Select Committee on Trade and Industry Appendices to the Minutes of Evidence


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  Research currently available, upon which many of the following comments rely, is relatively out of date; limited in research base or simply not in line with current developments.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.


  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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