Stage 1 Northern Ireland - Institute of the Motor Industry

Transcription

Automotivate
The Sector Skills Agreement for the Motor Industry
Sector Skills Agreement – Stage 1 – Skills Needs
Assessment
Northern Irish Final Report
September 2006
Institute of the Motor Industry
Fanshaws
Brickendon
Hertford
SG13 8PQ
01992 511521
www.motor.org.uk
Skills Needs Analysis – UK
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Contents Page
PREFACE........................................................................................................................................ 6
1
EXECUTIVE SUMMARY ........................................................................................................ 7
1.1
INTRODUCTION ................................................................................................................. 7
1.2
THE AUTOMOTIVE SKILLS SECTOR FOOTPRINT .................................................................. 7
1.2.1 Sector Definition......................................................................................................... 7
1.2.2 Sector Dimensions..................................................................................................... 8
1.2.3 Geographic Diversity.................................................................................................. 8
1.2.4 Geodemographic Comparisons ................................................................................. 9
1.2.5 Workforce Profile ....................................................................................................... 9
1.3
KEY DRIVERS OF BUSINESS COMPETITIVENESS ................................................................. 9
1.3.1 Profitability ................................................................................................................. 9
1.3.2 Remuneration and Rewards .................................................................................... 10
1.3.3 Image and Reputation.............................................................................................. 10
1.3.4 Recruitment and Retention ...................................................................................... 11
1.4
IMPLICATIONS FOR SKILLS NEEDS.................................................................................... 12
1.4.1 Broad Skills Issues................................................................................................... 12
1.4.2 Skills Gaps ............................................................................................................... 12
1.4.3 Skills Shortages ....................................................................................................... 13
1.4.4 Employability and Life Skills .................................................................................... 13
1.4.5 Basic Skills............................................................................................................... 14
1.4.6 Generic Skills ........................................................................................................... 14
1.4.7 Technical Skills ........................................................................................................ 14
1.4.8 Management and Leadership Skills......................................................................... 15
2
BACKGROUND AND INTRODUCTION .............................................................................. 16
2.1
THE PURPOSE OF THIS REPORT ....................................................................................... 16
2.2
METHODOLOGICAL APPROACH ........................................................................................ 17
2.2.1 Quantitative methodology ........................................................................................ 17
2.2.2 Qualitative methodology .......................................................................................... 18
2.2.3 Secondary Research ............................................................................................... 18
3
BUSINESS AND WORKFORCE CHARACTERISTICS ...................................................... 20
3.1
3.2
3.3
3.4
3.5
3.6
3.7
4
DEFINITION OF THE AUTOMOTIVE SKILLS FOOTPRINT ........................................................ 20
BUSINESS NUMBERS AND ORGANISATIONAL TYPE ............................................................. 20
BUSINESS SIZE ............................................................................................................... 22
EMPLOYMENT NUMBERS ................................................................................................. 23
EMPLOYMENT PROFILE.................................................................................................... 23
RECRUITMENT ................................................................................................................ 28
STAFF TURNOVER AND RETENTION ................................................................................. 30
WHAT DRIVES SKILLS DEMAND?.................................................................................... 33
4.1
THE GENERAL ECONOMIC CONTEXT ................................................................................. 33
4.2
THE ECONOMIC PERFORMANCE OF THE SECTOR ............................................................... 35
4.2.1 The UK car market................................................................................................... 35
4.2.2 UK Fleet Registrations ............................................................................................. 38
4.2.3 Commercial vehicles................................................................................................ 39
4.2.4 Motorcycles.............................................................................................................. 39
4.2.5 Maintenance and Repair.......................................................................................... 39
4.2.6 Other industry activities............................................................................................ 40
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4.3
INTERNATIONAL COMPETITION ......................................................................................... 40
4.3.1 Summary of economic performance........................................................................ 44
4.4
PROFITABILITY................................................................................................................ 45
4.5
CONSOLIDATION ............................................................................................................. 47
4.5.1 A downward trend .................................................................................................... 47
4.6
REASONS FOR CONSOLIDATION ....................................................................................... 48
4.6.1 Increased bargaining power with manufacturers..................................................... 48
4.6.2 Increased drive for market share ............................................................................. 49
4.6.3 Investment in physical capital .................................................................................. 50
4.6.4 Increasing cost of land ............................................................................................. 50
4.6.5 Summary.................................................................................................................. 51
4.7
DRIVERS OF BUSINESS COMPETITIVENESS ....................................................................... 52
4.7.1 Productivity .............................................................................................................. 52
4.7.2 Patterns of consumer demand................................................................................. 53
4.7.3 Government policy ................................................................................................... 53
4.7.4 Technological change .............................................................................................. 55
4.7.5 Globalisation ............................................................................................................ 57
4.7.6 Innovation ................................................................................................................ 58
4.7.7 Competition.............................................................................................................. 59
4.7.8 Enterprise................................................................................................................. 62
4.8
COMPETITIVE POSITION – BLOCK EXEMPTION REGULATION .............................................. 63
4.8.1 Block exemption regulation...................................................................................... 63
4.9
TRAINING ISSUES ............................................................................................................ 64
4.9.1 Incidence of training................................................................................................. 64
4.9.2 Possible reasons for low take-up of training ............................................................ 65
4.10
SUMMARY ...................................................................................................................... 66
5
CURRENT SKILLS NEEDS ................................................................................................. 67
5.1
OCCUPATIONAL PROFILE OF THE SECTOR......................................................................... 67
5.2
SKILL GAPS .................................................................................................................... 68
5.2.1 Evidence of skill gaps .............................................................................................. 69
5.2.2 Management Skills................................................................................................... 71
5.3
VACANCIES AND SKILL SHORTAGES ................................................................................. 72
5.3.1 Evidence of Vacancies and Skill Shortages ............................................................ 73
5.3.2 Employability and life skills ...................................................................................... 76
5.3.3 Basic Skills............................................................................................................... 77
5.4
GENERIC SKILLS NEEDS – GAPS AND SHORTAGES ............................................................ 78
5.4.1 Technical skills......................................................................................................... 78
5.4.2 Generic skills............................................................................................................ 80
5.5
RECRUITMENT AND RETENTION ....................................................................................... 81
5.5.1 The Urban/Rural dynamic........................................................................................ 81
5.6
SUMMARY ...................................................................................................................... 83
6
FUTURE SKILLS NEEDS .................................................................................................... 84
6.1
QUANTITATIVE FORECASTING .......................................................................................... 84
6.1.1 Headline issues........................................................................................................ 85
6.1.2 Forecast shifts in patterns of employment by occupation, employment status, and
gender ................................................................................................................................. 85
6.1.3 Trends in replacement demand ............................................................................... 85
6.1.4 Anticipated changes to pattern of skills requirements and skills ............................. 87
6.2
SCENARIO PLANNING ...................................................................................................... 87
6.2.1 Scenario 1 – Legislation and Infrastructure ............................................................. 89
6.2.2 Scenario 2 – Technology and fuel ........................................................................... 90
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6.2.3 Scenario 3 – Employees and Cost of Ownership .................................................... 91
6.2.4 Scenario 4 – Government and vehicle technology .................................................. 92
6.3
SUMMARY ...................................................................................................................... 93
7
GEOGRAPHIC PERSPECTIVES......................................................................................... 94
7.1
COUNTRY PERSPECTIVES OF FUTURE SKILL NEEDS ........................................................... 94
7.2
INTRODUCTION ............................................................................................................... 95
7.3
THE GENERAL NORTHERN IRISH CONTEXT ....................................................................... 96
7.3.1 Northern Ireland ....................................................................................................... 97
7.3.2 England.................................................................................................................... 98
7.3.3 Wales ....................................................................................................................... 98
7.3.4 Scotland ................................................................................................................... 99
8
SUMMARY AND PRIORITIES ........................................................................................... 101
8.1
SHORT-TERM PRIORITIES .............................................................................................. 101
8.1.1 Management and Leadership Skills....................................................................... 101
8.1.2 Employability and Life Skills .................................................................................. 101
8.1.3 Targeting of specific groups................................................................................... 102
8.2
LONG-TERM PRIORITIES ................................................................................................ 102
8.2.1 The image and reputation of the sector ................................................................. 102
8.2.2 Technical skills....................................................................................................... 103
8.2.3 Government policy ................................................................................................. 103
APPENDIX 1 – THE PASSENGER CAR SUPPLY CHAIN ....................................................... 105
APPENDIX 2 – TOP 50 FRANCHISED DEALERS.................................................................... 106
APPENDIX 3 – CAPITAL DEVELOPMENTS............................................................................. 108
APPENDIX 4 – SELECTED NEWS ............................................................................................ 111
APPENDIX 5 – URBAN/RURAL DYNAMIC............................................................................... 121
APPENDIX 6 – BLOCK EXEMPTION REGULATION ............................................................... 124
APPENDIX 7 – VALIDATION SURVEY RESULTS ................................................................... 129
APPENDIX 8 – TECHNICAL APPENDIX................................................................................... 130
APPENDIX 9 – BIBLIOGRAPHY................................................................................................ 131
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List of figures
Figure 1: Business Ownership and Organisation .......................................................................... 21
Figure 2: Regional breakdown of businesses (head offices and branches) ................................. 22
Figure 3: Business Size................................................................................................................. 23
Figure 4: Percentage share of Automotive Skills employment in regions and countries .............. 24
Figure 5: Gender of workforce....................................................................................................... 24
Figure 6: Age of workforce ............................................................................................................ 25
Figure 7: Ethnicity of workforce ..................................................................................................... 26
Figure 8: Occupational profile of cross-sector Northern Irish workforce ....................................... 27
Figure 9: Proportion of Managers with NVQ Level 4 or Higher, in Selected Sectors.................... 28
Figure 10: Trends in staff turnover (UK)........................................................................................ 31
Figure 11: Northern Irish new car registrations 2001 – 2005 ........................................................ 36
Figure 12: Trends in UK Registrations per Franchised Dealer Outlet........................................... 36
Figure 13: Used UK car market volume and value........................................................................ 37
Figure 14: Value of UK body repair market value to repairers ...................................................... 38
Figure 15: Selected European automotive statistics ..................................................................... 41
Figure 16: Analysis of Data from Figure 15 Ranked by Lowest Outlet Density ............................ 42
Figure 17: European registrations per Franchised Sales Outlet ................................................... 43
Figure 18: European used car sales per 1,000 people ................................................................. 44
Figure 19: Franchised dealerships – net profit as a percentage of turnover................................. 45
Figure 20: Net profit as a percentage of turnover (regional figures): ............................................ 46
Figure 21: Number of Franchised Sales Outlets ........................................................................... 47
Figure 22: Proportion of establishments funded or arranged off-the-job....................................... 65
Figure 23: Occupational profile of UK workforce........................................................................... 68
Figure 24: Proportion of establishments reporting internal skill gaps............................................ 69
Figure 25: Skills gaps as a proportion of employment .................................................................. 70
Figure 26: Occupational pattern of skill gaps ................................................................................ 71
Figure 27: Vacancies as a percentage of establishments............................................................. 73
Figure 28: Percentage of establishments reporting hard-to-fill vacancies .................................... 74
Figure 29: Proportion of establishments reporting skill shortage vacancies ................................. 74
Figure 30: Skills Shortage vacancies as a % of vacancies ........................................................... 75
Figure 31: Skills found difficult to obtain from applicants for skill shortage vacancies.................. 76
Figure 32: Proportion of Employers by Size of Employment and Location Type.......................... 82
Figure 33: UK Automotive Skills footprint replacement demand by occupation ........................... 86
Figure 34: Future influencers on the motor industry by clustered ................................................ 88
Figure 35: Maximum infrastructure and Maximum legislation....................................................... 89
Figure 36: Fuel runs out, maximum development of technology ................................................. 90
Figure 37: Employees unmotivated, high costs of vehicle ownership........................................... 91
Figure 38: Maximum government interference, maximum vehicle technology ............................ 92
Figure 39: Passenger car supply chain ...................................................................................... 105
Figure 40: Proportion of Employers by Location Type – England 2005..................................... 122
Figure 41: Proportion of Employers by Size of Employment by Location Type – England 2005122
Figure 42: Businesses with Employees...................................................................................... 123
Figure 43: Employers Validation Survey Results Summary....................................................... 129
Figure 44: Employer Validation Survey Respondent Geographical Breakdown........................ 129
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PREFACE
This report is one of a suite of reports prepared as part of the sector skills agreement (SSA)
negotiated between stakeholders in the retail automotive sector. The SSA process commenced
in 2004 and most reports present a view of the sector in 2006.
The SSA represents a milestone in the development of processes that will ensure the United
Kingdom has sufficient numbers of appropriately skilled people to meet the future needs of the
retail automotive industry and in particular to meet the targets identified by Lord Sandy Leitch in
his 2006 report, a Prosperity for all in the global economy - world class skills.
This report reflects the work of Automotive Skills Ltd (ASL), which was the original sector skills
council (SSC) for the retail automotive sector. Readers should be aware that in July 2007 ASL
merged with the Institute of the Motor Industry IMI, the industry’s professional body since 1920,
and in September 2007, the Sector Skills Development Agency (SSDA) issued IMI with a licence
to be the SSC for the sector. The name ‘Automotive Skills’ is still used by IMI in relation to its role
in developing national occupational standards and qualification frameworks.
The nature of the retail automotive sector means that research and policy development is
ongoing. Also, there are ongoing changes to the sector’s footprint. Details of current research,
the wide range of policy issues being addressed in the sector and the most recent definition of the
sector’s footprint can to be found on the IMI’s website, www.motor.org.uk.
Sarah Sillars
Chief Executive Officer
The Institute of the Motor Industry
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1 Executive Summary
1.1
Introduction
Automotive Skills launched Automotivate – the sector skills agreement for the motor industry – in
the late summer of 2005. This report provides a detailed examination of the skills needed in the
automotive retail sector both now and in the years for Northern Ireland. It describes the results of
Stage 1 of the Sector Skills Agreement brokering process. The information in this report is
derived from primary and secondary research, both qualitative and quantitative.
This report for Northern Ireland is part of a suite of reports covering the UK. Separate reports are
available for each home nation and for the UK as a whole.
1.2
The Automotive Skills Sector Footprint
1.2.1
Sector Definition
Automotive Skills’ footprint covers almost all activities in the motor industry downstream of the
factory gate.
Thirteen industry-defined activities cover all types of vehicle including cars,
motorcycles, commercial vehicles, passenger-service vehicles and other specialist vehicles:
•
New vehicle sales
•
Used vehicle sales
•
Routine maintenance & repair
•
MOT inspections
•
Accident/body repair
•
Restoration/rebuilding
•
Fast fit (tyres, exhausts, batteries, etc.)
•
Post-factory fitting and adaptation (electricals, Motability, etc.)
•
Parts and accessories sales
•
Roadside rescue/recovery
•
Contract hire/operational leasing
•
‘Daily’ rental (self drive or with driver)
•
Valeting/preparation
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Automotive Skills has five SIC codes covered by its licence: 50:10, 50:20, 50:30, 50:40 and
71:10. Unfortunately, these do not map onto industry-defined activities, and thus cannot be
analysed individually without giving rise to misleading and erroneous data. This is because of the
multi-activity and mutually inclusive nature of almost all businesses in the footprint. Where SIC
codes have been used, they have been used in aggregate to ensure the robustness of the data.
1.2.2
Sector Dimensions
The total turnover of the 2,000 retail motor businesses in Northern Ireland is £3.19bn per annum
(2% of the UK total) with a GVA of £478 million (2% of the UK total). Automotive Skills’ own
database suggests that there are just over 2,000 workplaces in the sector in Northern Ireland.
The estimated total employment in the sector in Northern Ireland is 17,297. Over 4-out-of-5
workplaces have fewer than 10 employees, with less than 1-in-5 employees being female. Under
half (40%) of employees in the sector in Northern Ireland are over 45.
The sector has seen a considerable amount of consolidation over recent years with the larger
businesses acquiring medium-sized and family firms as investment requirements increase. This
consolidation has seen many locations close, illustrated by the fact that the number of franchised
outlets across the UK has almost halved over the last 30 years, from 10,200 in 1975 to 5,600 in
2005. Meanwhile the number of bodyshops has fallen from 12,700 in 1997 to just 6,700 in 2005.
1.2.3
Geographic Diversity
In Northern Ireland the sector’s workforce accounts for about 2.5% of the working population – a
proportion that is second only to the West Midlands, and thus higher than the rest of the UK.
