Automotive Sector Deal - GOV.UK
IndustrialStrategyAutomotive Sector Deal
Industrial Strategy Automotive Sector DealForewordFor decades, the UK’sautomotive industry haspowered our economyforward. Today, automotivefirms from around the worldchoose to set up shop here,citing our history of excellence,skilled workforce and worldleading supply chains.As ever, partnership will be pivotal. In thenext 10 years, the sector will see morechange than in the previous hundred.From the engines that power our cars,to the way we control them and ourattitudes to owning them, technologyis changing what the industry lookslike and where money can be made.New conditions require new thinking and,as a country, we are extraordinarily wellplaced to provide this. Our rich historyof scientific discovery includes thelithium-ion battery, which was inventedin this country and already powersmillions of vehicles around the world.And in the future, the automotivesector will shape our response to theGrand Challenges articulated in ourIndustrial Strategy, such as CleanGrowth and the Future of Mobility —transformations which will foreverchange how people live, work and travel.2
As ever, partnership will be pivotal. Thisfirst Automotive Sector Deal builds onthe longstanding partnership betweenthe government and industry, brought tolife through the Automotive Council andwill be followed by further commitments.As a result of the Sector Deal, bothgovernment and industry will investabout a quarter of a billion poundsto develop and manufacture electricvehicles. This includes the FaradayBattery Challenge, which will drive thetechnologies to power electric vehiclesin the future, as well as 80 millionfor a new state-of-the-art automotivebattery development facility inCoventry. This investment marks yetanother step forward on our journeytowards mass producing electricbatteries and vehicles here in the UK.The deal also aims to create aworld-leading testing environmentfor Connected and AutonomousVehicles. Using our renowned testtracks, we will improve the safety ofthese vehicles by pushing them to thelimits of their speed and handling.And, finally, the government is investingin a new industry-led programmeto raise the competitiveness of UKsuppliers to match the best in Europe.For over a century, the UK haswritten the history of the automotiveindustry. As we open the sector’snext chapter, let’s work togetherto make sure the technologies oftomorrow are developed, tested andmanufactured right here in the UK.Rt Hon Greg Clark MPSecretary of State for Business,Energy and Industrial StrategyNigel SteinChief Executive GKN plc andAutomotive Council Chairman3
Industrial Strategy at a glanceIndustrial Strategy Automotive Sector DealWe will create an economy that boosts productivity and earningpower throughout the UKIndustrial Strategy is built on 5 foundationsIdeasthe world’s most innovative economyPeoplegood jobs and greater earning power for all5Infrastructurefoundations ofproductivitya major upgrade to the UK’s infrastructureBusiness environmentthe best place to start and grow a businessPlacesprosperous communities across the UKWe will set Grand Challenges to put the United Kingdomat the forefront of the industries of the future:4AI & Data EconomyWe will put the UK at theforefront of the artificialintelligence and data revolutionClean GrowthWe will maximise the advantagesfor UK industry from theglobal shift to clean growthFuture of MobilityWe will become a worldleader in the way people,goods and services moveAgeing SocietyWe will harness the power ofinnovation to help meet theneeds of an ageing society
Key policies include:IdeasBusiness Environment Raise total research anddevelopment (R&D) investment to2.4 per cent of GDP by 2027 Increase the rate of R&D tax creditto 12 per cent Invest 725m in new IndustrialStrategy Challenge Fund programmesto capture the value of innovation Launch and roll out Sector Deals –partnerships between governmentand industry aiming to increase sectorproductivity. The first Sector Deals arein life sciences, construction, artificialintelligence and the automotive sector Drive over 20bn of investmentin innovative and high potentialbusinesses, including throughestablishing a new 2.5bn InvestmentFund, incubated in the BritishBusiness Bank Launch a review of the actions thatcould be most effective in improvingthe productivity and growth of smalland medium-sized businesses, includinghow to address what has been calledthe ‘long tail’ of lower productivity firmsPeople Establish a technical educationsystem that rivals the best in theworld to stand alongside our worldclass higher education system Invest an additional 406m in maths,digital and technical education,helping to address the shortage ofscience, technology, engineeringand maths (STEM) skills Create a new National RetrainingScheme that supports people to re-skill,beginning with a 64m investmentfor digital and construction trainingInfrastructure Increase the National ProductivityInvestment Fund to 31bn, supportinginvestments in transport, housingand digital infrastructure Support electric vehicles through 400m charging infrastructureinvestment and an extra 100mfor the plug-in car grant Boost our digital infrastructure withover 1bn of public investment,including 176m for 5G and 200mfor local areas to encourage roll outof full-fibre networksPlaces Agree Local Industrial Strategiesthat build on local strengths anddeliver on economic opportunities Create a new Transforming Citiesfund that will provide 1.7bn forintra-city transport. This will fundprojects that drive productivity byimproving connections withincity regions Provide 42m to pilot a TeacherDevelopment Premium. This will testthe impact of a 1,000 budget forhigh-quality professional developmentfor teachers working in areas thathave fallen behindAn independent Industrial Strategy Council will assess our progressand make recommendations to government.4
