Opportunities for UK Businesses in the Automotive Sector to shine against European competitors says Coface
Grant Williams, Coface UK's Risk Underwriting Director said: "The combination of a weak economic climate and overcapacity on the continent means car manufacturers are trying to shift production to lower cost areas. This has led to the announcement by Ford that three of its facilities are to close, including two in Dagenham and Southampton, as well as the proposed closure of the PSA Peugeot Citroën plant outside Paris.
"However, we believe companies in the UK automotive sector are in a stronger position than their European competitors. Most significantly, the efficiency of UK car plants and the availability of technical expertise have encouraged manufacturers such as Jaguar Land Rover, BMW and Honda to invest in UK production facilities while Ford has said it still plans to invest in development and production in Essex and South Wales. Many UK plants are now the sole locations for global production to emerging markets such as China and India and this should have knock-on benefits for UK engineering companies and other specialist component suppliers."
Meanwhile, Coface's experts in France have warned suppliers that the automotive sector in France is at significant risk of bad debt. In a separate analysis3, the company reported that insolvencies in the French automotive and transport industry increased by 6.7% in the year to August 2012 and that the insolvency rate as a proportion of the number of companies within the sector was 2%, the highest of the 11 sectors analysed. Coface's findings reflect the latest figures from the European Automobile Manufacturers Association (ACEA) which show that the number of new car registrations in Europe declined by 10.8% in September 2012, a downward trend which has lasted twelve consecutive months. The ACEA reports that while the market in France contracted by nearly 14%, the UK was the only major market to expand, posting growth of 4.3%.
Grant Williams said: "Late payments within the automotive sector for the first half of 2012 were down by just under 9% on the same period in 2011 but there remains a significant risk of bad debt for UK component manufacturers with trading partners in the Eurozone and we urge them to tighten their credit management procedures and protect their cashflow. Coface's global reach means we are ideally placed to help UK exporters through services such as business information, credit insurance and receivables management."