the Securing a Future for the UK Auto Industry conference will help to develop a plan of action to safeguard the country’s world-class auto industry, a sector with a £71.6 billion turnover.

Speaking at the conference will be David Bailey, professor of industrial strategy at Aston University, shadow secretary of state for business Rebecca Long-Bailey, Society of Motor Manufacturers & Traders CEO Mike Hawes and Unite general secretary Len McCluskey.

They will be joined by auto convenors Trish Ford, Mick Graham, John Cooper and Mick Forbes.

Check back here throughout the day to follow updates from the conference. Comments and updates will appear on social media under #autoconf17.

3pm

Len McCluskey is now bringing the conference to a close.

He thanks the delegates for attending.

“The automotive sector is one of the jewels in the UK’s manufacturing crown. We intend to make sure your voice is heard and there are no doubts that these are going to be turbulent years,” he says.

“However, I do feel that the type of organisation we have within this sector and the high level of representation that we have, means we will be able to navigate these stormy waters and we’ll do that by remaining united and remaining strong.”

2pm

CEO of SMMT, Mike Hawes, is now speaking.

Hawes says that the automotive sector is vital to the UK economy. There are more than 800,000 jobs in the industry, just under 170,000 of those jobs are manufacturing roles.

“For every manufacturing job there are around five other jobs that depend on it. That underscores just how important this sector is to the UK economy.”

Hawes says that every area within the sector has had investment over the last few years. He says the fundamental challenge is to keep that success alive.

While vehicle production is set to continue in the short-term because decisions in the auto industry are taken around four years in advance, the dangers lie in the next investment cycle which will take affect in 2021 and 2022, Hawes says.

Hawes is clear that Brexit is the biggest challenge facing the UK automotive industry, “but if you were to sit in the boardroom of any of the global car makers and ask them to list their global challenges, Brexit would be five or six.”

These include the election of Donald Trump, changes to CO2 regulations, driverless cars, the change in how cars are bought and paid for and shifting markets in large countries like Russia, China and Brazil. It is up to the UK government to ensure that Britain’s auto industry is not disregarded, Hawes says.

“For any car company you have to be agile and you have to adapt. That’s why as we approach Brexit we have to get a deal that makes sure that we can secure the success we’ve had over the last few years.”

Hawes says that leaving the EU is going to erect major challenges. As an example of the problems that could be thrown up by leaving the single market he mentions the alcoholic drink Baileys, which moves between the Republic of Ireland and Northern Ireland 40 times before the product is ready for sale.

“Multiply that by the amount of products that go into a car, around 15,000, and you can see how complicated our future relationship with the EU is going to be.

“When the Prime Minister said ‘no deal is better than a bad deal’ it is really hard to see what deal would be worse for us than no deal, which would be WTO rules.”

He said that a firm like Jaguar Land Rover would have to swallow an eight percent increase in costs if they wanted to export to Germany under WTO rules. The costs of tariffs for importing cars to the UK would also be huge and be paid for by consumers, Hawes explained.

“Tariffs are about the biggest redline we have. We also need some kind of customs union arrangement. This industry has probably taken advantage of the single market more than any other.

“The way that parts move seamlessly, just in time, from one part of Europe to another, back and forth continuously. Any thing that puts a barrier – in terms of paperwork, in terms of logistics – in the way of that will add costs and a drop in competitiveness.”

1.30pm

Delegates have now returned from lunch break.

Toyota convenor Trish Ford is addressing the conference. She says that it’s clear Brexit is causing “massive massive uncertainty” within the automotive industry.

Given the prospect of the tariffs and the costs that Brexit could have, Ford says there is huge implications for whether the UK industry will win contracts to build new car models in the future.

She says she has real concerns over whether Toyota will move its manufacturing operations in the UK to another country when Britain leaves the EU.

Ford says that the Brexit negotiations should include trade unions because they will represent the priorities of workers. She says it is extremely important that workers’ rights, terms and conditions and health and safety are maintained and improved.

“We don’t want to see our rights eroded by companies moving towards zero-hour contracts with horrific working hours and things like ‘three strikes and your out’ policies.”

Ford is clear that UK-based companies should stay members of their European Works Councils (EWC). She says EWC reps should take steps now with their employers to make sure they will remain on the councils after Brexit.

She says that “positive procurement” should be used create a strong stable internal market to support manufacturing. Ford calls for the re-shoring of jobs and investment in skills to strengthen UK manufacturing.

1pm

Delegates break for lunch.

12.45pm

The floor is now open to questions.

A delegate asks about Polish members who work for an agency at a car manufacturing plant. He says they are worried about their future in the UK and wonders what he can tell them.

“Unfortunately there’s no way to tell what’s going to happen,” replies David Bailey. “May has refused to guarantee the rights of EU citizens before the Article 50 talks. If she had I think the negotiations would have been given a more positive start.”