Executive SummaryThe Automotive Sector Deal, the first in a rolling series ofintended deals with the sector, builds on the partnershipbetween the government and industry that has been in placesince the Automotive Council was established in 2009, settingthe direction and long-term strategic priorities for the sector.This partnership has yielded results:vehicle and engine output hasincreased, productivity has improvedand the proportion of UK componentsin each vehicle produced in theUnited Kingdom is rising (44 percent in 2016, up from 36 per centin 20111). For the seventh successiveyear expenditure in research anddevelopment (R&D) by motor vehiclemanufacturers has increased, and in2016 it reached 3.4bn, growing by20 per cent on the previous year2.These achievements matter not justto the industry but to the country. It isthrough these successes that the sectoris able to provide over 390,000 highquality, well-paid jobs, both directly invehicle manufacturing and through thesupply chain3, increasing prosperityacross the country. The industry is aninternational success story, generatingover 40bn of export revenue in 20164,and helping the UK to maintain areputation for engineering innovationand manufacturing excellence.Production levels achieved a 17-yearhigh in 2016 with 1.7 million vehiclesrolling off production lines5. Today thesector faces a new set of challenges.Significant changes in how cars are6built, powered and driven means theindustry must continue to adapt tomaintain its position as a global leader.It must take decisions now to ensureit remains both attractive to investin and central to the UK economy.The UK automotive industry with itsdiverse range of products, spanningvolume, premium and niche vehicles,has benefited from the Europeanmarket, with highly integrated supplychains and a significant demandfor UK-built cars across the region.In total, half of all UK automotiveexports go to the European Union.As the UK leaves the EU, the industrywelcomes the government’s ambitionto achieve a new relationship thatis free from tariffs and withoutfriction to trade – factors that arefundamental to the competitivenessof the UK automotive sector.The proposals contained withinthis Sector Deal are designed tocomplement this ambition and arealigned to the foundations set out inthe Industrial Strategy – ideas, people,infrastructure, business environmentand places. They support its visionfor the UK to be the world’s mostinnovative economy; for good jobs
and greater earning power for all;for a major upgrade to the UK’sinfrastructure; to be the best placeto start and grow a business; and forprosperous communities across the UK.in R&D from 9.5bn to 12.5bn, as wellas a commitment to work with industryto boost spending on R&D to 2.4 percent of GDP by 2027. This will increaseto 3 per cent over the longer term.We have prioritised an initial setof proposals, which have beenagreed between the AutomotiveCouncil and the government. Itis intended that this deal is thefirst of several with the sector.This Sector Deal demonstrateshow the automotive sector canplay an important part in meetingthis commitment by investingin the development of the nextgeneration of vehicles.IdeasIn recognition of this, the AutomotiveCouncil asked Richard Parry-Jones,former Chief Technical Officer andHead of Global R&D Operations atFord Motor Company, to conduct asector-led review into acceleratingthe transition to the manufacture ofultra-low and zero emission vehicles.The ambitions set out in the IndustrialStrategy White Paper are underpinnedby a commitment to world-classinnovation. It set out a further increasein R&D investment of 2.3bn in2021/22, raising total public investment7
The evidence gathered from the reviewunderpinned the rationale for thelandmark Faraday Battery Challenge6.Through the Faraday BatteryChallenge, the government isinvesting 246m over four yearsinto a programme of competitionsfocused on the research, innovationand scaling up of battery technology.In the coming months the governmentwill publish a strategy for the transitionto zero emission road transport,ensuring the UK continues to be aworld leader in the development,manufacture and use of these vehicles.The UK is also pursuing a position in theglobal vanguard of the development,demonstration and deployment ofconnected and autonomous vehicle(CAV) technologies, capitalisingon our commitment to R&D and8our competitive advantage ofbeing able to test anywhere in theUK today. It is estimated that theCAV sector will be worth 28bnto the UK economy by 20357.Business EnvironmentThe Industrial Strategy White Papersets out the government’s ambition tomake the UK the best place to start andgrow a business. A key part of this isour globally competitive corporatetax rate of 19 per cent, our continuousfocus on regulatory reform andour ability to attract global talentand disruptive start-ups. Ourchallenge is to improve how wespread the best practice of ourmost productive businesses.Our key policies include launchingSector Deals – and automotive is anearly partner. We are also establishing
