THE UK’S automotive manufacturing sector is experiencing the ‘worst period of underlying demand’ since late 2012, according to a report issued today.
The NatWest UK Automotive PMI Report is produced in partnership between NatWest and the global information provider IHS Markit.
The initials PMI stand for Purchasing Managers’ Index, best described as an indicator of the prevailing direction of economic trends.
Today’s report said that between April and May, there was the sharpest downturn in business conditions across the UK automotive sector for six-and-a-half years.
Export sales were especially subdued in the fifth month of the year, the document said, with automotive sector manufacturers pointing to the steepest drop in new orders from abroad since April 2009.
The crucial index referred to in the title of the document stood at 43.5 in May and was below the crucial 50.0 no-change threshold for the second month running. The figure for April was 48.9.
Comparisons of the UK data against international benchmarks illustrate that manufacturers have faced declines in order books of a similar scale to those seen across Europe and further afield.
Major disruption in the form of US-China trade frictions and the prospect of new tariffs has rippled through international supply chains. A subsequent rise in risk aversion and lower appetite for capital spending has added to industry-specific challenges for automotive manufacturers.
Other factors at play have included new diesel regulations, the transition to electric vehicle production and subdued consumer demand in key markets such as China.
Despite the current malaise across the globe, the report notes that the UK car industry has performed well over the past 10 years.
In fact, NatWest notes, the recovery in automotive production has been a key factor behind rising order books, employment and productivity across the north of England, Wales and the West Midlands.
Richard Hill, head of automotive and manufacturing at NatWest, said: ‘The challenge for the UK automotive sector is to chart a course through the intense industry headwinds that are so clearly evident in the report findings.
‘At NatWest, where we are committed to playing our role to support the automotive sector, we believe that new collaborative models hold the key to success. The resilience of the UK automotive sector is well proven, with a track-record of leading routes to recovery and advancement.
‘Manufacturers have faced and overcome ”perfect storms” before, most recently in the wake of the 2008/09 global financial crisis. The current storm is as significant with different factors at play therefore requiring new and innovative solutions.
‘The coming global shift towards electric powertrains is opening up huge rewards for value creation across the supply chain, while the technologies underpinning the future of mobility may create new geographic hubs for industrial innovation.
‘It is my firm belief that the UK is well placed to thrive in an environment of technology-driven automotive trends, but we must act fast and think collaboratively to maximise the opportunities ahead.’