However, the 17,297 employees in the footprint in Northern Ireland total fewer than in any region
of the UK
Broadly speaking, the skills issues identified in Northern Ireland are of a similar nature and
significance as those found elsewhere, with differences being largely at the margins. Essentially
the same kinds of education, skills and training problems affect employers right across the UK.
Where there is a difference, it is in the dichotomy between businesses with predominantly urban
and predominantly rural employee and customer territories.
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1.2.4
Geodemographic Comparisons
Our qualitative research has highlighted that the dynamics of urban and rural employers differ
significantly both in terms of the labour market and customer base. By and large, rural employers
tend to have more stable, lower-turnover workforces and customer bases, but they do find it
harder to recruit and harder to access training in a way that does not disrupt their businesses.
Proximity and access to colleges, institutes, academies and place of work as well as relatively
higher costs can cause significant disruption and difficulty due to extended travel time and
logistical difficulties.
Urban-based employers tend to face a higher-turnover workforce (enjoying a wider range of
alternative employment opportunities) set in a more transient societal environment.
The
customer base is less stable and poaching of staff is a greater problem. Access to training and
skills development is better and less disruptive, with a greater choice of delivery. There are also
perceived differences in quality of delivery.
1.2.5
Workforce Profile
Automotive Skills estimates that around one quarter of all employees in the sector work as
technicians, with a total of about a third in skilled occupations. Sales and administration staff
account for about a third of the total with around one-in-eight being owners or senior managers.
The remaining 10-15% includes professional and elementary occupations.
More than 80 percent of employees in Northern Ireland are male, a little higher than in the UK as
a whole. The imbalance in gender representation is reflected in behaviours and the culture of the
sector since the sector is very male dominated. Ethnic minorities are hardly represented at all in
Northern Ireland.
1.3
Key Drivers of Business Competitiveness
1.3.1
Profitability
Net profit ratios in the franchised retail sector typically hover around 1.5% – amongst the lowest
rates of any sector of industry.
Bodyshop employers typically enjoy even lower profitability,
enduring significant price deflation resulting from insurer and related pressures. Unsurprisingly,
such rates of return have a negative impact on investment levels, including investment in training
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and skills. There are sub-sectors where profitability is more buoyant – for example contract hire
and leasing, and breakdown recovery.
Across the footprint, capital investment requirements have been rising sharply and will continue to
do so as a result of the need to cope with ever more complex technology in vehicles and the
rising standards set by manufacturers – as permitted under the Block Exemption Regulations.
Such requirements include sector-specific IT, diagnostics hardware and software, showroom
premises specifications, as well as many other things. The cost of financing the debt used by
many employers to fund this investment is detrimental to supporting staff development and
training. The result is that many employers focus on the short-term training ‘essentials’ or the
‘absolutely necessary’ only.
1.3.2
Remuneration and Rewards
Although it is possible to be handsomely rewarded in terms of pay and bonuses across the sector
– especially in senior positions – in most occupations pay levels are somewhat depressed. This
stems in part from poor profitability afflicting some parts of the sector in particular, which in turn
can have a negative effect on motivation and attitudes of employees.
Where incentives and bonuses are offered, they are often biased towards volume target
achievement. This does not always encourage support of good customer service. Our research
has shown that 67% of employers responding to research ‘definitely agreed’ with the statement
that “Employees will need to respond more to customer needs than to short-term targets”, which
suggests a recognition by employers of the problem.
In many parts of the footprint there is a tendency to focus on jobs rather than careers, which itself
reflects the generally low level of quality HR practices and internal capabilities in many employers
(with the exception of the larger and/or more enlightened employers). Consequently, there is a
lack of defined career paths for those entering the sector.
1.3.3
Image and Reputation
Even among employers, it is widely accepted that the image and reputation of the footprint overall
is not as positive as it could be.
Negative press and publicity, plus fictional depictions of
characters working in the motor trade have contributed towards the impression, widely held by
the general public and career advisers, that the sector is not as attractive to work in as many
others. Many employers assert that this image is unfounded, and only applies to certain parts of
the industry, representing a small minority of businesses. There is much evidence to support the
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notion of the footprint being very professional, customer-focused and technologically advanced,
employing highly skilled staff at all levels. This is especially true in activities such as breakdown
recovery, daily rental and contract hire and leasing. Unfortunately for many, perception equals
reality and in some parts of the industry this is a significant hurdle to overcome. That minority of
businesses that do not adhere to high professional and ethical standards expected by today’s
consumers are damaging the footprint as a whole. By changing the behaviour of employers
underachieving in these areas, the culture of the sector overall can be raised to a new standard.
In turn, this poor image and reputation has a negative impact on recruitment, and too often parts
of the footprint are seen as a repository for less able school leavers. Those school leavers who
will eagerly sign up as apprentices in May tend to be high achievers more likely to go on to enjoy
a successful career in the sector. Those that choose to join in September, more often do not. It
is the high quality apprentices that are needed by, and who will gain most from a career in, the
sector.
Interestingly, 72% of employers questioned ‘definitely agreed’ that “It will be up to the sector itself
to take responsibility for behaving more professionally in order to improve its image and
reputation.” Automotive Skills will do whatever it can to support employers in achieving this goal.
1.3.4
Recruitment and Retention
Many employers complain about a high turnover of staff in the sector. Our research suggests the
rate is typically around 25% per annum overall, with considerable variation by occupation and
location. This, combined with the lack of funds to pay for training and the concern that trained
staff will leave, often leads to the poaching of employees from competitors – often for marginally
increased rates of pay. This is a particular problem in more urban environments.
There is relatively little recruitment from without the sector because sector-specific experience is
usually more highly valued than transferable skills sets and competences.
Uptake of graduates is also relatively low. Automotive Skills’ research has found that employers
consider graduate-level qualifications as “nice to have”, but it’s neither essential nor a
discriminator in terms of recruitment for most. This stems partly from the perception that it is
difficult to make graduates ‘productive’ (i.e. earning income for the business) as quickly as an
apprentice and that it is harder to develop graduates because of the lack of career opportunities –
as opposed to individual job roles. The low penetration of graduates in the existing workforce
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helps perpetuate the situation since experience of graduates among recruitment decision makers
is limited and is often coloured by their own experiences.
Research we have carried out shows that 62% of employers responding to the validation survey
‘definitely agree’ that “It will be necessary to have a broad range of career paths laid out if we are
going to attract and retain more high-quality recruits and apprentices.”
Most employers do not have stand-alone HR functions and have expressed a desire to access
HR toolkits to help them deliver the kinds of development and training larger employers with HR
functions do. Automotive Skills is looking at developing possible solutions in this area.
1.4
Implications for Skills Needs
1.4.1
Broad Skills Issues
There are two principle dimensions to the skills needs assessment:
Skills Gaps relating to
existing employees, and Skills Shortages, which relate to new recruits. Identified in relation to
these dimensions are five key areas of gaps and shortages:
•
Employability Skills – attitudes and motivation
•
Basic Skills – numeracy and literacy
•
Generic Skills – communications, customer handling, problem solving, team working, etc.
•
Technical Skills
•
Management & Leaderships Skills
1.4.2
Skills Gaps
About 1 in 5 of employers in Northern Ireland (11%) consider their existing workforce is not fully
proficient in their jobs – a slightly lower figure than for all businesses in the Northern Irish
economy.
It is, however, in line with the rest of the UK – and more significant than skills
shortages.
Almost a third of employers across the sector in Northern Ireland intimate that they have skill
gaps in the area of management. This is a similar figure to the rest of the UK economy. Further,
1 in 4 establishments say that they have a skills gap in craft and related occupations. This
compares to 1 in 5 employers who have the same problem across all sectors of the economy.
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In addition, there is concern about the low proportion of managers in the footprint with level NVQ
4+ or equivalent qualifications – just 14% across the UK – and the impact this has on
management and leadership skills that fundamentally determine business success across the
sector.
1.4.3
Skills Shortages
The vacancy rate in the footprint in Northern Ireland is 13% of establishments, with 4% of
establishments reporting vacancies deemed to be because of skills shortages. As a proportion of
all vacancies, skill shortage vacancies account for just over 1 in 5 of all vacancies in the sector.
Our own research has highlighted that without high quality management and leadership and
employees with an eagerness to learn based on the right attitude and a motivation to succeed,
businesses will find it more and more difficult to succeed in today’s increasingly competitive
environment. Addressing skills shortages is key to securing the long-term future of the sector and
employment within it.
1.4.4
Employability and Life Skills
Our research for this report has highlighted concern from employers about the employability and
life skills of apprentices in particular. Employers have clearly expressed the need for a higher
proportion of young people to possess the right:
•
Attitude
•
Consistency in quality of work
•
Motivation
•
Reliability
•
Willingness to learn
Many apprentices are highly motivated and become excellent workers – often those who express
an early interest in joining the sector – but too many are leaving school without these qualities in
sufficient measure. This may be because some see the sector as a repository for the less able.
Some employers in the UK have specifically told us that they would prefer to employ motivated
employees who are willing to learn but who have no technical skills, rather than vice versa.
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Automotive Skills’ research has shown that 74% of employers responding to research have
‘definitely agreed’ with the statement, ‘New employees will increasingly need the right attitude and
motivation over and above just the hard, technical skills.’
1.4.5
Basic Skills
Many employers believe the standard of literacy and numeracy of too many school leavers is
inadequate for even the most basic requirements of business. This is a major drag on the
productivity of businesses and requires much remedial action by employers to raise skills to a
minimally acceptable standard.
Broadly speaking, employers do not believe it should be their role, or that of an apprenticeship
programme, to take remedial action in basic skills which have been under-delivered through the
schools system.
1.4.6
Generic Skills
In common with many other sectors of the economy, there is an ever-increasing demand for
generic skills. These are demanded from almost all employers in all sectors because they are
critical at all occupational levels in ensuring business success. Typically sector employers cite
the following as being key:
•
Communications skills (internal and external)
•
Planning & Organising
•
Problem solving skills
•
Team working skills
•
Customer handling skills
These skills are in short supply, coupled with insufficient proficiency both among existing
employees and new recruits. This has a significant impact on quality of service. When asked, no
less than 74% of employers responding ‘definitely agreed’ with the statement that, ‘Capabilities in
generic skills like communications, team working and problem solving will need to increase
significantly for businesses wanting to stay competitive’.
1.4.7
Technical Skills
The phenomenal pace of technological change in vehicle technology is putting pressure on
employers and employees alike. When asked, an astonishing 89% of employers who responded
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to our survey ‘definitely agreed’ with the statement “Ever increasing technology and complexity of
vehicles will result in a considerably increased need for new training and up-skilling.” A further
74% ‘definitely agreed’ that, ‘The ability to use diagnostic IT equipment will be an absolute
minimum requirement in all after-sales operations.’
1.4.8
Management and Leadership Skills
As mentioned earlier, the sector enjoys the dubious distinction of having the lowest proportion of
NVQ 4+ or equivalent qualified mangers – at 14% – of any sector in UK industry. With 16% of
mangers having no qualifications whatsoever, the sector comes third from bottom.
Given the significance of management and leadership on all other aspects of business
productivity, profitability and success, the low volume of qualified managers is a matter for some
concern. Employers themselves tell us that much management thinking in the sector is silooriented (i.e. within function or department) and short-termist (this week/month), with a
predominance of a blame culture with too much poor leadership in too many enterprises. The
root cause is the bureaucratic outlook of many businesses, which are not behaving as learning
organisations.
From our own research we found that 73% of employers who responded ‘definitely agreed’ with
the statement that “Managers in the sector will need far better developed leadership skills”.
Automotive Skills believes that addressing this central issue will be absolutely key to ensuring the
success of the sector, and all who work in it, over the next 10 years and beyond. Businesses
need top quality management and leadership for a top quality sector delivering the productivity,
and profitability demanded and required of a high-technology industry in the twenty-first century.
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2 Background and Introduction
2.1
The purpose of this report
In many ways, the economy of Northern Ireland and Great Britain generally is performing
strongly.
The UK currently has the fifth largest economy in the world1, and the highest
employment rate of the G7 group of countries. 2 A recent slowdown in the UK economy has seen
the Northern Irish economy grow nearly twice as fast as the UK as a whole. 3 The latest data
available also shows that the unemployment rate in Northern Ireland, currently at 4.2%, is one of
the lowest of all the regions of the UK, having come down from a peak of 17.2% in 1986. 4
However, productivity in the UK economy is below that of many comparator countries. 5 Indeed,
the productivity of Northern Ireland is lower than even the UK average. 6 One factor that drives
productivity performance is skills, and recent research has shown that the UK’s skill profile is
relatively poor when compared to countries such as France and Germany, especially at
intermediate levels. 7 Recent evidence would suggest that this is especially true in Northern
Ireland8. However, given that the utilisation of skills contributes to the productivity performance
of an economy, it is vital that the training supplied to businesses and individuals matches that
which is needed and demanded.
In order to make sure that this is the case, Automotive Skills are brokering Automotivate - the
Sector Skills Agreement (SSA) for the motor industry. The SSA will give employers in the sector
the opportunity to shape the development of training to meet their short, medium and long-term
business needs, setting the skills priorities and direction for the next 5-10 years.
The
Government has agreed to back any changes the SSA identifies.
Therefore, the fundamental aim of this report is to understand what it is that drives business
success and profitability in the sector in Northern Ireland. From this base, the report will assess
1
The World Economic Outlook Database, International Monetary Fund, April 2006. The UK has the fifth largest economy if
comparing Gross Domestic Product at current prices using dollar estimates calculated at market or government official exchange
rates.
2
Employment Outlook 2006, The Organisation for Economic Co-operation and Development, June 2006.
3
Economic Performance Briefing. Northern Ireland Executive. 25 January 2006.
4
Northern Ireland Labour Force Survey 2006. Department for Enterprise, Trade and Investment, 30/08/2006. Unemployment
figures are for March-May 2006.
5
International Comparisons of Productivity, The Office for National Statistic0, February 2006.
6
The Northern Ireland Economic Bulletin, 2006. The Department for Enterprise, Trade and Investment 2006.
7
Skills Pay: The Contribution of Skills to Business Success, SSDA Research Report 5, September 2004.
8
See Article 28 in The Northern Ireland Economic Bulletin, 2006. The Department for Enterprise, Trade and Investment 2006
Page 16 of 134
July 2006
both the current and future requirements for skills and training from an employer perspective.
Once these have been analysed and their implications discussed, the report will conclude by
suggesting priorities for action. These priorities will feed into later stages of the SSA, when
potential solutions to any problems in the sector are discussed with key partners.
2.2
Methodological approach
The methodology employed to conduct this analysis is of both a primary and secondary nature.
Automotive Skills commissioned a quantitative survey of employers in the motor industry in order
to determine employer perspectives on current and future skills needs. This research combined
telephone, internet and self-completion methodologies.
Other research of a primary nature
included focus groups, in-depth interviews, forecasting and qualitative scenario planning.
The secondary research undertaken involved summarising existing research reports and data,
which were of both a general and sector specific nature.
2.2.1
Quantitative methodology
The sample for the Automotive Skills Needs Survey 2005 was drawn from a database compiled
especially for the SSA process.
Automotive Skills commissioned an independent research agency to develop an integrated
employer database, providing comprehensive coverage of employers in the footprint of
Automotive Skills. This database was compiled using business records from a variety of sources
including Yellow Pages, Dun & Bradstreet and Sewells. These sources were merged to create a
single database, holding company and subsidiary head offices linked to individual sites and
establishments.
The sample for the survey drawn from this database was stratified by business size to make sure
that it was representative of the business population as a whole. Due to difficulty in obtaining
interviews in Northern Ireland, the data from this survey will be presented as indicative, and not
conclusive.
To supplement this work, Automotive Skills also conducted a validation survey with over 100
employers. This survey drew its sample from an existing Automotive Skills database of SSA
employer registrants expressing an interest in Automotivate.
Page 17 of 134
July 2006
2.2.2
Qualitative methodology
To support the quantitative survey work discussed above, a series of depth interviews, focus
groups and scenario planning workshops were conducted across the UK. The depth interviews
and focus groups were conducted with members of the Automotive Skills Employers Nations Fora
and Council right across the UK, whilst the scenario planning events accessed a wide group of
industry representatives.
In all cases, attending respondents were selected to be representative of the different activities of
the Automotive Skills footprint, and the different nations of the United Kingdom.
Additional qualitative outputs were gathered from a debating conference – Automotivate Live! –
held in September 2005. The debating sessions at the conference were moderated by industry
opinion formers and academics and included ninety leading sector employer delegates. The
event was film recorded for research and potential output usage in connection with Automotivate.
