APPENDIX 12
Memorandum submitted by Motorsport Industry
Association
1. The Motorsport Industry Association (MIA)
is the lead trade association for the motorsport and performance
engineering industry in the UK and recognised by the DTI Automotive
Directorate in that role. The 180 businesses in membership transact
over 50 per cent of the estimated value of the UK motorsport engineering
industry, representing over £600 million of motorsport related
turnover.
2. Membership spans both the engineering
and creative services sectors of the industry. Currently, the
MIA has commissioned a National Survey of Motorsport Engineering
and Services, which is being co-ordinated by Birmingham University,
Cranfield School of Management and Henley Management College.
This Survey is approaching nearly 5,000 UK businesses, and 40,000
competitors seeking their views on the Scale, Scope and Future
for the motorsport industry. It is the largest ever such focused
research, and the results will be made available on 11 January
at a major conference on this subject at the NEC, Birmingham Autosport
International Show.
3. Research currently available, upon which
many of the following comments rely, is relatively out of date;
limited in research base or simply not in line with current developments.
However, the following submission is based on the best of current
knowledge. The MIA would be pleased to provide the Committee with
the Survey results in January 2001 if this is of value.
4. The MIA has consulted with members prior
to this submission and sought their guidance; together with other
leading figures in the industry. The creative services side has
been ignored even though it has an estimated value exceeding £1
billion and over 20,000 jobs. These encompass facility management;
global event management (eg F1; Rally etc); media services; hospitality;
marketing; TV and publishing; legal; insurance; sponsorship; recruitment;
education; design and many others. However, we understand that
the Committee and this submission is focused on manufacturing.
5. The industry has no SIC code and so little
official data is recorded. It is a new "industry" becoming
of significant value during the past decade only, although the
sport supplied by the industry is over 100 years old.
6. Research from the IPPR in 1996 ("Playing
to Win—the success of UK motorsport engineering"; Aston
and Williams) based on only 74 respondents, highlighted:
(a) a minimum of 633 firms were in motorsport
engineering—(subsequent research shows this more likely
to be between 2-3,000);
(b) this includes a majority of component
suppliers, with a hundred or so complete car builders (or assemblers)
in addition;
(c) engineering turnover is around £1.3
billion—but could be £2 billion;
(d) between 25,000 and 30,000 people are
employed in the engineering side;
(e) exports averaged 44 per cent (ie, approximately
£600 million) with Europe and USA the primary markets; and
(f) spend on R&D as a percentage of sales
is high at 14 per cent, but this is probably an understatement.
7. In the past four years since this report
the following facts have emerged:
(a) exports or overseas earnings appear to
be over 65 per cent of sales;
(b) R&D spend is more than 25 per cent
of sales, which (using DTI R&D Scoreboard) is over double
the pharmaceutical industry and over six times greater than automotive
generally;
(c) many businesses, within defence and aerospace,
transact valuable business in motorsport;
(d) all motorsport businesses are SMEs—the
largest employ 300 with turnover of £100 million. The average
is 20 employees with £3 million;
(e) profitability is high for the engineering
sector—averaging nett 10 per cent on sales; and
(f) a high rate of "churn"—low
entry barriers to start up but quick to fail if no competitive
advantage maintained.
8. Growth over the past few years has been
strong both in jobs and turnover. Many companies report well in
excess of 15 per cent increase, in sales per year, over each of
the past four years. On a conservative basis, total sales in motorsport
and performance engineering will exceed £2 billion in 2000.
9. Virtually every automotive manufacturer,
from whatever global region, has created working relationships
with UK motorsport businesses. Sporting performance is one significant
way to differentiate an automotive brand, particularly as the
consolidation of global "platform" continues. This development
has (and will) continue to attract business to the UK—and
note the value placed on motorsport by the MG Rover company, and
the statements of the Rover Taskforce.
10. The community of motorsport businesses
has been closely researched in 1988 by Dr Nick Henry of Birmingham
University in his excellent work—"In Pole Position—Ludvigsen
Press—1998". He confirms that:
(a) the region known as "Motorsport
Valley" is one of the few, true, globally recognised industrial
clusters in the UK;
(b) it is a community of knowledge based
on intellectual, innovative, creative people not engaged in mass
manufacturing;
(c) it is strongly interdependent for trade,
growth and employees;
(d) it is a global centre of excellence,
and significantly NOT a British business, but "a truly global
business that is based in Britain"; and
(e) it depends substantially on international
partnerships with major global players—in IT, aerospace,
finance, telecommunications, automotive for example. It utilises
input from all these partners to drive it forward in terms of
product development. It is the "added value" of these
partners that allows small businesses to lead in a global market.
11. Substantial but little-known inward
investment (and acquisition) has been received in recent years.
These include:
— Renault acquires Benetton F1 in Oxfordshire;
— Mercedes Benz acquire 40 per cent
of McLaren in Woking, and Ilmor in Northampton;
— Ford acquire Pi Research (Cambridge);
Stewart F1 (Milton Keynes); Cosworth Racing (Northampton) and
plan new motorsport centre for Silverstone;
— Credit Suisse and Deutsche Bank own
shares in UK F1 teams;
— Brembo of Italy purchase AP Racing
of Coventry; and
— Panoz of USA purchase Van Diemen
(Norfolk) and G Force (Sussex).
It is noticeable that whilst all these overseas
businesses continue to base their businesses in the UK—the
intellectual capital from the UK is available to be transferred
to their own overseas bases.
12. Regional development agencies have recognised
the economic values of these high-reward jobs. Both East Midlands
(EMDA) and Advantage West Midlands are particularly active with
the MIA in creating business development initiatives. South East
(SEEDA) are developing a strategy. It is hoped, by the MIA, that
this small industry can acquire genuine "cross-regional"
co-ordinated relevant support, without any border jealousies.