McCluskey says “it is wrong that the government is using our EU members as bargaining chips.”

12.25pm

Long-Bailey turns to what the Labour Party would do differently.

She says Labour would gain tariff and impediment free access to the EU and retain workers’ rights and protections underpinned by EU legislation. “The Labour Party has been fighting for these things and we will continue to do so. It is not patriotic to have a bad Brexit.”

Regarding an industrial strategy, Long-Bailey says Labour would invest an additional £250bn in capital expenditure projects over ten years matched by an equivalent amount through the National Investment Bank. Labour will also invest in skills, she says.

Decisions on how the resources would be used would be made on a national and local level, she says. She points out that devolved decision makers are much closer to local business and the regional economy and much more capable of taking wise and co-ordinated investment decisions.

Long-Bailey says that trade union and employment rights need to be strengthened and workers given more say in how companies are run.

For the automotive industry in particular, she says investors should be given consistent and transparent assurances and incentives to stay. She says that all funding lost from the EU should be plugged and increased and capital allowances enhanced. The UK should also be made attractive through public investment in things like infrastructure projects.

She says the UK car industry needs “to be at the forefront of new technologies” through R&D investment and that the barriers to re-shoring the supply chain need to removed by reducing energy costs and providing funds for small and medium sized suppliers through investment banks.

She says Labour’s industrial strategy “seeks growth, but growth which is equitable, balanced, environmentally sustainable and supports and champions the glimmering gems in our country’s economic landscape, such as the UK automotive sector and it’s brilliant workforce.”

12.05pm

Shadow secretary for business Rebecca Long-Bailey is now speaking.

She says that since a devastating fall in production in the 1980s, the car industry has “undergone an astonishing rebirth” culminating in a 17-year high in 2017, when 17m cars were built.

She says that Brexit represents a threat to much of what has been achieved and that a good trade deal and a bold and imaginative industrial strategy is needed to keep the auto industry thriving.

She says that the UK car industry is intertwined with the EU, though complex “just in time” supply chains and shared legislation. The EU is also the largest export market for the UK’s car manufacturers.

Because of the potential disruption caused by Brexit, investment and jobs are under threat.

Long-Bailey says, “Investment decisions for cars to be made in 2019 are yet to be a made and are at risk. This includes the Honda Civic which will begin production in 2023.”

Despite the plethora of risks, Long-Bailey says the Conservative’s plans for a trade deal and their industrial strategy are both “deeply flawed.”

She says Theresa May’s threat to crash out of the Brexit negotiations and onto WTO rules would be a disaster.

The government’s industrial strategy is no better, she argues because the Tories are “simply not mobilising the resources necessary”.

She points to figures that show that UK investment as a proportion as GPD is well below the OECD average, saying that this needs to change if the UK is to remain competitive.

The Spring Budget did little to change this this, Long-Bailey says – pointing to under investment in roads, broadband and skills.

Returning to the government’s industrial strategy she is clear that it cannot be conducted on a case by case basis, which is what happened with Nissan.

She says: “An industrial strategy cannot be conducted on a business to business fashion and in such an ad hoc way. It provides no certainly for investors.”

12pm

Bailey turns to what must be done. He says uncertainty over the UK’s EU trade position must be eliminated as soon as possible.

Opportunities to reshore component supply chains must be grasped. He suggests that capital allowances could be boosted rather than implementing a general cut to corporation tax.

Bailey says industrial policy needs to rebooted with adequate funding, investment in skills and support for exporters.

11.50am

Next up to speak is Professor David Bailey. He says that car production is doing well and there has been lots of investment. It could be that the UK is about to make more cars than ever before, but we can’t take that success for granted, he says.

Looking at the economic boom bust history of the UK car industry, Bailey says that cliff edges have typically been during times of political and upheaval – such as Brexit.

He says the form of Brexit is important to the cost to the industry. He cites Norway and Switzerland as the most positive models and falling back on WTO rules as the worst.

“We were promised everything by the Brexitters, we’re not going to get all that.” The Prime Minister said she is going to prioritise immigration and that means leaving the single market and the custom union, Bailey says. This probably means sector by sector deals.

Bailey says that the impact of Brexit on the auto UK industry could be felt via: economic growth, investment delays, shifting cost bases and export disruption.

He says there could be a short term economic success, but this would be offset in the longterm by uncertainty over the UK’s trading position with the EU. The uncertainty is a big deterrent to foreign direct investment, Bailey explains.

Bailey quotes a senior manager at a UK car plant: “At the point when we need the next round of investment, if we can’t compete and if the British government doesn’t help us then I will be very, very worried… we have to make a decision that makes economic sense.”

Uncertainty during talks the between the UK and the EU over Brexit — negotiations might start in May 2017 and might last two years — could see auto makers place work on model upgrades or new models at non UK plants.