2.2.3
Secondary Research
This Stage 1 Report has used a number of different secondary data sources. It is to be noted
that all of these data sources have limitations in terms of how well they represent the footprint of
Automotive Skills. It is important that these are in mind when data using these sources are
presented. The following bullet points summarise the key issues:
•
The National Employers Skills Survey (NESS) covering England does not include sole
traders in its sampling framework. This is significant considering that estimates put the
9
number of businesses in the sector in this category at about 56% of the total .
•
The Northern Ireland Skills Monitoring Survey used the BT business directory to
construct a random sample 6,955 businesses from which 4,504 interviews were
achieved. This survey contains businesses from both the private and public sector.
•
The Annual Business Inquiry (ABI) is a dataset based upon information gathered on VAT
registered businesses.
Thus, those businesses that are not VAT registered are
systematically excluded from the sampling frame.
The ABI therefore excludes
enterprises with an annual taxable turnover of less than £60,000 (the threshold for VAT
registration) – and therefore excludes a high proportion of sole traders and micro
businesses.
9
SME Statistics UK, 2004. The Small Business Service, February 2006. This data is for SIC code division 50, and so does not include
the leasing and renting of motor vehicles.
Page 18 of 134
July 2006
These limitations may mean that there are differences between the outputs of these data and the
Automotive Skills Needs Survey 2005.
Throughout this report, where consistent data is
accessible from more than one source, both of the figures will be published together.
To ensure robustness of secondary data, Standard Industrial Classification (SIC) codes have only
been used in aggregate. At three- or four-digit level, the SICs do not map onto industry defined
activities (as noted in 1.2.1). This is made more complex still because of the multi activity reach
of most businesses’ activities and so SIC codes cannot be used individually without creating
misleading and erroneous outputs.
Page 19 of 134
July 2006
3 Business and Workforce characteristics
3.1
Definition of the Automotive Skills footprint
The footprint of Automotive Skills covers the activities of businesses in almost the entire
downstream motor industry and all types of automotive vehicles. These vehicles include not only
cars, but also motorcycles, commercial vehicles and passenger service vehicles. The following
list of industry defined activities shows the breadth of work undertaken in the sector:
•
New vehicle sales
•
Used vehicle sales
•
Routine maintenance & repair
•
MOT inspections
•
Accident/body repair/bodyshop
•
Restoration/rebuilding
•
Fast fit (tyres, exhausts, batteries, etc.)
•
Post-factory fitting and adaption (electricals, Motability, etc.)
•
Parts and accessories sales/wholesaling
•
Roadside rescue/recovery
•
Contract hire/operational leasing of vehicles
•
‘Daily’ rental (self drive or with driver)
•
Valeting/preparation
Many businesses will operate across more than one of these activities. A franchised dealer, for
example, will sell new vehicles as well as maintain them. They may also rent them on a daily
basis, offer company car contract hire or leasing, provide fast fit services, perform MOT
inspections, sell and maintain used vehicles, and have a bodyshop, for example. A great many
enterprises in the footprint do not fit neatly into activity categories. This again highlights the
importance of aggregating businesses operating across these activities for the purpose of
analysis. A diagram of the industry supply chain illustrating this point can be found in Appendix 1.
3.2
Business numbers and organisational type
It is possible to estimate the number of businesses operating across the industry in Northern
Ireland. The Automotive Skills Employer Database estimates that there are just over 2,000 sites
Page 20 of 134
July 2006
of all types in existence across Northern Ireland10. This is just under 3% of the UK total for the
sector.
These businesses are organised into a variety of business types. These range from independent
sole traders to multi-site franchised dealers. The Automotive Skills Needs Survey 2005 shows
that a majority of companies in the sector are single site businesses (83%) with only 17%
operating at multiple sites.
Figure 1: Business Ownership and Organisation
2500
Nu m b er of b u sin esses
2023
2000
1664
1500
1000
359
500
0
Head Office
Branch
All site types
Source: Automotive Skills Employer Database
The Automotive Skills Employer Database shows how Northern Ireland compares in this regard
to other regions in the United Kingdom. The totals in the table over confirm that a majority of
companies operate from a single site.
10
These are not all separate businesses, as some sites will be owned by the same company.
Page 21 of 134
July 2006
Figure 2: Regional breakdown of businesses (head offices and branches)
Head Office
%
Branch
%
All site type
%
South East
8,680
15.30
3,048
16.76
11,832
15.71
North West
6,673
11.76
2,116
11.64
8,830
11.72
East
6,449
11.37
2,054
11.30
8,570
11.38
West Midlands
5,574
9.82
1,728
9.50
7,341
9.75
South West
5,439
9.59
1,803
9.91
7,286
9.67
Yorkshire & Humber
4,983
8.78
1,556
8.56
6,563
8.71
East Midlands
4,154
7.32
1,332
7.32
5,533
7.35
London
4,102
7.23
1,217
6.69
5,337
7.08
Scotland
4,008
7.06
1,370
7.53
5,395
7.16
Wales
2,975
5.24
879
4.83
3,855
5.12
North East
2,035
3.59
714
3.92
2,761
3.67
Northern Ireland
1,664
2.93
359
1.97
2,023
2.69
Total
56,736
100
18,176
100
75,330
100
This diversity in business organisations within Northern Ireland means that solutions to skills and
training problems will need to be tailored to ensure that they meet the needs of all business types
where this is appropriate. For example, Charles Hurst, part of the Lookers plc Group, forms a
multi-franchise main dealer group with franchises for many car manufacturers in Northern
Ireland11.
The Lookers plc Group have dealerships right across the UK.
Likewise many
employers in other parts of the industry, such as daily rental, contract hire, leasing, breakdown
recovery and so on, operate across the UK and wish to enjoy common standards and provision of
training across the UK. Therefore, any proposed solutions to problems developed through the
SSA process need to have the capacity for application across all countries and regions
simultaneously. Solutions that are specific to one country or region only may be seen by many
employers as unsatisfactory.
3.3
Business Size
The Automotive Skills Employer Database provides data on the size of businesses within the
automotive sector in Northern Ireland.
11
The methodology used to construct this database is
From http://www.charleshurstgroup.co.uk/about-us/index.asp
Page 22 of 134
July 2006
outlined in section 2 of this report The data shows that businesses in Northern Ireland are slightly
more likely to be smaller than businesses in other regions:
Figure 3: Business Size
Number of
employees
Northern Ireland
England
Scotland
Wales
Automotive sector
(%)
Automotive
sector (%)
Automotive
sector (%)
Automotive
sector (%)
1 employee
22.84
20.33
17.92
18.47
2-4 employees
42.87
41.24
39.85
45.73
5-9 employees
16.28
17.44
18.83
18.57
10-49 employees
7.35
7.33
7.04
6.51
50-99 employees
4.93
5.78
6.27
4.95
100-249 employees
1.04
1.77
3.02
1.17
250-499 employees
0.39
0.76
0.65
0.54
500-999 employees
0.05
0.10
0.11
0.05
1000 + employees
0.05
0.04
0.02
0.00
3.4
Employment numbers
Total employment in the footprint of Automotive Skills across Northern Ireland can be estimated
using the Labour Force Survey.
according to this source is 17,297.
Estimates of total Northern Irish employment in the sector
12
Employment across the UK is forecast to fall by 0.2% per annum over the period 2004-2014. This
is, however, an improvement on the performance during the previous ten years when
employment fell by 0.8% per annum. 13
3.5
Employment profile
The following tables briefly summarise the employment profile of the sector from one source - the
Labour Force Survey (LFS). The first table shows the percentage of employment within each
region/country accounted for by personnel operating within the footprint of Automotive Skills.
12
13
Labour Force Survey (2006 quarter 1). Office for National Statistics.
Working Futures II, January 2006. Institute for Employment Research and Automotive Skills Needs Survey 2005.
Page 23 of 134
July 2006
Northern Ireland is second only to the West Midlands in having the highest proportion of
employment in any country or region:
Figure 4: Percentage share of Automotive Skills employment in regions and countries
Area
Percentage
%
West Midlands
2.51
Northern Ireland
2.49
Yorkshire & the
Humber
2.29
South West
2.27
East Midlands
2.26
East of England
2.24
UK Mean
1.99
South East
1.95
North West
1.93
Wales
1.91
North East
1.86
Scotland
1.77
London
1.18
Source: Labour Force Survey, Q1 2006.
This employment has the following demographic features:
Figure 5: Gender of workforce
Northern
Ireland
Northern
Ireland
England
Wales
Scotland
All Sectors
Automotive
sector
Automotive
sector
Automotive
sector
Automotive
sector
Males
54%
84%
77%
85%
81%
Females
46%
16%
23%
15%
19%
Gender
Source: LFS Q1 2006
Page 24 of 134
July 2006
The gender imbalance in the motor industry in Northern Ireland is evident from the above table.
In January of this year, only one other sector had a lower proportion of female workers in its
workforce across the UK. 14
This imbalance may give rise to one way of filling any existing skill shortages in the sector recruiting more females into occupations where such shortages may exist. This solution has
been given cross-sector attention by the government in the UK wide Women and Work
Commission’s report entitled ‘Shaping a Fairer Future’. 15 It highlights a need to strip barriers to
women from working in roles traditionally done by men, and has made 40 recommendations to
tackle job segregation and the gender pay gap. Once the plan is formulated, the Department for
Trade and Industry will work with employers to attract more women into sectors with skills
shortages such as motor retail. 16
Figure 6: Age of workforce
Northern
Ireland
Northern
Ireland
England
Wales
Scotland
All Sectors
Automotive
sector
Automotive
sector
Automotive
sector
Automotive
sector
Aged 16 - 24
16%
20%
17%
14%
20%
Aged 25 - 44
49%
39%
48%
56%
40%
Aged 45+
35%
40%
35%
30%
39%
Age
Source: LFS Q1 2006.
Although the age profile of the motor industry in Northern Ireland does not differ significantly from
the Northern Irish economy as a whole, attracting more young people into the sector could be a
possible solution to reducing any skills gaps and shortages that may or may not exist.
Apprenticeships could have a key role to play in narrowing the skills gap at technician and craft
level.
For example, in response to the skills shortage in service workshops, franchised and independent
dealers have now taken on more apprentices relative to the number of fully-qualified technicians
and mechanics. Two years ago, franchised dealers only employed one apprentice for every 4.7
fully-qualified service staff. This has now increased to a ratio of 4.0 to 1. A similar improvement
Diversity and the Skills for Business Network –How the Sector Skills Councils are Addressing Diversity and Some Good Practice
case Studies. GHK Consulting, January 2006.
15
Shaping a Fairer Future, Women and Work Commission, February 2006.
16
‘Fairer deals for women workers’. AM Online, 17th March 2006.
14
Page 25 of 134
July 2006
was noted for independent garages 17.
It is hoped that by 2008, the numbers completing
apprenticeships across the whole economy will have risen by three-quarters. 18
Also relevant to the data on age distribution is the reduction in the number of garages and body
shops in the past 5 to 10 years. This is said to be one of the main contributory factors in reducing
the availability of skilled staff. This downturn had the effect of causing some people to leave the
sub-sector altogether. This means there is now a gap between the younger apprentice level staff
(age early 20s) and the more experienced more established staff (aged 40s and 50s). 19 Thus,
there is a danger that a large element of skilled workers is an aging part of the workforce,
meaning that the many people with vast experience and fundamental skills will leave the sector
through the retirement process. 20
Utilising migrant workers and increasing the ethnic diversity of sector’s workforce may be another
way to combat skill shortages. The imbalance seen in the automotive sector is evident from the
data above. Anecdotal and qualitative evidence from employers suggests that in the face of staff
shortages some in the bodyshop sub-sector in certain regions in particular are already employing
staff from the EU accession states.
Figure 7: Ethnicity of workforce
Ethnicity
Northern Ireland
Northern Ireland
All sectors
Automotive sector
White
98.55%
100%
Mixed
0.26%
0.0%
Asian or Asian
0.62%
0.0%
Black or Black
0.04%
0.0%
Chinese
0.44%
0.0%
Other ethnic group
0.08%
0.0%
Source: LFS Q1 2006
Indeed, projected skill shortages in the construction industry have led the industry’s Sector Skills
Council to develop ‘Step into Construction’, a programme which supports employers in the
The Retail Motor Industry Pay Guide 2006. Sewells Information & Research, 2006. Featured in article ‘Car Sales Execs Feel Pain
In The Wallet’, Retail Motor Industry Federation 2006.
18
‘Five year strategy for children and learners’. Department for Education and Skills, July 2004.
19
BodyshopError! Bookmark not defined. Sub-Sector Research. Automotive SkillsError! Bookmark not defined. Ltd, July 2005.
17
20
Office for National Statistics. Labour Market Statistics Group the European Labour Force SurveyError! Bookmark not defined.
March – May 2005.
Page 26 of 134
July 2006
recruitment of Black and Asian people who are ‘job ready’. 21
Later stages of the SSA will
determine whether or not there are any lessons from schemes such as this which can be applied
to the motor industry in future years.
Figure 8 is based on general classifications applicable to all sectors of economy, so the
terminology is generic rather than sector-specific. It illustrates that the labour market of Northern
Ireland has a high proportion of the workforce in the skilled trades category. This is significant
given that across the UK, the automotive sector has just under 40% of its employment in this
category. 22
Figure 8: Occupational profile of cross-sector Northern Irish workforce 23
Managers and senior officials
Professional
Associate professional and technical
Administrative and secretarial
Skilled trades
Personal service
Sales and customer service
Process, plant and machine operatives
Elementary
0%
2%
4%
6%
8%
10%
12%
14%
16%
A more interesting UK statistic, however, is that the sector has the lowest proportion of managers
trained to the equivalent of NVQ level 4+ or equivalent.
Figure 9 shows that only 14% of managers operating in the sale and maintenance of motor
vehicles across the UK are qualified to this level, compared to 39% across all sectors of the
economy. This evidence would suggest that managerial issues will need to be addressed in the
formative periods of the next stages of the SSA process.
21
22
CITB-ConstructionSkills Equal Opportunities Statement, June 2006.
Labour Force Survey 4 quarter average (2004q1 – 2005q2). Office for National Statistics.
23
Persons in Employment by Occupation, April – June 2006. LFS Quarterly supplement, Department for Enterprise, Trade and
Investment.
Page 27 of 134
July 2006
Figure 9: Proportion of Managers with NVQ Level 4 or Higher, in Selected Sectors 24
Sale & maint. of motor vehicles
Hotels & restaurants
Retailing
Agriculture, etc
Wholesale distribution
Textiles & clothing
All industries
Health and social work
Public administration & defence
Computing services
Mining and quarrying
Education
0%
10%
20%
30%
40%
50%
60%
70%
P roportion with NV Q4 or hig her
Source: IER estimates based on the Labour Force Survey (LFS) Data is for the whole of
the UK.
3.6
Recruitment
Not being able to recruit the right kind of workers may be a reason why the sector has the fewest
managers of any sector with qualifications at NVQ level 4.
Specific information is not available for Northern Ireland, but recent research conducted across
the UK would suggest that this is not the case. For example, 64% of franchised dealers report
having recruitment problems, but only 3% of these 64% report having difficulty recruiting
managers. For independent dealers, the figure is even lower. Of the 46% that experience
recruitment difficulties across all occupations, only 2% report having difficulties recruiting
managers.
25
Sectoral Management Priorities: Management Skills and Capacity. Research report prepared for the Sector Skills Development
Agency by the Institute for Employment Research, January 2005.
25
The Retail Motor Industry Pay Guide 2005. Sewells Information & Research, 2005.
24
Page 28 of 134
July 2006
This evidence would suggest that employers generally find management vacancies fairly easy to
fill. Nevertheless, the data on qualification levels would seem to suggest that the vacancies are
not being filled with personnel that are qualified to the appropriate levels. Thus the problem could
surround employer expectation of the level to which potential managerial candidates are qualified.
According to the same source, the real recruitment problems lie in the area of after-sales, most
notably technicians. Just over 20% of franchised dealers and 20% of independent dealers had
difficulty recruiting technicians and mechanics in 2004. There are also an appreciable number of
independent dealers describing issues in retailers where trained technicians leaving to work in
Government MOT centres, rather than moving into MOT testing roles within the retailer as might
happen elsewhere in the UK.
