Buoyant car makers warn of risks of cap on immigrant workers

Britain's manufacturing sector got a much needed shot in the arm yesterday as new figures showed car production leapt by more than a third last month as export orders roared ahead.

But the bumper numbers came with a warning that the coalition government's planned cap on migrant workers could hurt UK-based car manufacturers.

Almost 78,000 cars were built in the UK during August, an increase of 37 per cent on the same month in 2009, according to the Society of Motor Manufacturers and Traders (SMMT). Over the year to the end of August, production was up by some 41 per cent.

SMMT chief executive Paul Everitt said the figures showed that vehicle and engine production was leading "a strong manufacturing recovery", but cautioned that activity remained below the pre-recession levels of 2006-07.

There had been concern that the industry would be hit hard by the ending of the car scrappage scheme in April, but the sector was moving forward quite strongly, Everitt added.

Sales were increasing in countries such as the United States, China and India, while domestic demand for new cars was holding up, the society noted.

"We are moving in the right direction and also seeing more vehicle manufacturers wanting to increase the sourcing of parts in the UK," said Everitt.

Exports - which have been benefiting in general from the weak pound - jumped by 51 per cent last month, accounting for almost three-quarters of the total production.

Meanwhile, Everitt called for the planned cap on immigrants into the UK to exclude transfers of staff within companies. Major multi-national car manufacturers with plants in the UK include Vauxhall-owner General Motors, Toyota and Nissan.

"Highly skilled employees transferred to work within the UK automotive industry are essential to maintaining and improving our global productivity and competitiveness," argued Everitt.

"(The] industry is concerned that the inclusion of intra-company transfers could impact on the attractiveness of the UK as a location for inward investment and undermine the UK's role in an increasingly global economy."

Yesterday's data showed commercial vehicle output had increased 22 per cent, year-on-year, in August and rose by more than two-fifths in the first eight months. Engine production was up 15 per cent for the month and 27 per cent for the year to date.

The SMMT said: "The UK is an important part of the global automotive industry, exporting cars, commercial vehicles and engines to markets around the world.

"There are still significant challenges ahead and government must do all it can to encourage continued international investment in UK-based research and development, skills, plant and machinery."

Manufacturers will be hoping that export sales remain buoyant as recent results from major car dealerships have painted a mixed picture of trading.

Earlier this month, motor industry chiefs warned that Scottish new car sales were not expected to recover until well into next year after sliding 19.8 per cent in August.