a new 2.5bn investment fundincubated in the British Business Bankto drive investment in innovativeand high potential businesses. A newUK-backed and industry-led brandfor CAV – Meridian – was set up toconvene UK industry around sharedpriorities, and showcase our approachinternationally. Meridian will cementthe UK’s status as the go-to destinationfor the development and testing ofCAV and new vehicle technologies.Manufacturing is crucial to theeconomy, providing 10 per cent ofthe UK’s Gross Value Added (GVA),generating around 50 per cent ofour exports and accounting for70 per cent of business-led R&D8.Advanced manufacturing supplychains are highly complex and globallyintegrated, with components oftencrossing borders several times.Although we have a strong position,there is a major opportunity todeepen the supply chain presence forthe sector in the UK. We thereforeintend to launch a new supply chaincompetitiveness and productivityimprovement programme targetingareas where key businesses need toimprove to match the best in Europe.The programme will provide bespoketraining and streamlined businessprocesses to help build the integratedsupply chain we need in the UK tomanufacture the future generation ofvehicles at volume. This will support theindustry’s ambition to increase the levelof UK content by value in domesticallybuilt vehicles to 50 per cent by 2022.InfrastructureAs we set out in the Industrial StrategyWhite Paper, having modern andaccessible infrastructure throughoutthe country is essential to ourfuture growth and prosperity.We have announced an increase inthe National Productivity InvestmentFund to 31bn, supporting investmentsin transport, housing and digitalinfrastructure. We are investing over 1bn in boosting digital infrastructure,including 176m for 5G and 200mfor local areas to encourage rollout of full-fibre networks.Our investments in infrastructureare among the government’s mostsignificant interventions in the economyand we are ensuring that they activelysupport our long-term productivity anddrive the growth of emerging industries.To accelerate the transition to electricvehicles we are creating a new 400mCharging Infrastructure InvestmentFund ( 200m from the governmentto be matched by private investors);and providing 200m Office for LowEmission Vehicles R&D funding overthe current spending review period; 100m new funding for the plug-in cargrant; 40m R&D funding (matched byindustry) for new charging technologiesincluding on-street and wireless projects;initiating a 20m vehicle-to-gridR&D competition, a 23m HydrogenTransport programme and makinga commitment that the governmentwill lead the way, making 25 per centof all cars in the central governmentfleet ultra-low emission by 2022.9
PlacesPeopleThe Industrial Strategy set out our goalof helping prosperous communities tothrive across the UK. We are creating anew Transforming Cities fund that willprovide 1.7bn for intra-city transport.This will fund projects that driveproductivity by improving connectionswithin city regions. We are alsocommitting to agree Local IndustrialStrategies that build on local strengthsand deliver on economic opportunities.The government set out its vision tocreate good jobs and greater earningpower for all in the Industrial Strategy.To do this, we need to ensure that weare equipping citizens for jobs shapedby next generation-technology.The 2017 CAV testbed competitionaimed to create the world’s mosteffective CAV testing ecosystem bycreating a number of distinct testcapabilities which would work togetheras part of an open testing environment.Collaborative projects supported underthis initiative form part of a uniquecluster running from our automotiveheartlands in the West Midlands,through our innovation centres nearOxford and Milton Keynes, to London.The portfolio of projects linked tothe Advanced Propulsion Centre(APC), a ten-year, 1bn initiative,funded 50:50 by government andindustry to support the developmentof low carbon technologies, includeparticipants spread across the UK,and is supported by a network ofCentres of Research Excellence.These centres, the ’APC spokes’,are linking industrial and academiccommunities from Newcastle toBrighton and from Nottingham to Bath.10The growth of the UK automotivesector and the transition to the nextgeneration of vehicles will requirepeople with new skills and a substantialupskilling of the existing workforce.This requires a coordinated nationaland local approach through establishedinstitutions such as the Institute forApprenticeships and supportingthe development of the new T levelqualifications. The government andindustry are committed to takingforward this agenda through thenext phase of Sector Deals.Under the direction of the AutomotiveCouncil, and with initial grant supportfrom the government, the industry hasestablished the Automotive IndustrialPartnership for Skills (AIP). The AIPhas developed a skills roadmap for thesector, which is guiding steps to tacklecritical skills shortages as the sectorgrows and evolves. A key element is toboost apprenticeships. The automotivesector has been at the forefront ofapprenticeship reforms, leading thedevelopment and piloting of the new‘trailblazer’ standards, and setting upthe Apprenticeship Matching Service.