Testing can only be carried out at one of the 15 government run test centres in Northern Ireland
operated by the Driver and Vehicle Testing Agency (DVTA). Cars and motorcycles are tested on
the fourth anniversary of their initial registration and annually thereafter and the inspection covers
the same areas as the MOT test in the rest of the UK. Trucks, buses and taxis have similar test
arrangements with varying requirements and schedules depending on the type and usage of the
vehicle. The issues caused by this have been described by some employers as ‘desperate’ or
something similar.
26
Employers have also expressed concerns about the number and quality of trainees coming
forward. Some have said that they are unprepared by the education system to meet the technical
skills required. 27 Possible reasons for this that have been suggested by employers include:
•
training providers not having up-to-date equipment
•
staff with insufficiently up-to-date skills who experience difficulties with new technologies
•
trainees not being sufficiently experienced in practical work for them to be able to ‘hit the
ground running’ when they start work.
Analysis of the Automotive Skills Needs Survey 2005 supports this data on recruitment difficulties
and identifies some key concerns.
considered adequate.
28
For example, the pool of possible employees is not
Employers say that applicants are sometimes not fit for purpose and the
‘wrong’ people are pushed towards the industry;
Ibid.
Bodyshop Sub-sector Research. Automotive SkillsError! Bookmark not defined. Ltd, 2005.
28
Automotive Skills Needs Survey 2005. Automotive Skills, 2005.
26
27
Page 29 of 134
July 2006
“At the moment we haven’t got the right talent coming through the door, because it (the
industry) is not attractive enough.”
The same source would also suggest that the sector has a very poor image overall, thus having a
negative impact on the calibre of workers willing to consider it as a career option. Another reason
given for the low level of young people wishing to join the sector is the increased numbers of
young people who are being guided towards Higher Education.
Thus, the pool of possible
recruits available for sectors such as the motor retail sector is reduced.
Progressing from this, research has shown that there is doubt about the availability of graduates
willing to enter the sector, and the feasibility of using graduate level recruits to fill skill
shortages.
29
Other sources suggest that there are concerns over salary levels (starting salaries
for graduates need to be higher than those for non-graduates, for example) and experience of
having graduates ‘poached’ by other employers. There is also a concern about the extent to
which graduate qualifications are relevant to the sector. 30
Evidence from the Automotive Skills Needs Survey 2005 suggests that from an employer and
employee perspective, low pay and poor working conditions relate closely to the sector’s inability
to attract and retain staff. The Pay Guide 2005 also shows that ‘perks’ enjoyed by employees are
also on a downward trend. 31 Franchised dealers seem to be reducing the provision of private
petrol and medical plans.
3.7
Staff Turnover and Retention
It has been reported that staff turnover is a key issue for the motor industry 32. Data for the UK
show that the figures fluctuate significantly from year to year. The Pay Guide 2005 suggests that
high staff turnover may be the reason why actual increases in basic pay exceed the pay awards
that responding businesses say they give.
Ibid.
Graduate and Extra-Sector Experience Research, Automotive Skills, January 2005.
31
29
30
32
Staff turnover was first measured by the Sewells Pay Guide in 1998. The most recent figures are here quoted.
Page 30 of 134
July 2006
Figure 10: Trends in staff turnover (UK)
25%
S taff turnover
20%
15%
10%
Franchised Dealers
Independents
5%
Bodyshops
0%
1997/98
1998/99
1999/2000 2000/2001 2001/2002 2002/2003 2003/2004
Y ear
Source: Sewells, The Retail Motor Industry Pay Guide 2005
Data for franchised dealers shows that staff turnover is likely to be highest in both sales and
service, something that is disguised within the data above. It is suggested that this could be due
to the fact that both departments employ large numbers of executives and technicians.
Independent dealers have the highest turnover rate in servicing; a fact that is unsurprising given
that servicing and repair is an independent dealer’s core business. 33
The impacts of staff turnover seem to be absorbed as far as is possible by micro businesses (10
or fewer employees), who often choose to spread work among the existing workforce. Larger
companies (11 or more employees) are more inclined to promote existing staff members or
recruit replacements. 34
The Automotive Skills Needs Survey 2005 also indicates that staff turnover is still perceived as
high, and a problem for many companies in the footprint. Possible causes are many but may
include relatively low wages and anti-social or long hours, and may reflect the management skills
challenge. This is illustrated in the following comments made by employers:
“I don’t think they can take the pressure - it’s not a normal office environment. We work
from 7.30 a.m. till 6 p.m. and often there are people here till 7.”
33
34
The Retail Motor Industry Pay Guide 2005. Sewells Information & Research, 2005
Automotive Skill Needs Survey 2005. Automotive Skills, 2005.
Page 31 of 134
July 2006
“They are paid such low wages, you know, the minimum wage, you sort of get what you
pay for. We only actually sacked one for being useless - the others left of their own
accord when they found a better paid job.” 35
There is, however, strong anecdotal evidence that training offers a return on investment and in
particular that training has a positive impact on staff retention.
“[Without training] the service levels would drop, the skills would not be updated, and it
would also worry me about de-motivating the staff.” 36
35
36
Ibid.
Ibid.
Page 32 of 134
July 2006
4 What drives skills demand?
This section of the report will consider the key drivers of skill demand in the motor industry. It will
consider general drivers of change, as well as assess the factors that affect business
competitiveness.
Consideration will also be given to international competition.
Before this,
however, an introduction to the current macro-economic situation in Northern Ireland and the UK
generally will be given.
4.1
The general economic context
The Organisation for Economic Cooperation and Development (OECD) has recently described
the economy of the United Kingdom as a ‘paragon of stability’. This conclusion was drawn from
data over the last decade that shows robust growth in GDP, small cyclical economic fluctuations
and inflation rates at target levels. 37
The latest available figures show that nominal growth in the Northern Irish economy (measured
by Gross Value Added) was 5% in 2004, above the UK rate of 4.6%. Looking at the long term,
Northern Ireland has experienced some convergence with the rest of the UK. In 2004, Northern
Ireland’s GVA per head was 80.2% of the UK’s, up from 74.8% in1989.
Further, Northern
Ireland’s GVA per head is higher than two other UK regions – Wales (79.1%) and the North East
(79.9%).
38
In terms of the employment rate, even though on a slight downward trend, it is also relatively high
in the UK compared to other G7 counties. 39 It must be noted however that the employment rate
of Northern Ireland is one of the lowest of any region in the UK. Indeed, Northern Ireland’s
working age employment rate is, at 69.3%, the lowest among the UK regions.
It is 5.4
percentage points below the UK average of 74.7%. Thus, Northern Ireland’s key labour market
weakness is the high levels of economic inactivity that it has. In the three months to March 2006,
27.4% of the working age population in Northern Ireland were economically inactive –
substantially higher than the UK (21.2%). 40
The Economic Survey of the United Kingdom 2005. OECD, 2005.
The Northern Ireland Economic Bulletin 2006. The Department for Enterprise, Trade and Investment.
39
Employment Outlook 2006, The Organisation for Economic Co-operation and Development, June 2006.
37
38
40
The Northern Ireland Economic Bulletin 2006. The Department for Enterprise, Trade and Investment.
Page 33 of 134
July 2006
The continuous rise in UK consumer spending over the past 5 years has been widely reported.
Across the UK since 1995, consumer spending has increased 3.5% year on year as growth in
household consumption has increased above GDP for the last 10 years 41.
Total household
income in the UK rose by 4.3 per cent between 2002 and 2003 from £1,101 billion to over £1,149
billion. Northern Ireland, along with the East Midlands, had the highest increase at 4.7 per cent,
although Northern Ireland continued to have the lowest total household income at £26.6 billion in
2003. 42
In this regard, total household debt across the UK has grown sharply as a percentage of
disposable income over the past decade and currently stands close to 150%. 43 At the end of
2005, the secured debt to income ratio was 121%, compared to 80% in 1995. The unsecured
debt to income ratio was 24%, a figure which is almost double that of 10 years ago. 44 The
implications of this could be significant to the motor industry – if households borrow less in the
future, disposable income available for the purchasing of vehicles will obviously decrease.
It is worth noting along with this that the current economic situation in Northern Ireland is strong.
Historically low numbers of unemployed and high numbers in employment, coupled with low
interest rates and a buoyant housing market makes credit easier to manage. 45
An article by the Economist however suggests that these trends cannot continue. It argues that
both government and household spending across the UK is likely to decrease in the coming
years. This means that GDP growth will have to be sustained by other sources. One such
source could be investment by businesses. Businesses are not likely to invest however if they
think that consumer spending is likely to be weak. 46
Despite this, the OECD still expects a short-term pick-up in momentum, with a strengthening in
private consumption and investment expected to take UK GDP growth to around 2½ per cent in
2006 and 3% in 2007. Headline inflation is projected to move slightly higher in the short term in
response to the recent rise in domestic fuel prices. 47
Lustre lost. The Economist, March 23rd 2006.
Regional Accounts, from Regional Trends 39. The Office for National Statistics, 2006.
43
The Scottish Economic Report. The Scottish Executive, June 2006
44
Debt facts and figures. Credit Action, June 2006.
45
Personal Over-indebtedness in Northern Ireland. NISRA 2006.
46
47
Economic Outlook No. 79. OECDError! Bookmark not defined., 2006.
41
42
Page 34 of 134
July 2006
This is the economic context in which the analysis of sectoral data will need to be considered. It
is obvious from the above data that operating as a business across all sectors of the UK economy
may be more difficult in the coming years than in has been in the past decade. The next section
will start by considering how the economic conditions above have affected the demand for goods
and services in the motor industry.
4.2
The economic performance of the sector
4.2.1
The UK car market
In 2005, a total of 2,439,717 new cars and 385,969 new commercial vehicles were registered in
the UK. The UK was the second largest new car market in Europe after Germany (3,266,826 in
2004). There were 7,731,609 used cars sold in the UK in 2004. In the same year there were
over 30 million cars in use on the UK’s roads. Recent evidence suggests however that, in line
with a slowing of the UK economy, new car registrations have fallen by about 100,000 in 2005
compared to 2004.
48
Figure 11 shows the number of cars registered in Northern Ireland since 2001. As can be seen,
Northern Irish new car registrations rose between 2001 and 2003, even if they have slowed
recently. Of the new car registrations in 2005, 64,881 were in Northern Ireland 49
The general trend upwards in new car registrations is due in part to the fact that people are
changing their cars more often. The average age of a car in the UK car parc has decreased from
7.3 years old in 1997 to 6.8 in 2003. 50
Motor Industry Facts 2006. SMMTError! Bookmark not defined., 2006.
Ibid.
50
The Automotive Industry Handbook 2005. SewellsError! Bookmark not defined., 2005.
48
49
Page 35 of 134
July 2006
Figure 11: Northern Irish new car registrations 2001 – 2005
68,000
67,000
66,000
65,000
64,000
63,000
62,000
61,000
60,000
59,000
58,000
2000
2001
2002
2003
2004
2005
2006
Yea r
(Source: SError! Bookmark not defined.MMT Motor Industry Facts and Figures 2006)
The general increase in new car registrations is happening at the same time as steady long-term
upward trend in the annual average sales per UK franchised outlet dealer up to 2004. However,
as Figure 12 shows, these can also be seen to be slowing slightly in recent times.
Avera g e S a les P er Ou tlet
Figure 12: Trends in UK Registrations per Franchised Dealer Outlet
600
500
400
300
200
100
0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Yea r
Source: Manufacturers, featured in The Automotive Industry Handbook 2005, Sewells 2005.
Page 36 of 134
July 2006
The UK used car market also shows signs of upward trends. Figure 13 shows recent increases
in both the volume of cars sold, and their corresponding value.
Figure 13: Used UK car market volume and value
8
35
6
30
5
4
25
3
2
Va lu e (£b illion )
Volu m e (m illlion u n its)
7
20
1
0
1994
1995
1996
1997
1998
1999
Volume
2000
2001
2002
2003
15
Value
Source: BCA Used Car Market Report 2004 featured in The Automotive Industry Handbook 2005, Sewells
2005.
Looking at other parts of the sector, Figure 14, based on available data, shows a slight upward
trend in the net value of the UK body repair sub-sector.
Page 37 of 134
July 2006
Total market value excl VAT (£billion)
Figure 14: Value of UK body repair market value to repairers
6
5
4
3
2
1
0
1996
1997
1998
1999
2000
2001
2002
2003
2004
Y ear
Source: Sewells' Bodyshop Opinion Survey 2004 as featured in Sewells - The Automotive Industry
Handbook 2005. Data for 2002 is unavailable.
4.2.2
UK Fleet Registrations
Fleet registrations in the UK also continue to grow. The Automotive Industry Handbook shows
the 25-plus fleet segment reached a new high of 1.1 million registrations in 2004. This is an
increase of about 2.4% on the previous year. The sector has now gone over the one million mark
for the eighth consecutive year. The fleet share of the new car market also rose by 1.2% in 2004
to 42.6%.
It is estimated that the size of the total business and fleet market is larger than this, however.
Vehicles may be purchased for business purposes but not logged as business/fleet – especially
in the sub-25 micro-fleets. There are estimates that have put the combined 25-plus fleet and sub25 fleet business sectors’ share of the new car market at over 60 per cent. 51
51
The Automotive Industry Handbook 2005. Sewells, 2005
Page 38 of 134
July 2006
4.2.3
Commercial vehicles
Commercial vehicle registration in the UK decreased slightly by 1% in 2005 (385,969 registered)
compared to 2004 (389,923 registered). This static picture follows year on year increases since
1999. 52
The demands of commercial vehicle customers differ somewhat from those of passenger car
keepers. For CV operators, downtime is lost income, which may have a significant impact on
business success. So, for example, all-hours maintenance and repair services are commonly
offered combined with a “can-do” engineering-focused, problem-solving ethos in support of
customer needs. Overall the dynamics of sales and aftersale activities are rather different from
that found in the passenger car sector and subtly, but significantly different skills sets are
required.
4.2.4
Motorcycles
According to the Department for Transport’s Compendium of Motorcycling Statistics 2006
motorcycle traffic in Great Britain has increased by an estimated 37% in the last ten years.
Although motorcyclists make fewer trips on average in 2004 than they did annually twenty years
ago, the distance travelled and the time spent traveling on those trips has increased over the
same period. The most recent government statistics found that there are more than 1.6 million
motorcycles in Great Britain. The ownership rate in 2004 was highest in the South West of
England and lowest in Scotland – perhaps a function of relative temperature and precipitation
events.
According to the Motor Cycle Industry Association (MCIA) registrations of Motorcycles and
Scooters rose 9% in the year to March 2006 compared to the previous year, whilst Mopeds fell
slightly. Consumers in this sector range from very demanding biker ‘experts’ to commuters and
all points in between.
4.2.5
Maintenance and Repair
The Automotive Industry Handbook 2005 shows that the UK servicing and repair sector is one
activity that is showing some signs of a small decline.
Although the cost of servicing has
increased due to higher labour costs, the servicing and repair market is a key activity which is
experiencing a reduction in value.
52
Motor Industry Facts 2006. SMMT, 2006.
Page 39 of 134
July 2006
The trend in replacement of components rather than repair, and the use of sensors to identify
which components require changing, impacts both on the volume of servicing and on the skills
and time needed to deliver the service. 53
Service demand among owners of older cars is likely to be more influenced by the relative cost of
servicing than those of younger cars. Owners of older cars are, therefore, more likely to defer
having a car serviced if there is an economic downturn, while owners of younger cars may be
tempted to use lower cost service outlets such as independent garages. This represents a threat
to the maintenance and repair market. 54
4.2.6
Other industry activities
The diverse footprint of this report includes some highly-customer-focused sub-sectors such as;
daily rental, fast-fit and roadside recovery to name but three. Very specific skills sets are needed
in the different occupations in these sub-sectors, but it probably true that these can be considered
in relative contextual relationship, rather than as different sets of requirements. Sector Skills
Councils that have undertaken SSAs has found many cross-sectoral skills needs common to all
and the same is true within the footprint of Automotive Skills. In order to gain greatest benefit for
the largest possible number of employers, the focus must be on where skills have greatest impact
on profitability.
4.3
International competition
The previous data has shown some upward trends in the value and volume of much of the motor
industry. Having looked at key data on the UK car market, comparisons to other European
countries will help to show how UK car market is performing relative to EU comparator countries.
The following table presents some key figures for the European motor industry.
53
54
The Automotive Industry Handbook 2005. Sewells, 2005
The car service and repair market in the UK – 2005. Mfbi, CMS 2005.