13. Observers are keen to find specific
areas of transfer of technology into the automotive industry—however
these are rare and hard to identify given the confidentiality
often involved. Areas more clearly evident are often surprising
and include:
(a) the rotation of engineers from mainstream,
through motorsport, back to mainstream (eg, Ford/Jaguar; Honda/BAR).
Ford say engineers learn valuable techniques—fast, on time
delivery of engineering solutions; aerodynamic values; rapid print
typing etc;
(b) correct development and utilisation of
technical partnership programmes;
(c) management and motivation of creative,
innovative engineers working to short lead time deliveries; and
(d) rapid testing and evaluation of engineering
concepts.
ASSESSMENT OF
FUTURE PROSPECTS
AND PROBLEMS
14. Over the next five years, prospects
appear good to excellent for the industry to grow profitably.
However, after this, some of the threats shown below may begin
to affect this positive outlook.
15. Government (nationally and regionally)
has recently become more aware of the real value of this sector.
This can be of positive value as long as the support offered is
carefully considered; well targeted and entirely relevant to these
already successful businesses. Until the past two/three years,
when the MIA has worked closely with the government agencies,
virtually no targeted support had been offered—and yet the
businesses prospered internationally.
16. The UK owned automotive manufacturers
(such as they are), have a growing international reputation based
on performance combined with style. This group includes MG; TVR;
Marcos; Caterham and the like. They rely on the motorsport industry
for a great deal of their marketing story and product development.
17. The global automotive manufacturers
will continue to come to the UK for motorsport based solutions
to add value to their "sporting" brands. It appears
they will continue to acquire the leading companies and so the
knowledge accumulated therein—which may lead to the erosion
of our knowledge base.
18. UK motorsport engineers have developed
their world beating skills in real competition in UK based events
for many years. Hence a strongly supported sport is needed so
as to nurture engineering talent. Sadly, the interest in competing
in the UK has remained static for the past decade—there
being 32,000 competition licence holders only. The perception
that this is a "wealthy" sport, enhanced by Formula
One publicity, works against it in receiving sports grants from
the Lottery and other sources.
We now have declining circuit facilities; less
events and a cycle that may lead to the decline of the creation
of new young engineers. This depressing cycle needs to be addressed
by Government, so we maintain a good supply of British engineers.
19. As long as the sport continues to attract
new interest from emerging economies (eg China; South America;
South East Asia; Africa) then new business will accrue to the
UK. However, this "sport" development is in the hands
of the FIA, based in Switzerland and not UK based. It also relies
on television covering a growing number of events—again
a factor not controlled from the UK.
20. The UK industry is reliant on the provision
of engineers and the weakness of the education sector in attracting
young people to engineering will become a serious problem. The
MIA has pioneered a strategy, which requires Government support,
which uses the clear attraction of motorsport to young people
to interest them in engineering as a career option. This strategy
uses national motorsport competitions for schools (Formula Schools)
and for universities/colleges (Formula Student). Motorsport can
definitely capture the imagination and creativity of young potential
engineers, and this concept is an under-utilised asset at present.
21. The MIA regularly surveys economic problems
of members. Recently the high value of sterling has been mentioned
increasingly, and in view of the substantial reliance on exports
by these small producers, has a particularly important influence.
22. Government, at the highest level, has
recently had a difficult relationship with the sport and its legislative
bodies. However, we are the UK based industry supplying the sport
and we need a clear message of support from leading members of
Government. This message attracts global business and encourages
further partnerships and investments. The MIA has received good
financial support in recent years from Government agencies.
23. Initial response from the survey also
suggests that the growing amount of European legislation, and
the "red tape" involved is throttling growth. The recent
Working Time Directive has severely damaged these businesses—who
are focused on a critical delivery time to customers (eg, the
start of the race) and which often requires substantial, and immediate
extra working time. Similarly, customer service at events often
requires unlimited working hours at a weekend to resolve an engineering
problem. The Directive makes no allowance for this business problem.
24. These engineering businesses have grown
rapidly in the past decade and continue to do so—often rising
from 20 to 200 employees in three years or so. Recruitment is
a constant difficulty—not from graduates but at the skills
level (eg, CNC milling; tool setters etc). Many of these employees
may not be aware that motorsport engineering is now a sensible
sound career choice, so publicity and awareness is needed. This
is also true of the education sector who have overlooked this
new and growing career opportunity. Little progress, despite attempts,
has been achieved by the MIA with the D of EE on this point.
25. Overseas business growth is critical
and so growing, sectorally focused support from British Trade
International and the DTI Automotive Directorate is invaluable.
The MIA has created close links here, but more relevant work has
to be maintained.
26. In closing, the MIA would wish to highlight
the following:
(a) we are proud of our successful new sector
and keen to demonstrate that it currently contributes a significant
number of high reward engineering jobs, and that this could be
substantially enhanced with well targeted, focused support from
Government;
(b) this sector is no longer a trivial aside
to the automotive industry, but has emerged as a global leader
in its own right spanning aerospace, automotive and high performance
engineering solutions of a wide variety;
(c) "Performance engineering" is
not solely concerned with high speed—but more specifically
highly efficient performance including fuel efficiency, lightweight
materials and alternative solutions. This knowledge is critical
when exploring environmentally beneficial solutions and this sector
could take a global lead, based on motorsport, in this vital area
of R&D; and
(d) it is of great importance to our development
that Government, at the highest level, embraces the UK industry
that is behind the sport and is seen to recognise its success.
This is notwithstanding previous, and perhaps current issues involving
the legislation bodies controlling the sport itself, via the FIA.
This industry, as opposed to the sport, would value Government
recognition which would help it achieve even greater global success
for Britain's engineering industry.
24 October 2000
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