Resurgent car industry drives hopes of recovery after mixed year for business

AUSTERITY Britain seemed to have been overlooked as Japanese car maker Nissan last week unveiled its plans for a £250 million investment in its latest model.

The company announced it was creating 1,000 jobs and confirmed its British plant as one of the premier manufacturing centres in the world.

The good news came amid more warnings of a further plunge in Britain’s economic fortunes and, after all, this was the year of the double dip recession, troubles in the Eurozone and more cutbacks and closures.

But in spite of worries that a trip dip is in store, the car industry was among those industries that will celebrate 2012 as a vintage year of growth and expansion.

Together with whisky and energy it saw huge expansion in a year that most others would prefer to forget. The winners have been those that have adapted to new markets and shifting demands.

Scott Corfe, senior economist at the Centre for Economics and Business Research (CEBR), warned that the big cuts to tackle the public deficit have yet to kick in but businesses have reacted positively and are realigning their strategy to a changing world.

“It’s true that we haven’t had strong export growth, but the data shows we are increasing the amount we export to non-EU countries. Businesses are rebalancing who they export to,” he said.

Earlier this year, British firms began exporting more goods to countries outside the European Union than to the EU for the first time since the 1970s. Although he expects uncertainty over the Eurozone will continue into 2013, Corfe says there is hope that British exports will pick up thanks to the weakness of the pound, which remains well below pre-crisis levels.

Britain’s second spell of recession since the financial crisis was exacerbated by a dire performance from the construction sector, which dragged the overall output figure lower by the sheer size of its contraction. It was the dominant services sector that helped pull the UK back to growth in the third quarter, while survey evidence suggest manufacturers are still struggling to keep output flat.

Industries that have bucked the trend are led by the motor trade. Nissan’s pledge to invest £250m to build its latest luxury car in Sunderland highlighted that Britain’s car makers have been making solid progress this year. The Japanese firm’s plant, which employs 6,000 workers, will become the first British factory to build more than half a million cars in a year after it accelerated production of the Juke and Quashqai models. The plant, which is powered by its own wind turbines, is also the production site for the Leaf electric car.

Figures from the Society of Motor Manufacturers and Traders (SMMT) show that other manufacturers have also been enjoying a good run since production dipped in the first part of the recession following the financial crisis. UK car output fell by 30 per cent 2009 to below one million vehicles, but it has since rebounded. Output grew by 9.2 per cent in the first 11 months of this year, taking production to levels similar to those of 2007 and 2008.

SMMT chief executive Paul Everitt says the UK has been producing “the right product at the right time”. Models such as the hybrid Quashqai and the quirky Juke, as well as classics such as the Mini and the latest Range Rover, are proving popular around the world. “It’s something different and of the moment,” he says.

This year’s figures were also helped by a wave of investment at the end of 2011 and early 2012 by global manufacturers such as Honda, Toyota and Jaguar Land Rover.

More than three-quarters of the vehicles built in the UK are destined for export, and Everitt says Britain is well placed to take advantage of the booming car market in emerging economies. Demand has also picked up strongly in the US, where the economy has grown relatively strongly and created jobs this year. That has offset declining sales in Europe, particularly the struggling southern nations of the Eurozone. In the UK, new car registrations have grown by about 5 per cent in 2012, fuelled by private buyers.

Other boom industries have also sprung from improbable sources this year. Given the problems faced by the pub trade in the UK and the ongoing squeeze on consumers from inflation and recession, few would have predicted that the micro-brewery revolution would continue in 2012. Yet figures from the Campaign for Real Ale show British beer drinkers can chose from the highest number of domestic breweries for more than 70 years after the total passed the 1,000 mark in September.

One exclusively Scottish success story that has defied this year’s recession has been the whisky industry. In the 12 months to the end of June, the value of Scotch whisky exports increased by 12 per cent to £4.2 billion. Whisky has enjoyed rampant sales in emerging markets, where a growing middle class see it as an aspirational drink, and that has helped make up for loss of earnings from recession-hit Greece and Spain.

The North Sea oil industry also looks in robust health. The UK government revealed yesterday that it is granting a record number of exploration licences. It has issued 167 permits covering 330 North Sea blocks in its 27th round, as the continuing high price of Brent crude encourages firms to embark on costly exploration.

Twitter: @DominicJeff78

STAR PERFORMERS

Cars

• 1.36 million cars were built in the UK in the 11 months to November, up 9.2 per cent on last year.

• UK car manufacturing peaked in 1972 at 1.92 million units, but the 2012 figure is on track to match pre-recession levels of 1.45m in 2008 and 1.53m in 2007.

• However, commercial vehicle manufacturing has not enjoyed the same success as cars, with production down 5.9 per cent in the 11 months to November.

• Of 1.34 million cars made in the UK last year, 84 per cent were exported.

Whisky

• Scotch Whisky exports increased by 12 per cent from £3.8bn to £4.2bn.

• Growth was particularly strong in Germany, Venezuela and the US. In the first half of 2012, exports to the US jumped by 13 per cent to £303m and it remains the biggest market by value for Scotch.

• Diageo announced plans to invest £1bn in two new distilleries.

• Pernod Ricard is investing £40m at four Scottish distilleries.

Oil

• UK drilling activity in the first nine months of 2012 is just 6 per cent off the total number of wells drilled in 2011. The number of UK deals this year is up 5 per cent on the total number which took place last year.

• Statoil announced £4.3bn investment in Mariner field last week, creating 700 jobs.

• £1.4bn Cygnus project announced in April by GDF Suez, Bayerngas and Centrica will create 1,200 jobs.