Page 40 of 134
July 2006
Figure 15: Selected European automotive statistics
Population
(‘000s)
Population
density
(per sq km)
New Car
Registrations
Car Parc
Eurostat
2004
Eurostat
2003
ACEA 2004
ACEA 2004(a)
Country
Number of
Franchised
Sales outlets
GMAP
European Car
Distribution
Handbook
2004
Austria
8,140
97
311,292
4,109,129
2,581
Belgium
10,396
340
484,757
4,818,571
3,575
Denmark
5,398
125
121,490
1,914,370
1,239
Finland
5,220
17
142,439
2,331,190
993
France
60,200
110
2,013,709
29,900,000
12,774
Germany
82,532
231
3,266,825
45,375,526
18,830
Greece
11,041
84
289,691
3,960,189
1,554
Ireland
4,028
58
154,136
1,582,833
833
57,888
191
2,264,688
33,973,147
6,857
Luxembourg
452
174
48,234
Netherlands
16,258
480
483,745
7,151,000
3,132
Portugal
10,475
114
197,645
4,100,000
1,736
Spain
42,345
83
1,517,286
19,541,918
6,428
8,976
22
264,246
4,113,424
1,924
59,700
244
2,567,269
30,267,204
5,777
14,127,452
192,249,487
68,233.0(a)
Italy
Sweden
UK
EU
383,047
Source: SMMT Motor Industry Facts 2006
Note: (a) EU excluding Luxembourg
The table shows that Germany and the UK have similar population densities. However, Germany
has 3 times as many franchised sales outlets. The fact that Germany has a 30% larger population
can only account for some of the difference. The German market is even more fragmented than
the UK market. Therefore, statistics showing annual new car sales per franchised sales outlet will
give us greater insight into how the two markets are operating.
Page 41 of 134
July 2006
By analysing the data in Figure 15 it is possible to see quickly how in love with the motor car the
UK is and how efficient the downstream motor industry is in the UK as shown in Figure 16.
Figure 16: Analysis of Data from Figure 15 Ranked by Lowest Outlet Density
Franchised
Outlets Per
Person (b)
Annual
Registrations per
1000 people
Rank(a
UK
43
2
507
3
10
1
Italy
39
4
587
1
12
2
Greece
26
13
359
14
14
3
Spain
36
8
461
8
15
4
Portugal
19
15
391
13
17
5
EU average
37
7
502
5
18
6
Finland
27
12
447
10
19
7
Netherlands
30
10
440
11
19
8
Ireland
38
5
393
12
21
9
France
33
9
497
6
21
10
Sweden
29
11
458
9
21
11
Germany
40
3
550
2
23
12
Denmark
23
14
355
15
23
13
Austria
38
6
505
4
32
14
Belgium
47
1
464
7
34
15
Source: SMMT Motor Industry Facts 2006
Note:
(a)
)
Parc per
Person
Rank(a
)
Rank(c)
The car parc is the sum of all registered vehicles
Ranked by value
(b)
Multiplied by 100,000
(c)
Ranked by efficiency
Although the market in Germany is the largest in Europe, it is characterised by a density of
franchised outlets over twice as high as that found in the UK. Such outlets are typically smaller
and more fragmented than is the case in the UK where persistent consolidation over several
decades has concentrated outlets. The same is true of the market in France.
These structural differences have implications for skills, although it should be remembered that
overseas competition is a very minor factor in the automotive trade downstream of the factory
gate. Consider a customer that lives in Coventry - it may not be practical to have their car
serviced in Northern Ireland.
Page 42 of 134
July 2006
Likewise, with the recent relative equalisation of vehicle prices across Europe the incentive to go
to the trouble of sourcing a new car overseas has been greatly reduced to the point where it has
no measurable impact on the UK market.
Figure 17: European registrations per Franchised Sales Outlet
444
330
Luxembourg
Denmark
Portugal
Austria
Belgium
Sweden
Finland
Netherlands
France
Germany
Ireland
186 185 173
158 154 143
137 136 121
114 98
Greece
207
EU (15)
Spain
Italy
UK
236
Source: The Automotive Industry Handbook 2005. Sewells, 2005
Figure 17 shows that even accounting for population and population density differences, the UK
registers more cars per franchised sales outlet than Germany.
Figure 18 also shows a strong
UK performance in the sales of used vehicles.
Page 43 of 134
July 2006
Figure 18: European used car sales per 1,000 people
140
120
100
80
60
40
20
Spain
Portugal
Italy
Norway
Denmark
Germany
Belgium
France
Austria
UK
Netherlands
0
Source: The Automotive Industry Handbook 2005. Sewells, 2005.
4.3.1
Summary of economic performance
It has been shown in the sections above that the Northern Irish and UK economy generally are
performing moderately at this time, with GVA increasing in line with the long term trend.
Consumer spending, however, is near to static. It has also been shown that the retail motor
industry seems to be showing some signs of economic decline, with new car registrations slowing
in recent years.
It has also been shown, however, that some of the UK motor industry has been growing in
volume and sales, such as the used car market.
A logical deduction to make from this data would be that businesses are yielding at least average
profit margins. Even if the economy and the sector are showing signs of slowing now, it would
still be expected that in the years of growth previous to 2005, profitability would be healthy. This
is the subject of the next section.
Page 44 of 134
July 2006
4.4
Profitability
The following two figures show that profitability in the sector across the UK is low, and has been
for at least the last five years. In 2004, the average profit of a franchised dealership was just 0.7
per cent. (The AM Top 50 franchised dealers, with profit figures, can be found in Appendix 2).
Figure 19: Franchised dealerships – net profit as a percentage of turnover
9 month national average 2005
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Net p rofit a s a % of tu rn over
Source: Driving Force, Trevor Jones Chartered Accountants, Issue 12, 2005.
The regional dimension to these figures is also significant. Businesses operating in the South
East and London have found it incredibly difficult to make a profit, with many returning a loss.
The Chief Executive of one of the UK’s largest franchised dealer groups has commented that
making a profit in the capital is impossible, and that London is the most expensive places for
motor trading in the world. 55
Northern Ireland is a slight contrast to this, but as the following
graph shows, profitability is still low:
55
Forward Drive. RMSI, Issue 09, April 2006.
Page 45 of 134
July 2006
Figure 20: Net profit as a percentage of turnover (regional figures):
Northern Ireland
Scotland
North West
North East
Midlands and East
South West and Wales
South East
London
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Net p rofit as a % of tu rn over
Source: Driving Force, Trevor Jones Chartered Accountants, Issue 12, 2005.
The figure above shows that firms in Northern Ireland make, on average, 1% of their turnover in
profit. This is similar to the rest of the UK and is generally very low. Not all businesses perform
badly in terms of profit margins, however. The Lookers group, for example, with sites under a
different group name in Northern Ireland, is the eighth largest franchised dealer group, and have
outperformed the rest of the franchised dealer market with its car supermarket model. 56
Generally, however, profits are low, and it has been argued that manufacturers are now trying to
cut costs in the supply chain by concentrating on the dealerships distribution network. One
response to this threat suggested by the Retail Motor Industry Federation is that dealerships need
to send a collective voice to manufacturers, and hence provide through ‘strength in numbers’. 57
Another solution would be for dealerships to consolidate, becoming large enough entities in
themselves to dictate terms to manufacturers. This is the subject of the next section.
56
57
Lookers' qtr 1 results well ahead of expectations. AutoWired, 18 April 2006.
Carmakers eye dealers for profit chop. AutoWired, 09 June, 2006.
Page 46 of 134
July 2006
4.5
Consolidation
There are many reasons why consolidation is taking place in the motor industry. After providing
evidence that consolidation is taking place in the sector, the following section will highlight some
of the main reasons why this is happening. All of the reasons shown will have some implications
for skill requirements.
4.5.1
A downward trend
The number of UK franchised points has decreased overall (despite a slight increase in 2004)
from 2000 to 2005. Even more interestingly, the number of franchise points has almost halved
over the last 30 years, from 10,200 in 1975 to 5,600 in 2005. This however has not had a
significant effect on new car registrations or the car parc.
58
Figure 21: Number of Franchised Sales Outlets
6100
6000
Num ber
5900
5800
5700
5600
5500
5400
2000
2001
2002
2003
2004
2005
Y ear
Source: Sewells, The Automotive Industry Handbook 2005
Consolidation of dealer networks has increased as a result of the growing power of dealer groups
within them. The 1990s saw a large number of acquisitions of dealership sites by other dealers to
form small regional dealer groups with up to five or ten dealerships, and larger national or
regional dealer groups with up to 100 dealerships. In Northern Ireland, the late nineties saw
58
The Automotive Industry Handbook 2005. Sewells, 2005.
Page 47 of 134
July 2006
Lookers purchase Charles Hurst, keeping the name of the dealer because of its prominence in
Northern Ireland. By the end of 1996, Hurst had made its first acquisition, buying Baird Cars in
Belfast for £2.7 million. In 1998, Hurst also acquired Neville Johnston Garages in Belfast, and its
Toyota and Daihatsu dealerships, for £3.3 million. 59
Lookers itself has remained an aggressive player in the consolidation of the motor vehicle sales
market. The acquisition of Hurst put it into seventh position among the top 200 British automobile
sellers. The company's fast-growing automotive component encouraged Lookers to exit other
areas of operations, such as caravan sales and the operation of holiday parks, sold in 1997. 60
The introduction of the Supply of New Cars Order in 2000 and the new Block Exemption
Regulation in 2003 resulted in a further concentration of outlets, with larger dealer groups
acquiring smaller groups as well as individual dealerships. This was a consequence of vehicle
manufacturers reorganising the structure of their dealer networks to accommodate the growing
power and influence of large dealer groups. 61 (The AM Top 50 franchised dealers by turnover
can be found in Appendix 2).
4.6
Reasons for consolidation
4.6.1
Increased bargaining power with manufacturers
It is the stated aim of Pendragon Plc that through business acquisitions, it will ‘build large-scale
relationships with key manufacturers’. 62
One benefit that consolidation may bring to dealerships is to increase the reliance of
manufacturers on large dealer groups. Manufacturers and dealers have differing agendas, and
dealerships, as the previous section on profitability has shown, are currently being placed under
pressure by car manufacturers.
The overproduction of cars means that dealers are being
‘encouraged’ to take on more stock by manufacturers, leading to pre-registration of vehicles
which haven’t actually been sold.
63
Although the resulting reduced car prices are favoured by consumers, there is financial pressure
being placed on dealers (e.g. stock holding and debt costs as well as lower margins). Many may
Lookers Plc. From www.referenceforbusiness.com
Featured in Gala expected to top private firms league. The Scotsman, July 2006.
The UK Car Body Repair Market 2005. MFBI (A division of Trend Tracker Limited), Report reference 143, 2005.
62
Acquisition of Reg Vardy PLC. News, Pendragon Plc, 2006.
63
Consolidation and the rise of the east. Business Money, April 2006.
59
60
61
Page 48 of 134
July 2006
choose to sell, and thus consolidation arises. If consolidation results in more franchises being
controlled by one large dealer group, manufacturers will be increasingly dependent on that dealer
group, rather than the other way round. 64
If dealerships are better placed to set their own agendas, the industry may see a move away from
manufacturers forcing dealerships to act in a certain way. Thus, business activities may become
broader, and skills requirements more diverse.
4.6.2
Increased drive for market share
The previous section showed that profits in the sector are generally low.
Another way that
companies can seek to change this situation is through increasing their overall share of the UK
market.
Only recently, the UK’s largest franchised dealer group, Pendragon Plc, agreed to
acquire Reg Vardy Plc, at that time the UK’s third largest franchised dealership. Pendragon hope
that the agreed acquisition will enable them to grow with their selected manufacturers.
remains the ambition of Pendragon to hit a double figure market share.
66
65
It
It is also likely that
other major franchised dealer groups will be seeking takeover opportunities.
It has already been shown that businesses in the sector are struggling to make a profit. Recent
evidence has shown that it is not only small-scale dealerships that are struggling. Lookers’ 2005
figures, for example, show that from a turnover of £1.23bn, the company made only £16.4m profit
before tax, figures that would be ‘unacceptable in most industries’ but are seen as perfectly
adequate in automotive terms. They have thus become a takeover target. 67
This aim for consolidation is possibly fuelled in part by what has happened in other areas of retail
such as the food industry. The rise of Tesco and Asda, for example, can be used to assess the
likely impact on car retailing. Small dealer groups are similar to corner shops, and these smaller
dealerships will continue to decline in number with the continued growth of leading franchised car
dealership groups. 68
This activity will almost certainly have implications for skills and training demand. As companies
get bigger, economies of scale are utilised, and labour requirements reduce. Thus, the demand
for skills and training may decrease, although the reduction in staffing could also lead to
Ibid.
Acquisition of Reg Vardy PLC, Pendragon Plc, 2006.
Dealer Consolidation - When size matters for the watchdogs. The IMI Magazine, 2006.
67
Consolidation and the rise of the east. Business Money, April 2006
68
64
65
66
Page 49 of 134
July 2006
increased needs for multi-skilling. On the other hand, the more that economies-of-scale are
utilised, the more profitable a business may be.
The available resources for training and
development may therefore be greater.
4.6.3
Investment in physical capital
The demands for investment in physical capital may have two effects. In the first place, the
requirement to spend on refurbishments to premises, for example, may force some companies
out of business. Alternatively, the bigger companies get, the more they can optimise economies
of scale, and begin to reduce investments in physical capital.
The cost of opening and refurbishing dealerships is high, and with already low profit margins,
available funds for investment in training become low. In Northern Ireland, for example, David
Prentice last year opened a new BMW dealership at a cost of £2m.
The above data must be considered in the context of generally low profitability in the sector.
Vehicle manufacturers can demand that a franchised dealership makes refurbishments often
running in hundreds of thousands of pounds. A recent survey of National Franchised Dealers
Association members shows that the average cost of refurbishment implementing manufacturer
standards since 2003 has been £683,071.
69
The chairman of the NFDA commented:
“At a time when dealers have to fight for every sale in return for average profits of just 0.5
per cent, every penny counts. If these standards do not help to shift more stock, it is
difficult to justify the “investment” dealers are required to make in implementing them.” 70
With average profits of 0.5 per cent, and high costs of refurbishment detailed above, it is easy to
deduce that training budgets will be small if existent at all.
This obviously has serious
implications for future skills demand – many businesses may decide that operating in the industry
in unviable, possibly reducing the pool of available labour.
4.6.4
Increasing cost of land
The increasing cost of land is a problem for many car dealerships. However, the problem may
not be as bad in Northern Ireland as it is in other areas of the UK. High prices in London and the
69
70
RMIF car dealer attitude survey says manufacturer standards cost too much. Auto Industry, April 2006.
Dealers Wave White Flag On Manufactuer Standards. RMIF, 2006.
Page 50 of 134
July 2006
South East of England, for example, has also led many businesses to consider leaving the motor
trade altogether.
London is obviously more expensive than any other region, with values in the capital averaging
about £2m per acre. The South East is also expensive, with land at around £1.2m per acre. This
situation is forcing dealers to reconsider trading within the M25. Indeed, HR Owen is selling
some of its sites, while Capital Chrysler has lost all of its presence in the capital. 71
Demand for land to be used for alternative means is also putting pressure on land values, with
values in the West Midlands just under £1m per acre. This is compared to the South West of
England and Scotland, where land values are just over £300,000 per acre.
One independent dealer has made the following comment:
I can work for 60 hours a week and make a six figure loss this year, or I could sell the site
for flats for £6m. Why am I even thinking about it?
72
A recent study has shown that there is a growing trend among freehold-owning dealers based in
the south east to sell their sites and exit the industry altogether. The high value of land has led
many dealers to sell their sites for redevelopment. 73 This gives other companies opportunities to
buy these businesses and thus increase their own market share.
It is unlikely that small independent dealers, such as those run by families, will want to compete
when they are up against much bigger businesses. Pendragon, the UK’s largest franchised
dealer group, recently set up a joint-venture property business with Royal Bank of Scotland,
through which it raised £98m through a sale and lease-back of 34 of its 250 sites. Lookers has
also stated that new car sales are not where it makes its money.
74
However, Sytner, another
franchised dealer group, has argued that it intends to focus on selling and servicing cars only, not
wishing to make money from buying property. 75
4.6.5
Summary
Consolidation is taking place in part because large businesses wish to increase market share and
profitability by taking advantage of economies of scale. This dynamic is also fuelled by the
Rising land values and rent costs hit retailers. AM Online, December 2005.
Forward Drive. RMSI, Issue 09, April 2006
Dealer profitability slumps to record low. Motor Trader, 20 March 2006.
74
Ibid.
75
Ibid.