He says that if the UK’s access to the EU single market after Brexit is seen as inadequate by auto makers, then they might close some of their UK factories.

Honda and Toyota plants are most at risk of closure because they are reliant on exports to Europe and have low margins and profitability. He says that new models decisions are in-coming.

Bailey says there are question marks’ over Mini, Nissan and Vauxhall’s position in the UK, as these companies have a strong British heritage but EU options.

11.25am

McCluskey says UK plants are at a disadvantage against those in Europe. He says that British workers are cheaper and easier to sack than German, French or Belgian staff.

“If anyone doubts that, look at the record of Ford, which has shut down one plant after another in Britain, which is now threatening Bridgend and which no longer assembles a single vehicle in Britain – but of course sells tens of thousands here.”

Successive governments have given the green light to corporate irresponsibility. Now, with Brexit looming, it’s time to draw a line, he says – Theresa May should protect British workers in factories and supply chains.

He mentions how car components can across the channel time and again before they end up in a finished vehicle.

“A bungled Brexit could devastate this business,” single market access is essential.

On immigration, he says: “Our proposals are all about safeguards for workers, communities and industries, by ensuring that labour should only be recruited abroad into companies or industries that are covered by proper collective bargaining agreements.”

He outlines the rest of the strategy, single market access on terms no less favourable than at present, tackling the barriers to reshoring, better access to financial support, tackling the skills gap, pressing for a tougher approach to takeovers with much greater political and union involvement and sustained investment in research and development.

“If, and only if, we follow this strategy then your industry can have a strong future even after Brexit.

That’s what Unite is fighting for now, day-in, day-out, with business and politicians both here and abroad.”

He says that the delegate’s role in this is vital.

“I can and will kick down doors in Whitehall, Detroit or wherever.

“But it’s your work at plant level – getting agreements that work for your members and guarantee a future for the factories and the supply chain – that will make the decisive difference.”

11.12am

McCluskey introduces the panelists and apologies for MP Gregg Clark’s absence, but says he will meet with the secretary of state for business at a later date.

McCluskey says the auto industry “sits at the heart of the British economy” and represents the best of UK manufacturing, skills and productivity but is being threatened by Brexit.

“That’s why it’s so vital that we meet here today, as representatives of the workforce in this critical industry, to map out a way forward”.

He says that the corporations and investors will be heard during the Brexit negotiations but it is up to Unite to make sure the voices of the working men and women who actually make the vehicles are heard.

“Over the recent weeks and months I have been meeting employers and ministers, putting the case above all to defend jobs – your jobs.”

McCluskey says there are three main problems today.

The first is securing new investment in next-generation models to ensure a prosperous future for the main assembly plants in the industry, plants that are now all in the ownership of foreign firms.

The second is to protect jobs in the supply chain in the event of a “hard” Brexit that leaves Britain outside of the single market to some degree or other.

Third is the development of a new phase of automation, including robotics, that is going to reduce the role of human labour in manufacturing in the motors sector.

McCluskey turns to solutions. He says that no company in a globalised world will invest in a limited domestic market. Brexit negotiations need to put single market access “front and centre”.

“The government acknowledged as much when it signed a deal with Nissan to protect the plant at Sunderland, a vital element in the whole economy of the north-east. Unite welcomed that approach. We might welcome it even more if we knew what was in the deal.”

However McCluskey says case by case solutions are not enough.
This industry on which at least a quarter of a million jobs depends, needs long-term security.

Big investment decisions affecting Vauxhall, Jaguar Land Rover, BMW and more are not going to wait for a few years while the government sorts out its Brexit agreement with Europe.

He points out that 80 per cent of our vehicles are exported, and half of that is to Europe. Tariffs could add as much as £1.8 billion over a model’s lifecycle.

“So we need to hear a good deal less speculation and waffle from ministers on this vital issue. Around a quarter of a million jobs are at stake here. It’s a matter fundamental to the future of hundreds of thousands of families and communities up and down the country.”

10.46am

Welcome to a lovely sunny morning at Birmingham’s International Conference Centre, where the Securing a Future for the UK Auto Industry conference is about to begin.

Around 150 delegates from across the UK’s auto manufacturers and supply chain businesses have gathered in Birmingham – a city with a proud history of car manufacturing – to discuss the ramifications of Brexit on the industry and plan how to best to deal with them. The issues of automation, electrification, investment and the digital revolution in manufacturing will also be raised.

Unite has been lobbying for the government to declare ahead of Brexit talks that it will seek to secure access to the European Union single market and the customs union, so sending a much-needed signal to workers and UK manufacturing that a strong economy is a Brexit priority.

The union is opposed to sector-by-sector trade deals as these do not reflect the complicated nature of modern day manufacturing.

Unite general secretary, Len McCluskey, will open the conference at 11am.