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Rise and Demise of the British Automotive Industry

The British automotive industry has historically hinged on two pillars: non-discrimination in negotiations between government and business in the sector, and a bias towards attracting inward foreign investment rather than supporting and sustaining existing production sites (Coffey & Thornley, 2020). These two characteristics have been present since its very inception and have prevented the rise of a strong, state-backed motor manufacturer like Fiat in Italy or Renault in France. This short essay addresses the history of the British automotive industry from a business and governmental perspective, with particular attention to the watershed years of the 1970s and 1980s, which heralded the demise of domestic carmakers.

The first British-built vehicle appeared on the isle in the late 1800s due to imported German engines and to a French design that had already been superseded on the continent by the time it arrived in Britain (Adeney, 1988). Nonetheless, this big novelty – the car – swept the nation into a frenzy, with a huge number of motor companies springing up between 1901 and 1905. Numerous historic brands such as Austin, Morris, Rolls Royce, and Rover were established at the dawn of the last century. A few years later, in 1909, Ford established its first plant near London, inaugurating a long history of foreign investment in the automotive industry. Ford was followed by General Motors (GM) acquiring Vauxhall in 1925, Chrysler taking over the Rootes Group in 1967, and then the wave of Japanese investment in the 1980s. Today, Japanese brands constitute a considerable industrial force in the country, amounting to around 17% of the market share in the United Kingdom, compared to 11% of Ford (CCFA, 2017).

According to Adeney (1988), it was estimated that as many as 221 companies dove into the new business in the early 1900s, but by the beginning of the Great War almost 200 of them had gone to the wall. Still, between 1932 and 1955 the British automotive industry was the biggest in the world and second only to the United States in terms of output (Wood, 2010). Church (1995: 21) calculates that by 1936 the car production in Britain hovered around 375,000 units, while its most direct competitor, Germany, did not even reach 300,000, with France and Italy lagging far behind with 175,000 and less than 50,000 respectively.

Figure 2: Homegrown (2017, May 26th). A Maharaja's Rolls Royce in 1907 [Photograph].

Like in several other countries, the industry output was boosted by the Second World War, during which government involvement ‘seeped through almost every one of [the industry’s] arteries’ (Adeney, 1988: 179). However, post-war industrial reconversion meant that heavy-handed rationalisation was needed. This implied a two-pronged strategy: steering industrial production towards civilian production, and reducing the degree of fragmentation that characterised the British motor industry, which could lead to inefficient outputs (Church, 1995: 90).

The main tool of rationalisation in Britain was mergers and acquisitions (M&A). Between 1952 and 1968 the number of manufacturers decreased from nine in 1947 to seven in 1960 to four in 1968. Of these, three were American companies (Ford, Chrysler and GM), and only one was a domestic producer, British Leyland Motor Corporation, or BLMC (see Dunnett, 1980: 20). BLMC was the British response to the likes of Fiat, Volkswagen and Renault. Yet, this experiment also failed spectacularly, and by 2005, with the demise of MG Rover, sold to the Chinese SAIC, the death of a national British industry had finally come. To understand how Britain got to this point, it is necessary to detail the hard times of the 1970s and 1980s, which signalled the beginning of the end for the local manufacturers starting with BLMC.

BLMC was created in 1968, following the merger between the British Motor Company and the British Motor Holdings. Leyland was by then the only national mass manufacturer in the country, facing off competition from the American ‘big three’: Ford, Chrysler and GM. Despite the merger, BLMC’s profits were not satisfactory for a company with a turnover of over £1bn, and by the early 1970s it was becoming clear that it would not survive without government intervention (Carver et al., 2015, 30-1). The 1973 crisis only sped up the inevitable, and between 1974 and 1982, the British government committed to investing over £1,400 million in BLMC (Bhaskar, 1984). Yet, already in 1979, as Margaret Thatcher came to power, her Secretary of State for Industry, Sir Keith Joseph, admitted that the chances of success of BLMC were ‘less than 50/50’ and that a break-up of the company was inevitable. In the long run, he conceded, the best hope to keep the plants alive was to dispose of BLMC to other manufacturers and that ‘the sooner it is done, the better’ (The National Archives 1979). John Hoskyns, policy advisor to Margaret Thatcher, had an even bleaker view. On the chances of survival of BLMC, he wrote that ‘we [the Prime Minister's office] regard them as nearly zero’ (The National Archives 1979).