71
72
73
Page 51 of 134
July 2006
difficulties experienced by small businesses to make reasonable profits due to pressures to invest
capital and the temptation to sell land at high prices. There are, however, other drivers affecting
the sector, and other reasons why profitability may be low. These will now be discussed.
4.7
Drivers of business competitiveness
This section considers the factors affecting productivity and profitability and the demand for goods
and services in the sector.
It will start, however, with a brief summary of the productivity
performance of the sector.
4.7.1
Productivity
In general, the economic performance of the UK in terms of economic growth, has, in the last 20
years, been weak compared to the USA. However, compared to the EU as a whole it has been
strong, securing real increases in GDP above the EU average throughout the last 20 years. 76
However, this superior performance has been entirely due to the UK achieving more rapid
employment growth compared to other EU countries.
The difference is not accounted for by productivity growth. Productivity performance in the UK
has been weak. 77 Northern Ireland has a greater GDP per head of population than only North
East England and Wales of all UK regions. 78
It should be noted at the beginning of this section however that productivity in vehicle
maintenance and repair across the UK is strong compared to European comparator countries.
The SSDA Research Report No. 6 has found that the vehicle maintenance and repair sector
performs strongly when compared to the European Union 15 group of countries. Indeed, the
sector is in the top 5 of the 15 for productivity performance. 79
It is with this background that the next sections look at drivers of business competitiveness.
76
EUError! Bookmark not defined. Productivity and Competitiveness: an industry perspective. O’Mahoney and van Ark 2003,
quoted in The UK Skills and Productivity Agenda: The Evidence Base for the SSDA’s Strategic Plan 2005-2008. Campbell, M and
Garrett, R, SSDA Research Report 6, 2004.
77
The UK Skills and Productivity Agenda: The Evidence Base for the SSDA’s Strategic Plan 2005-2008. Campbell, M and Garrett, R,
SSDA Research Report 6, 2004.
78
Regional GDP per capita in the EU25. Eurostat, 25 January 2005.
79
Ibid.
Page 52 of 134
July 2006
4.7.2
Patterns of consumer demand
The changing volume and pattern of consumer demand will almost certainly impact upon the
requirement of skills in the sector, whether this is a positive or negative impact.
The section above highlighted evidence from the Northern Ireland Statistics and Research
Agency showing that access to credit in Northern Ireland was widespread.
It must be
remembered that in Northern Ireland, about 1 in 5 people are considered to be ‘over-indebted’. 80
The effect that this could have on consumer demand is significant. Indeed, one industry figure
has argued that a high level of credit card debt has left consumer confidence low. It is suggested
that as people try to repay these debts, disposable income will be less, and thus buying a new car
less of a priority. 81
The same article argues that high fuel prices are also putting people off investing in new and
used cars. This pattern would suggest that the demand for vehicle servicing and repair may
begin to decline as new and used car sales fall.
Recent evidence would indicate however that there is a growing consumer demand for used cars,
as residual values remain high. Indeed, the improving value of residual values of used cars is
down to increasing consumer demand.
82
Values continue to be strong for diesel, small and
family cars. There may therefore be skills and training needs as businesses try and adapt to
these trends.
The following factors will also have significant effects on patterns of consumer demand.
4.7.3
Government policy
Government policy can drive consumer demand and business behaviour, and thus the direction of
the sector. The skills and training needs of the workforce could also be affected in many ways. A
few examples have been selected.
Personal Over-indebtedness in Northern Ireland. NISRA 2006.
Dealers hit by troubled consumer finances. AM Online, May 2006.
82
Better used car demand cuts rates of depreciation. AutoWired, October 2005.
80
81
Page 53 of 134
July 2006
4.7.3.1
Super Complaint – National Consumers Council
Under Section 11 of the Enterprise Act 2002 (EA 2002), consumer bodies designated by the
Secretary of State for Trade and Industry are able to submit “super-complaints” to the Office of
Fair Trading where they consider that there is ‘any market feature, or combination of features,
such as the structure of a market or the conduct of those operating within it, that is or appears to
be significantly harming the interests of consumers’. 83
This complaint has now been delayed, as the NCC has recognised the significant investment in
skills based initiatives taking place in the sector across the UK.
However, the NCC has
highlighted a range of areas that it would like to see improved, and thus the super-complaint is
still a real threat to the sector. 84 Any form of quality standard would have significant implications
for skills and training requirements.
4.7.3.2
Green schemes
Government policy could also affect the demand for skills through legislation on vehicle
emissions. For example, Band A vehicles (those that release under 100 g/km per kilometre)
currently incur no tax costs at all. 85
There are also examples of manufacturers manufacturing ‘green cars’ despite any government
legislation being in place such as a low carbon grants scheme (now discontinued). For example;
Honda has said it will build these cars regardless of government pressure and Honda has said
that they will continue to develop “today's hybrid technology, and tomorrow's fuel cell vehicles”. 86
In Northern Ireland, the push for environmental sensitivity is already taking place. In February of
this year, a £59m Environment and Renewable Energy funding package was put in place that will
assist a wide range of renewable energy initiatives, including many at household level as well as
larger scale developments. The Secretary of State has commented that the vision for the whole
of Northern Ireland is that it should be ‘a model for green energy’.
83
84
Super-complaints Fact Sheet, the Department for Trade and Industry, 2005.
Automotive Skills will continue to promote skills - based initiatives to help ensure the industry avoids a ‘Super Complaint’. Press
release from Automotive Skills, March 2006.
85
86
The 2006 Budget Changes to Cost of Vehicle Tax, the DVLA 2006.
Grant-less green cars difficult concept to sell. AutoWired, June 2006.
Page 54 of 134
July 2006
4.7.3.3
Employee-related legislation
The government can also impact upon businesses through legislation affecting employment.
For instance, discussions are currently taking place to consider statutory paternity leave of six
months.
It is argued by the RMIF, for example, that “such a move would add yet another layer
of cost and bureaucracy to the administrative burden which small and medium sized businesses
already shoulder”.
87
Further, it has been suggested that the proposals could threaten the future
prosperity of many small and medium sized businesses, potentially adding “considerable costs in
terms of recruitment, training and loss of productivity.”
4.7.4
Technological change
There are two ways in which technological change can affect the skills needs of motor retail
businesses. One way is how able personnel are to adapt to changes in technology such as I.T.
hardware and software. The second way is how technological advances affect the manufacture
of motor vehicles themselves, and thus the requirements for maintenance and repair.
These
create two key groups of skills needs; high-level problem solving skills and technical diagnostic
skills to cope with very complex vehicle systems (e.g. adaptive suspensions, telematics, DSC,
ABS, ECUs, etc.).
4.7.4.1
Information and Communications Technology
The first of these problems has been highlighted by a report which shows how ageing IT
hardware is having detrimental effects on dealer performance.
88
It is argued that old computers
are leaving dealers struggling to make the most out of any investment they make in new software.
Dealer management system specialist Pinewood reports that IT hardware in many dealerships is
so out of date that it is of “little more than ‘junk’ value”. The Pinewood research covered 1,040
dealers using its own and other Dealer Management Systems (DMS). Problems with IT were
identified in at least 58% of the dealers surveyed. The problem of having outdated hardware
takes two forms:
87
88
•
It is being used in conjunction with old software.
•
investment in software has been made but not hardware
6-months paternity leave will be too costly. AutoWired, October 2005.
Old computers leave dealers struggling to make the most of their software investment. Pinewood Research, on
www.pinewood.co.uk, 11/04/2006.
Page 55 of 134
July 2006
In the first instance, technology will simply be very out of date, probably holding back the
business, with the whole system liable to “break down regularly”. The situation highlighted in the
second bullet is sometimes workable, but more often the old computers ‘clip the wings’ of the new
Dealer Management Systems (DMS).
The research conducted by Pinewood has found that the average age of the core software
behind the dealer management systems being used in franchised dealerships was more than 10
years old. It argues that this statistic puts the dealer sector ‘firmly in the dark ages in IT terms,
and years behind the software technology used in other retail industries’.
89
This has implications for other integrated IT systems, such as computer diagnostics for which
highly skilled technicians are required.
From 2006 MOT testing (regulated by VOSA) is now
entirely computerised, replacing the old manual certificate system and this too has created IT and
related skills difficulties for MOT testing stations.
4.7.4.2
Use of the internet
This IT problem does not seem to have adversely affected how franchised dealers use the
internet.
Indeed, franchised dealers are very likely to carry out business on the internet,
according to research carried out exclusively for Motor Trader.
90
The Franchise Barometer has found that 96% of retailers have their own website to promote
sales and services. Opinion is divided however over how the internet will be used over the next
five years. Just over half (57%) of traders believe it is set to expand and become a major part of
the business activity, whilst 39% believe that it will not grow enough to make a significant impact.
4.7.4.3
Advancement in vehicle technology
Advancement in vehicle technology will mean that there is a requirement for skills in the motor
industry workforce that do not currently exist.
For example, the SMMT Foresight Vehicle
suggests that in the next 10-20 years, the following developments could be fostered into vehicle
production:
91
•
zero failure electronics with self-monitoring circuits and active intervention
•
switches that do not have to be pressed but respond to finger pointing
Ibid.
Franchised dealers embrace technology. MotorTrader, 21 Apr 2005.
91
Britain’s Automotive Industry Leads the World. Carsource, 2006.
89
90
Page 56 of 134
July 2006
•
sleep/drowsiness monitoring
•
on-board computers that predict vehicle and pedestrian movements and automatically
trigger the car to respond to an emergency
•
real conversation voice control
Although manufacturing developments are not the subject of this report, the significance of this is
that all of these developments will require the maintenance and repair and fault diagnosis of
advanced electronics. Any technological developments in vehicle manufacture will possibly feed
through to the maintenance and repair sector.
4.7.5
Globalisation
Although the automotive industry as a whole is highly globalised, the activities downstream of the
factory gate are focused almost entirely on the domestic market.
Only a tiny proportion of
enterprises in the footprint have any operational reach outside the UK and those are mainly
involved in sourcing vehicles and parts.
However, ownership of UK retail operations is far more international, even if managed in the UK.
Of the AM100 (AM magazine, June 2006), 7 retail groups are owned by foreign vehicle
manufacturers with a combined turnover of £3.7bn accounting for just over 10% of the total
AM100 turnover of £35.6bn.
A number of other AM100 dealer groups are foreign owned
including the third largest, Sytner Group – bought in 2002 by Roger Penske’s United Auto Group
(UAG) of the US – which in the UK has a turnover of £1.8bn, with 105 outlets employing nearly
4,500 staff. UAG has outlets in Germany as well.
In the daily rental sector, many household names are part of major multinationals, for example:
•
US-based Avis Group (including Budget) is owned by Cedant.
•
Hertz was owned by Ford until a private equity consortium bought it in December 2005.
•
Tulsa (Oklahoma)-based Dollar/Thrifty has franchises around the world, including the UK
•
Alamo/National owned by Vanguard Car Rental is curiously also based in Tulsa with a
significant presence in the UK
•
Europcar became a wholly-owned subsidiary of Volkswagen in 1999 until being acquired
by European venture capitalists Eurazeo in 2006.
Page 57 of 134
July 2006
The Block Exemption regulation could have some impact on how some businesses in the sector
work across different countries.
The location clause of the European Commission’s Block Exemption Regulation 92 essentially
prevents dealers from expanding outside their own territories. However, from October 2005, any
dealer wishing to sell passenger cars and commercial vehicles will be able to set up secondary
sales and delivery outlets anywhere within the EU, Norway, Iceland and Liechtenstein. This
should significantly strengthen competition between dealers across the Single Market. 93
Fleet management providers will probably benefit, as they will have the opportunity to supply their
international clients on a pan-European basis more easily. A recent article has argued that a
large number of multinational users want European contracts, due to the savings they can
secure. Fleet managers in countries where the use of company cars is widespread could benefit
most of all. 94
The Enterprise Minister in Northern Ireland recognises the importance of competing in a global
economy:
"Whilst much economic progress has been made in the last decade, Northern Ireland still
faces a number of challenges as we look to the future. In particular, increased
globalisation offers both opportunities and challenges. Productivity and economic activity
levels must rise if Northern Ireland is to achieve and sustain international
competitiveness."
95
It will be important that managers in all parts of the sector respond to these opportunities and
challenges positively.
The implications for skills needs could be significant in terms of
management and leadership.
4.7.6
Innovation
According to the OECD, across a range of conventional indicators, innovation performance in the
UK is mediocre in comparison with the best performing OECD countries.
96
In Northern Ireland,
official data shows that productivity of firms in the region is also relatively mediocre, with 56
92
93
94
95
96
For more on the BERError! Bookmark not defined., see section 4.7.
Block exemption for cars fact-sheet. The Department for Trade and Industry, 2006.
Abolition of location clause under block exemption regulation draws near. Pricewaterhouse- Coopers LLP, 2005.
Working to improve Northern Ireland’s economic performance. The Department for Enterprise, Trade and Investment, 2005.
The Economic Survey of the United Kingdom 2005. OECD, 2005.
Page 58 of 134
July 2006
percent of firms in Northern Ireland ‘innovation active’, compared to the UK’s 57%. Businesses in
the region are more likely than others in the UK to be innovators of processes as opposed to
products, which could have implications for the maintenance and repair of motor vehicles. 97
When looking at barriers to business innovation, Northern Irish evidence suggests that cost is one
of the biggest factors. This is significant given that profitability in the retail motor sector is low.
With little income to spare, businesses are highly likely to cut innovation budgets. It is highly
unlikely also that businesses will be able to afford both budgets for training and innovation.
Indeed, ‘Wholesale and retail trade, repair of motor vehicles, motorcycles and personal and
household goods’ was the category of business least likely to be innovating in Northern Ireland. 98
Continuing at the sector level, one analyst has said that the UK automotive industry needs to
redefine its role to ensure that it has a healthy future in what is ‘a rapidly evolving global industry’.
Much of the literature centres on innovation in vehicle manufacturing, which is not of primary
concern in this report.
However, it has been argued previously that innovations in vehicle
manufacture will possibly have implications further down the line in terms of vehicle maintenance
and repair.
In this regard, it is argued that Britain cannot just concentrate on value-added products if it is to
survive the competition from Eastern Europe and the Far East. Suggestions include the UK
selling prestige brands where price pressures are less intense and also in niche markets where
the country could ‘harness its design and development expertise’.
99
If this advice was heeded,
future innovation in vehicle manufacturing would possibly lead to greater demand for these types
of car and thus new markets in new and used car sales. As suggested above, any innovations in
car design will have a direct impact upon the skills needed for vehicle maintenance and repair.
4.7.7
Competition
4.7.7.1
Customer satisfaction and retention
The presence of well-trained, responsive staff is a key factor in ensuring that customers feel they
have received the service to which they are entitled. The importance of customer facing skills
and the impact they have on business competitiveness cannot be underestimated.
UK Innovation Survey 2005: Northern Ireland Results. May 2006.
Ibid.
99
Engines, prestige and niche models is way forward. AutoWired, June 2006.
97
98
Page 59 of 134
July 2006
From a number of reports and data sources based upon mystery shopping research, there is
evidence of poor customer service throughout the sector.
It is argued that ‘a significant
proportion of the industry is responsible for delivering poor standards.’ 100
Recent qualitative research undertaken for Automotive Skills has suggested that good customer
relationships and service are essential if businesses are to remain productive and profitable. 101
Good relations with clients will make the following more likely:
1. Repeat business
2. Recommendation to others (good word-of-mouth)
3. More efficient and cost effective to retain existing customers
4. Improved profitability
This is summed up by one employer:
“…a small dealership…has managed to survive every iteration of dealer agreements,
restructuring of franchises, block exemption and so on and so forth. Why? Because [x] is
up first thing in the morning greeting his customers at service, he’s handing the vehicles
over to them when they buy a new car, and despite all that he still manages to sell 150 cars
a year. It’s [about] excellence in terms of meeting his customers needs and experience.”
The previous quote suggests that it is softer skills that are needed, but are often the ones that are
not employed.
The following points were also suggested by employers as ways in which
dealerships and other businesses within the sector can gain an advantage in competition:
•
It is attention to detail rather than staff numbers that makes the difference.
•
Looking at other retail sectors, lessons can be learned about customer experience (e.g.
Dell).
•
The fragmented nature of the sector with departmental silos makes consistency of
experience more difficult – but this must still be strived for.
•
Many customers do not appreciate the value of routine servicing – that’s a failure of
communication by the sector, and must be improved.
100
101
From a speech by Steve Brooker. National Consumer Council.