AutomotiveSector DealKey commitments11
Industrial Strategy Automotive Sector DealGovernment action to support the automotive sectorIdeasAdvanced Propulsion Centre 500m over 10 years to 2023 toresearch, develop and industrialisenew low-carbon automotivetechnologies in the UK.Automotive R&D 225m from 2023 to 2026 tosupport R&D in the sector9.Transition to ultra-low andzero emission vehicles 246m for the Faraday BatteryChallenge to make the UK aworld leader in the design,development and manufactureof batteries for the electrificationof vehicles. This includes:- 78m for the Faraday Institution(100 per cent public fundingto support fundamentalacademic research);- 80m for the Faraday NationalBattery ManufacturingDevelopment Facility; and- 88m for the Faraday BatteryChallenge Innovate UK programme.Shaping the future of mobility 250m to position the UKas a global leader in thedevelopment and deploymentof connected and autonomousvehicles (CAVs). This includes:- 150m for collaborativeR&D projects; and- 100m for CAV testinginfrastructure.Business EnvironmentSupply chain competitiveness and productivity improvement 16m funding subject to businesscompetitive UK supply chain forcase for an industry-led nationalfuture volume vehicle production.supplier competitiveness andA robust monitoring and evaluationproductivity improvementframework will be set up to measureprogramme to support athe success of this programme.sustainable and internationally12
Industry action to support the automotive sectorIdeasAdvanced Propulsion Centre 500m match funding forcollaborative R&D projects; and Match funding to supportAPC and its core activities.Battery ManufacturingDevelopment Facility; and 59m match funding for theFaraday Battery ChallengeInnovate UK programme.Automotive R&D 225m match fundingfor collaborative R&Dfrom 2023 to 2026.Shaping the future of mobility 56m funding for theCAV collaborative R&Dprojects to date; and Match funding for the 100mCAV testing infrastructure.Transition to ultra-low andzero emission vehicles 80m funding over theworking lifetime of the NationalBusiness EnvironmentSupply chain competitiveness and productivity improvementIn order to support the industry’schain companies participating in theambition to increase the valuecompetitiveness and productivityof UK content in domesticallyimprovement programme.produced vehicles to 50 per Vehicle manufacturers and Tiercent by 2022 , industry will:one suppliers will take a leading Implement a single scalablerole in identifying key strategicproductivity improvementsuppliers and take part in theprogramme; andgovernance of programme. Match fund at least 16m(contribution in kind) from supply13
Government action to support the automotive sectorBusiness Environment 100m new funding for the PlugIn Car Grant to help consumersbuy battery electric vehicles. From April 2019, Government willexempt zero-emission capabletaxis from the VED supplementthat applies to expensive cars,consulting in advance onhow to define such taxis. Provide a Benefit in Kind exemptionfor employees offering freecharging for electric vehiclesat work, to come into effect inApril 2018. This will supportthe roll out of electric vehiclechargepoints at workplaces. 25% of cars in central Governmentdepartment fleets will be ultralow emission by 2022, and theEnvironment Agency will ensureall its cars are ultra-low emissionby 2025, and stop buying orleasing diesel cars immediately.Infrastructure 23m hydrogen transportprogramme to increase thenumber of publicly accessiblerefuelling stations and increasethe uptake of fuel ce
The Automotive Sector Deal, the first in a rolling series of intended deals with the sector, builds on the partnership between the government and industry that has been in place since the Automotive Council was established in 2009, setting the direction and long-term strategic priorities for the sector. This partnership has yielded results: vehicle and engine output has increased, productivity .
Executive Summary The Automotive Sector Deal, the first in a rolling series of intended deals with the sector, builds on the partnership between the government and industry that has been in place since the Automotive Council was established in 2009, setting the direction and long-term strategic priorities for the sector.
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Foreword 1 Executive Summary 3 The Green New Deal 5 The Green New Deal for energy 10 The Green New Deal for housing 13 The Green New Deal for transport 15 The Green New Deal for industry 18 The Green New Deal for food, farming & forestry 21 .
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