Automotiveate Live. Automotive Skills focus group of emolyers, 2005.
Page 60 of 134
July 2006
Another way businesses compete in the industry is through the use of reward schemes.
However, employers have suggested that these schemes concentrate too much on volume rather
than customer care. Thus, productivity per se is not the important factor. Rather, it is quality as
well as quantity that is important. Through offering a quality service, businesses will aim to
increase their client base. Productivity will then become as issue. This is supported by the
following comment:
“I think that we have got to think about the perspective that comes from a £15k
experience, not from the gross profit of the car, or from the point of view of the sales man
getting £30 commission. If someone walked into M&S with £15k to spend you would have
everyone running around and falling over themselves.”
In this regard, Kia UK Dealers are to be monitored on how well they are performing in terms of
customer satisfaction and service. The following quote is from the customer support & service
development manager of KIA Motors (UK) Ltd:
"Customer satisfaction and retention is central to our growth and absolutely vital for the
long term sustainability and profitability of our dealer network. Finding-out what our
customers really think of the service they receive from our sales and after-sales operation
helps us to shape our future business strategy and dealer training and will ultimately allow
us to achieve our ambitious targets."
102
Kia are not doing this in isolation, as 34% of employers in the Automotive Skills Needs Survey
2005 said they have a formal measure for customer satisfaction. This figure increases to 46% in
Northern Ireland but drops to 22% in Scotland.
Employers who took part in the qualitative
research made a connection between staff being ‘fit for purpose’ and whether or not they were
able to deliver the required output and maintain customer satisfaction.
The following statement from the Automotive Skills Needs Survey 2005 makes the link more
forcefully:
“We spend a lot of time at branch level making sure the training is right and making sure
they’re competent in what they’re selling, because if they’re not competent it comes
102
Kia dealers to get honest appraisal of performance. AutoWired, May 2006.
Page 61 of 134
July 2006
across to the customer, and they will go somewhere else. We can’t afford to be losing
customers like that.”
This comment highlights the need for businesses in the sector to make sure that their staff
receive adequate training in these ‘softer skills’.
4.7.8
Enterprise
It is crucial to the improvement of productivity that entrepreneurship is encouraged within an
economy, and that government supports people who take opportunities and risk.
A strong
entrepreneurial base is a driver of growth and prosperity in an economy. It has recently been
argued that new and more dynamic businesses increase competitive pressures in markets and
facilitate the introduction of new ideas, technologies and more efficient working practices.
103
In Northern Ireland, the ‘Accelerating Entrepreneurship Strategy’ was launched in 2003, and
Invest Northern Ireland sponsored the Global Entrepreneurship Monitor (GEM) UK project. This
was part of its commitment to try and understand the levels and types of entrepreneurial activity
in Northern Ireland. Latest data available shows that Total Entrepreneurial Activity (TEA) in
Northern Ireland has increased from 3.6% in 2002 to 5.3% in 2003. However, it still ranks among
one of the lowest of the UK regions (10th). Some 83% of all entrepreneurial activity in Northern
Ireland is to take advantage of opportunities that are available. The rise in TEA in Northern
Ireland between 2002 and 2003 is accounted for almost entirely by the increase in opportunity
entrepreneurship.
104
Further, the subgroup formed to concentrate specifically on the economic challenges facing
Northern Ireland has argued that there is a need to ‘harness the potential of the public sector’ in
order to stimulate entrepreneurship. For public-sector employees, entrepreneurship training and
basic
business
entrepreneurship.
skills
may
help
to
improve
policy
development
and
encourage
105
The previous data presented indicated that many businesses were deciding to leave the motor
industry because of low profitability, in part due to the requirements to invest significantly in
physical capital. This may also be a barrier to others entering the industry.
103
104
105
Enterprise and Innovation, HM Treasury, 2006.
GEM UK regional summary Northern Ireland 2003. Invest northern Ireland.
Subgroup On The Economic Challenges Facing Northern Ireland. August 2006.
Page 62 of 134
July 2006
As profits in the sector fall, more may need to be done to encourage more entrepreneurs to take
risks in the industry. There may also be a need for current managers to be trained to a higher
standard in order that they may be better placed to make strategic business decisions.
4.8
Competitive Position – Block Exemption Regulation
The analysis so far has shown that UK franchised dealers are selling more vehicles per outlet
than their European counterparts. This section will briefly consider how, if at all, changes to the
Block Exemption Regulation (BER) will affect competition between countries of the European
Union.
4.8.1
Block exemption regulation
The Supply of New Cars Order 2000 was introduced following the Competition Commission (CC)
monopoly inquiry into the supply of new cars. The CC found that private car buyers in the UK
were paying about 10% too much for the average car, taking account of discounts, trade-ins and
finance deals
106.
The Block Exemption Regulation exempts the distribution, sale, maintenance,
repair and other related after-sales activities associated with passenger cars from European
Commission competition rules.
The BER enables car manufacturer national sales organisations to create networks of ‘selective’
or ‘exclusive’ dealership networks:
•
Dealers are now able to operate in different areas and EU countries
•
Sales/after-sales activities for different franchises are allowed from the same premises
with fewer restrictions.
•
Non-franchised dealers and brokers will be better able to compete
•
Greater servicing and repair market competition
•
Lower costs
•
After-sales activities can be carried out by any retailers (whether franchised or not)
provided the retailer abides by manufacturer-approved standards
•
Independent retailers/suppliers will have access to necessary technical information,
including diagnostic equipment and software.
106
Block exemption for cars fact-sheet. The Department for Trade and Industry, 2006.
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July 2006
There was also a location clause of the BER which essentially prevented dealers from expanding
outside their territories. From October last year, however, any dealer wishing to sell passenger
cars and commercial vehicles and who meet the manufacturers standards will be able to set up
secondary sales and delivery outlets anywhere within the EU, Norway, Iceland and Liechtenstein.
It has been argued that those with the most to gain are large dealers and multinational fleet
providers, with already pronounced national variations. Franchised dealers sold an average of
444 new cars per outlet last year, reflecting the fact the market has already consolidated. In
Europe's other markets, the figures were lower, with 330 in Italy, 236 in Spain, 173 in Germany
and 158 in France. It was also lower still in most of the other countries to which the regulation
applies suggesting that ‘dealers are in a better position than continental counterparts to exploit
the scrapping of the clause.’
107
Evidence would suggest however that the lifting of the clause has made little difference so far. As
this report noted earlier, profits in the sector are low. It is therefore a risky strategy to move into
the area of another dealer to compete ‘head-to-head’. Many will choose to do this on the internet,
which is a far more cost effective approach. 108
4.9
Training issues
This section has so far looked at the drivers of change impacting upon the motor industry within
Northern Ireland, and how businesses within the sector may need to respond to these changes.
This section will look at the current training practice of businesses. From this, it will be possible to
assess how well-placed businesses are to respond to demands for new skill sets.
4.9.1
Incidence of training
The following figure shows the proportion of establishments that have provided training for
employees in the preceding 12 months to when the survey fieldwork was carried out:
107
108
Abolition of location clause under block exemption regulation draws near. Pricewaterhouse- Coopers LLP, 2005.
Location Clause is no more. Did the earth move for anyone? AM Online, October 2005.
Page 64 of 134
July 2006
Figure 22: Proportion of establishments funded or arranged off-the-job
Training in last 12 months?
Automotive Skills NI
Whole NI Economy
Yes
30%
42%
No
70%
58%
Total
100%
100%
Northern Ireland Skills Monitoring Survey 2002
The high proportion of those that haven’t provided training in this time period is not altogether
dissimilar to the figure for all sectors of the UK economy. However, it shows that the majority of
employers and employees in the sector have not trained during the last 12 month. This is a
function of the fact that many businesses are returning slim profits, with training budgets being cut
drastically.
4.9.2
Possible reasons for low take-up of training
Qualitative feedback to the Automotive Skills Needs Survey 2005 also shows that the cost of
training is a particularly important issue for the sector. One employer put it this way:
“The reality is that the emphasis is on putting money towards the commercial activity and
the training side being self-funded but that money has to come from somewhere and that’s
coming out of dealers' margin and profitability which is tiny.”
Perhaps more importantly, there is a significant opportunity cost, which means small businesses
are at a disadvantage as they can ill afford to lose staff for training days:
“It’s a time issue really you know they have to really do it on their own time and if you’re
sending someone away from the branch you know it can be quite costly.”
To summarise, evidence from the qualitative research shows that the following issues are
impacting upon the sector’s businesses:
•
Location of training. One employer identified training at a distance of 500 miles away this
would demand three days away from work, considering travelling etc.
•
There is a perception of a poor training offer by the Further Education sector and private
providers.
Page 65 of 134
July 2006
•
There is a lack of available training.
•
There is a preference for 'on-the-job' training.
•
Some employers have difficulty in affording training and experience difficulty in releasing
staff for training. This applies particularly to micro businesses.
•
The spread of businesses throughout the UK and devolved administrations means that
available centralised training facilities are not always accessible to all.
The data suggests that the sector is not really in a position to respond to changes in the skill sets
that might be needed as the drivers of change impact upon the sector.
4.10
Summary
This section has shown that consumer spending and thus demand in the UK economy is currently
slowing. It has also shown a small slowdown in the demand for new cars. There is, however,
evidence of rising demand and value of trade in other parts of the sector.
It has been evidenced that profits in the sector are very low, with industry consolidation taking
place across the UK, specifically in the industry of franchised dealerships. It has been shown that
productivity is relatively high compared to comparator EU countries, but that demands for high
capital investment (in buildings and refurbishment) have seen many businesses leave the sector.
Other businesses are now generating income from other means, such as property utilisation. The
section has also looked at other drivers of business competitiveness, such as technological
change and the effects of government policy.
The report will now go on to look at what skills employers feel they need both currently and in the
future.
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July 2006
5 Current Skills Needs
Having looked at the drivers of business competitiveness in the last section of this report, this
section will now assess the current skills needs of sector businesses in Northern Ireland. It will
start by presenting a brief occupational profile of the sector. It will then go on to assess the skill
needs of the sector, first with reference to skill gaps, and then with reference to skill shortages.
Skill needs giving rise to both skill gaps and shortages will then be assessed. To finish, the
section will look at some issues concerning recruitment and retention, including the rural and
urban dynamic.
5.1
Occupational profile of the sector
It is useful to keep in mind the occupation profile of the sector across the UK before discussing
current and future skills needs in Northern Ireland. This will help to keep perspective when
discussing particular occupational roles.
Figure 23, prepared using data from the 2004-05 Labour Force Survey, shows how employment
in the sector is distributed across the standard occupational groups. Data specific to Northern
Ireland is not available. It highlights the huge importance of skills trade occupations, including
technical skills. It also shows the relative importance of managers and customer service officials
in terms of volume compared to other occupations. It is important to keep this in mind when skill
gaps and shortages are discussed in the next sections.
Page 67 of 134
July 2006
Figure 23: Occupational profile of UK workforce 109
Managers and senior officials
Professional
Associate professional and technical
Administrative and secretarial
Skilled trades
Personal service
Sales and customer service
Process, plant and machine operatives
Elementary
0%
5%
10%
15%
20%
25%
30%
35%
40%
P roportion of workforce
Automotive
All Sectors
Source: Labour Force Survey 4 quarter average (2004q1 – 2005q2). Office
for National Statistics
5.2
Skill Gaps
Skill gaps occur when the existing workforce of a business does not have the skills required in
order to be fully proficient. The extent of these gaps in the sector can be seen from the latest
Northern Irish survey data.
Figure 24 shows some data on skill gaps within the motor industry compared to other sectors of
the economy.
109
Labour Force Survey 4 quarter average (2004q1 – 2005q2). Office for National Statistics.
Page 68 of 134
July 2006
5.2.1
Evidence of skill gaps
Figure 24 shows the number of establishments in the sector in Northern Ireland who reported
having internal skill gaps in 2002:
Figure 24: Proportion of establishments reporting internal skill gaps
14
% of establishments
12
10
8
6
4
2
0
Automotive
All sectors
Source: Northern Ireland Skills Monitoring Survey 2002. Base: All establishments.
The figure shows the proportion of establishments that have skill gaps. The numbers are very
similar to those for the economy as a whole.
Figure 25 shows skill gaps as a proportion of employment. Although the proportion of
establishments with skill gaps is lower in the automotive sector than other sectors, the proportion
of total employment with skill gaps is higher.
Page 69 of 134
July 2006
Figure 25: Skills gaps as a proportion of employment 110
Proportion of employment (%)
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
Automotive
All sectors
Source: Northern Ireland Skills Monitoring Survey 2002. Base: All establishments
Figure 26 shows that within the sector in Northern Ireland, many of the skill gaps lie in the
management occupations, not unlike the rest of the economy. It also shows that there is a
significant difference in “craft” occupations between the automotive sector and the economy as a
whole. This may not be surprising given the high numbers in this occupational category as
illustrated earlier in this section. A lack of management skills may contribute to the impacts of
these skill gaps. Indeed, it was shown earlier that management skills are a good example of
where a skills gap exists in the sector. This subject is the focus of the next section.
110
Northern Ireland Skills Monitoring Survey 2002.
Page 70 of 134
July 2006
Figure 26: Occupational pattern of skill gaps 111
30%
25%
20%
skills
15%
10%
5%
Other occupations
Plant and machine operatives
Sales occupations
Personal and protective services
Other sectors
Craft and related occupations
Automotive
Clerical and secretarial
Technical Occupations
Associate Professional and
Professional Occupations
0%
Managers and administrators
% of establishm ents with skill gaps
35%
Source: Northern Ireland Skills Monitoring Survey 2002. Base: All establishments with skill gaps
5.2.2
Management Skills
It has been noted before in this report that across the UK, there are a low number of managers
that are qualified to NVQ Level 4. Figure 9 of this report shows that only 14% of managers
operating in the sale and maintenance of motor vehicles are qualified to this level, compared to
39% across all sectors of the economy.
Also significant is the number of managers in the sector without any qualifications. A recent
report has shown that the proportion of managers in the sector without any qualifications is 16%,
the third lowest of any sector across the economy.
111
112
112
Ibid.
Sectoral Management Priorities: Management Skills and Capacity. Research report prepared for the Sector Skills Development
Agency by the Institute for Employment Research, January 2005.
Page 71 of 134
July 2006
Whilst it is important that managers have a good understanding of technical issues where
relevant, the importance of good management to business performance has been highlighted by
employers in the sector through qualitative focus group events 113. Employers argued that good
management and leadership is the key factor in delivering change to the sector.
As one
employer has put it:
“…putting a good manager into a poorly performing place with the right procedures can
really pay off…”
The research further concluded that managers:
•
need skills improvement and training as much as technicians do
•
are under too much short-term pressure and are not sufficiently trained to manage the
way they need to
•
are from sales or finance backgrounds, meaning that there needs to be career
progression for those from other disciplines
This sentiment is also confirmed by the Automotive Skills Employer Validation Survey. Managers
who operate in the sector were asked to state whether they definitely agreed, tended to agree,
tended to disagree or definitely disagreed with the statement that managers in the sector will
need to have far better leadership skills if business performance is to improve. Just under three
quarters (73%) said that they definitely agreed.
114
This issue is absolutely fundamental to the future of the downstream motor industry.
5.3
Vacancies and Skill Shortages
Skills shortages occur when companies cannot fill vacancies within the business because of a
lack of candidates with the required level of skills. A special focus in this section will be on basic
and employability skills, particularly in the realm of young recruits.
113
The data presented here is from ‘Automotivate Live’, a focus group of employers organised by Automotive Skills, using employers
taken from all sub-sectors of the Automotive Skills footprint.
114
Automotive Skills Employer Validation Surve. Automotive Skills, 2005.
Page 72 of 134
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5.3.1
Evidence of Vacancies and Skill Shortages
The following data will first show how many vacancies occur across the sector in Northern
Ireland. It will then show how many of these vacancies are hard-to-fill. Of all vacancies, the
proportion due to skill shortages will be given.
Figure 27: Vacancies as a percentage of establishments
18
% of establishments
16
14
12
10
8
6
4
2
0
Automotive
All sectors
Source: Northern Ireland Skills Monitoring Survey 2002.
Figure 27 shows a similarity between automotive sector businesses and businesses across all
other sectors of the economy, with the automotive sector fairing slightly better in this statistic.
Data on vacancies that are hard-to-fill are presented in Figure 28. The data here shows again
that the Northern Irish automotive sector is similar to the average for the whole economy.
The reasons why employers have hard-to-fill vacancies differ between different countries.
Although these reasons are not always down to skills, they are nevertheless important when
thinking about the future of the sector.
Page 73 of 134
July 2006
Figure 28: Percentage of establishments reporting hard-to-fill vacancies
12
% of establishments
10
8
6
4
2
0
Automotive
All sectors
Source: Northern Ireland Skills Monitoring Survey 2002.
In England, for example, employers are most likely have to hard to fill vacancies because:
•
There are a low number of applicants with the required skills (38%);
•
There are not enough people interested in doing a job within the sector (34%); and
•
There are a low number of applicants generally (28%).
115
This data highlights important issues and themes which will be addressed later in this report.
Table 29 shows how many hard–to-fill vacancies are due to skill shortages.
Figure 29: Proportion of establishments reporting skill shortage vacancies
Automotive
Other Sectors
4%
4%
Proportion reporting hard-to-fill vacancies
Source: Northern Ireland Skills Monitoring Survey 2002
Figure 30 shows skill shortages as a percentage of employees.
115
National Employer Skills Survey 2004.
Page 74 of 134
July 2006
Figure 30: Skills Shortage vacancies as a % of vacancies
25
% of vacancies
20
15
10
5
0
Automotive
All sectors
Source: Northern Ireland Skills Monitoring Survey 2002
In short, the data shows that just over one in five of all vacancies are down to employers not
being able to find potential employees with the right skills.
Table 31 shows the specific nature of skill shortage vacancies. The data is for England, but is
likely to be indicative of the sector in Northern Ireland.
Again, this table highlights important issues that will be picked up in the next section.
Concentration will now be given to two specific areas of skill shortage:
Employability and life skills
Basic skills
Page 75 of 134
July 2006
Figure 31: Skills found difficult to obtain from applicants for skill shortage vacancies
Automotive(a)
All
Sectors
Technical and practical skills
60%
51%
Problem solving skills
41%
34%
Customer handling skills
33%
39%
Written Communication skills
32%
31%
Oral Communication skills
31%
37%
Team working skills
31%
33%
Literacy skills
29%
28%
Numeracy skills
26%
24%
Management skills
19%
25%
General IT user skills
19%
16%
Office admin skills
18%
17%
IT professional skills
11%
14%
Foreign language skills
8%
11%
Skill
Source: NESS 2005 – data is for England
Note: (a) Bold figures indicate skills areas for the footprint that are higher than those for all sectors
5.3.2
Employability and life skills
Qualitative focus group research has stressed the importance of making sure that the sector does
more to attract a range of young people in the motor industry. Increasing the presence that the
industry has in schools, for example, would be a way to make sure that the industry is appealing
to many young people.
One employer summed this up in the following way:
“…we, as an industry, don’t do nearly enough to promote the industry to schools…and
until we do more of that, we won’t get enough young people into the industry.”
Much of the reason for this drive is because some young recruits to businesses currently lack
general life skills such as:
•
Having the right attitude
Page 76 of 134
July 2006
•
Consistency in quality of work
•
Good motivation
•
Reliability
•
Having a willingness to learn
This finding is confirmed by the Automotive Skills Employer Validation Survey and the statistics
given in this section. National statistics show that in Wales, for example, 30% of businesses
cannot find applicants with the required attitude, motivation or personality. In England, 34% of
businesses have hard-to-fill vacancies because of a low number of applicants generally.
The Automotive Skills Employer Validation Survey has found that 74% of businesses responding
to the survey would definitely agreed that new employees will increasingly need the right attitude
and motivation over and above just the hard, technical skills. Almost 60% questioned definitely
agree that more employees will need to be welcomed from outside the motor industry if it is going
to get all the high-quality recruits it needs.
The importance of employability skills in Northern Ireland has been highlighted in the Skills
Strategy for Northern Ireland: A Programme for Implementation. The Skills Strategy set out the
rationale for putting in place an overarching framework for the development of skills. One of the
types of skills it recognised was employability skills, including the key skills of team working,
problem solving and flexibility. This will now be implemented in the first place over the next three
years.
5.3.3
116
Basic Skills
The Automotive Skills Employer Validation Survey also shows evidence that the basic skills of
young people coming into the sector are sometimes less than adequate. Over half of employers
questioned (56%) definitely agreed that to gain successful entry into the sector, school leavers
will need to have far better literacy, numeracy and life skills than today’s school leavers. A
massive 94% questioned either definitely agree or tend to agree.
116
The Skills Strategy for
Northern Ireland: A Programme for Implementation. 28th February 2006.
Page 77 of 134
July 2006
5.4
Generic Skills Needs – gaps and shortages
Some skills are both hard to find in potential employees as well as lacking within the existing
workforce. Evidence for this is presented in the tables above, where some skills are short in the
existing workforce, as well as difficult to find in potential recruits. A few examples will now be
discussed.
5.4.1
Technical skills
The statistics above show that technical skills are urgently required, both in the existing workforce
and from potential new recruits:
•
a majority of 60% of businesses said that they found technical skills hard to find in
possible new recruits; and
•
just under this amount, 58%, said that technical skills were lacking in the
existing workforce.
This is despite the fact that technical skills have been at the heart of the apprenticeship
programme for many years.
A recent study of businesses operating in the sector across two regions of the United Kingdom
has shed much light on this technical needs discussion
117.
This data is not specific to Northern
Ireland, but is likely to be indicative of the situation in businesses across Northern Ireland. Both
small and large employers were surveyed. In the case of employers with ten or more employees,
they were asked to identify their ‘core group’ of employees.
This was defined as ‘the group of
employees at this establishment - excluding managers - whose skills and knowledge you feel
make the greatest contribution to the success of your business”.
Roughly seven in ten
establishments nominated ‘vehicle trades’ as their core group of employees for the purposes of
answering the survey questions.
Establishments with less than ten employees answered
questions about core groups on behalf of all their employees.
Almost three quarters of vehicle maintenance establishments in Devon and Cornwall questioned
for the research said that the technical and practical skills of their core group of employees
Skill and Training Requirements in the Vehicle Maintenance Industry in Greater Manchester & Devon and Cornwall. Geoff Mason
and Matt Osborne, National Institute of Economic and Social Research, London. Prepared on behalf of Sector Skills Development
Agency and Automotive Skills, October 2004.
117
Page 78 of 134
July 2006
(mainly in vehicle trades) needed improving or upgrading.
The need however was not for
technical skills in isolation – the study shows that 57% of the vehicle maintenance establishments
in Devon and Cornwall actually wanted combinations of both technical and generic skills to be
upgraded. The same study was undertaken in Manchester, and the findings were very similar.
This survey was able to gather information on the specific types of skills that need improving in
more detail than most such surveys.
For example, the technical skill requirements strongly
emphasise new skill needs in diagnostics, electronics and keeping up to date with new
technology. The IT skill requirements range from use of standard programmes to use of new
MOT software and diagnostic equipment.
The Automotive Skills Employer Validation Survey confirms that technical skills are a real
requirement in the sector at present. When asked if ever increasing technology and complexity of
vehicles will result in a considerably increased need for new training and up-skilling, a huge
majority of 89% definitely agreed.
A further 10% tended to agree, with only 1% tending to
disagree.
Further, many employers feel that a requirement to use diagnostic IT equipment will be an
absolute minimum requirement in all after-sales operations. Just fewer than three-quarters of
respondents said that they definitely agreed with this statement. This sentiment is supported by
qualitative research that suggests technology is moving at such a pace that technicians’ skills are
barely able to stand still given the technology found in vehicles requiring maintenance and repair
right now:
“…the pace of technology now means we need the people now to service the cars in the
workbay, now…”
118
The occupational profile of the sector shows that much employment is in technical occupations,
and so these gaps and shortages need to be addressed going forward.
118
Autotmotivate Live.
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5.4.2
Generic skills
In common with many sectors of the economy, there is an increasing demand for skills of a
generic nature. These are demanded from employers in this sector because they are critical at
all occupational levels in ensuring business success. Typically employers cite the following as
key competencies:
•
Communications skills (internal and external);
•
Planning & Organising;
•
Customer handling skills;
•
Problem solving skills; and
•
Team working skills.
The evidence, was presented above – Figure 31 demonstrates the need for all of the skills in the
list above from potential new recruits. Figure 26 also demonstrates the need for skills in the
existing occupations. Indeed, 45% of employers have said that they need their staff to have
problem solving skills. This is the second highest skill need after technical skills.
The need for generic skills is also confirmed by the Automotive Skills Employer Validation Survey.
When asked if capabilities in generic skills like communications, team working and problem
solving will need to increase significantly if businesses want to stay competitive, just fewer than
75% said that they definitely agreed that they would.
Turning to Northern Ireland, the Skills Monitoring Survey lists the 25 detailed occupational groups
where skills shortage vacancies were most prevalent.
This list includes some occupations
broadly categorised as involving customer handling skills, such as sales and retail assistants (3rd
most frequently reported), and sales representatives (8th most frequently reported). In terms of
skills gaps amongst the existing cross-sector workforce in Northern Ireland, the sales and
customer service occupational group was the one with the largest skills deficit, with 55% of
employees here regarded as ‘not fully proficient’.
119
There are obvious implications for the
automotive industry.
119
Skill Needs in Customer Service: Overview of Research Evidence. SSDA.
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July 2006
5.5
Recruitment and Retention
Some skills gaps and shortages occur because of image problems with the sector. Employers
were asked about the importance of improving the image of the sector in the Validation Survey.
A majority of managers believe it is the responsibility of the sector itself to take responsibility for
behaving more professionally in order to improve its image and reputation. Only 4% of employers
asked disagree with this statement in any degree.
This perception is supported by data from the National Employer Skills Survey presented above
which shows that some employers cannot fill vacancies because there are not enough people
interested in working in the sector. One in four employers in Wales believe that this is the case.
Pay and benefits packages also contribute to vacancies being hard-to-fill. The Retail Motor
Industry Pay Guide
120
shows falling trends in real increases of basic pay and total salary.
Moreover, focus group work with employers has confirmed this 121. The following points sum up
the arguments:
•
The pay structure needs closer examination – it constitutes a significant barrier to entry to
those who would otherwise wish to work in the industry;
•
Benefits are not sufficiently attractive, especially to those working outside the sector; and
•
Poor overall margins remain an obstacle to further increases in pay.
There are also issues of recruitment and retention linked to the urban/rural dynamic.
5.5.1
The Urban/Rural dynamic
For understanding to be gained about the urban/rural dynamic, data from the Inter-Departmental
Business Register has been analysed by aggregated SIC codes, and thus represents the whole
Automotive Skills footprint. An analysis of this data has been carried out by the Department for
Environment, Food and Rural Affairs (DEFRA) using standard cross-governmental rural
definitions. Headline results are shown in Figure 32.
120
121
The Retail Motor Industry Pay Guide. Sewells, 2005.
Automotivate Live.
Page 81 of 134
July 2006
Figure 32: Proportion of Employers by Size of Employment and Location Type
100+
51-110
100
0
99
10
85
11-49
6
80
5-10
7
72
2-4
9
69
0-1
0%
10%
20%
Urban
30%
11
9
40%
50%
Rural town or fringe
60%
70%
Rural village
4
8
13
10
74
All
5
7
9
13
80%
4
90%
7
100%
Rural dispersed
Source: Defra Rural Statistics Unit – IDBR Class 4 Local Authority Data 2005 – Figures are for England
Although these statistics are for England, it highlights the point that urban/rural dynamics are
important. Qualitative research conducted during the early part of this SSA has shown it to be
clear that there are some key differences in the employment and market dynamics for those
employers with an urban or rural customer base/location. 122
Employers advised that in more rural locations it was harder to attract employees, including
apprentices, where travel-to-work and travel-to-college times and means were restricted. At the
same time, existing employee turnover was lower and staff were more loyal. This appeared to
reflect local market dynamics and the place the workplace had in the community.
On the other hand employers in more urban environments tended to see higher staff turnover – in
part a reflection of alternative employment opportunities and the more transient nature of the local
community. Finding new employees was said to be a little easier.
122
Automotivate Live.
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5.6
Summary
This section has described an overview of the current skills needs priorities for the sector in
Northern Ireland, showing that there are both skill gaps and skill shortages across the footprint. It
was shown that there is a need for management skills, technical skills, employability skills, basic
skills and generic skills.
It was also shown that many businesses have hard-to-fill vacancies because of reasons not
directly related to skills, such as industry image problems and poor remuneration.
The range of significant issues that have been identified will form the central element to the short
and long-term priorities that are considered in Section 8 of this report.
However, any solutions to these problems may also have future skill requirements, which are the
subject of the next section.
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6 Future Skills Needs
In order to assess the likely demand for future skills needs in Northern Ireland, this section of the
report will present the results of quantitative forecasting and qualitative scenario planning. For
the former of these two elements, an independent research company was commissioned to
provide quantitative estimates for employment and replacement demand. These estimates were
done by analysing the Working Futures II data. 123
For the scenario planning, 4 workshops were conducted across the country, all of which were
facilitated by an independent research company.
6.1
Quantitative Forecasting
This section presents quantified estimates of future skills needs for the Automotive Skills’ footprint
by looking at data on replacement demand. The quantified analysis presented here is from the
work undertaken by the Warwick Institute for Employment Research and Cambridge
Econometrics. 124
The results provide a useful benchmark and assessment of overall changes in trends in
employment within the industry. It would obviously be unwise however to interpret them as
precise forecasts. Results presented here are an aggregation of more detailed analysis, which
cannot be published due to confidentiality and the diminishing robustness of the more detailed
estimates.
In this quantified analysis, estimates for the sector as a whole are briefly summarised. The data
has been run using the ‘best fit’ SIC codes, the relative merits of which were discussed at the
beginning of this report. The SIC definition has been used because this is the basis upon which
Office for National Statistics (ONS) data are classified. Only from the ONS can the required data
be obtained which is consistent across all of the dimensions analysed (sector, region, gender,
status, occupation, qualification, time).
123
R. Wilson, K. Homenidou and A. Dickerson, Institute for Employment Research, University of Warwick - Working Futures
National Report 2003 – 2004
124
Working FuturesError! Bookmark not defined. 2004-2014 (SSDA WF2), Institute for Employment Research and Cambridge
Econometrics.
Page 84 of 134
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6.1.1
Headline issues
An assessment of current and future skills has identified the following key issues for the sector:
•
A decline in employment numbers.
•
A substantial replacement demand.
•
An increase in qualifications required.
•
A predominance of males working in the sector which is likely to continue.
•
A need to raise the image of the sector.
6.1.2
Forecast shifts in patterns of employment by occupation, employment status,
and gender
In summary, the key findings of the Working Futures II data are:
•
Employment in the Automotive Skills footprint is forecast to fall slightly
between 2004-14;
•
A high proportion of current employment is male and on a full-time basis - this
composition of the workforce is not expected to change greatly during 200414;
•
A high proportion of workers are managers and senior officials, reflecting the
high proportion of small independent traders in the sector. One-quarter are
employed in sales and customer services occupations;
•
In both managerial and senior official and skilled trade occupations, the
numbers employed are forecast to fall during 2004-14, but at a slower rate
than during the previous ten years; and
•
The fastest growth in employment in the sector is forecast in the North East, a
relatively low cost region, and in the East of England, where population
growth is strong and which is also influenced by demand in adjacent high-cost
London.
6.1.3
Trends in replacement demand
It is projected that around 30% of the 2004 workforce will need to be replaced during the years
between 2004-14. This compares with 40% for the economy as a whole. The largest total
requirement is for 60,000 additional recruits in sales and customer service occupations.
Employment projections indicate the total numbers of people expected to be employed within the
sector in the future. However, it is important to look also at replacement demand in order to
Page 85 of 134
July 2006
provide an indication of the numbers of workers that employers will need to replace because of
retirement, mortality, career moves or other reasons. Total requirement indicates the sum of
expansion demand (due to the change in employment) and replacement demand (due to turnover
of the workforce).
Figure 33: UK Automotive Skills footprint replacement demand by occupation
2004
Changes 2004-2014
Employment
level
Expansion
demand
Replacement
demand
Total
requirement
(‘000s)
(‘000s)
(‘000s)
(‘000s)
Managerial
134
-8
45.8
37.8
Professional Occupations
22.9
0.5
7.4
7.9
Associate Prof and Tech.
54.8
-1.1
17
15.9
Administrative, Clerical and
Sec.
36.5
-6.9
13.7
6.8
Skilled Trades Occupations
83.9
-11.4
26.6
15.2
Personal Service
Occupations
22.8
2.3
9.1
11.4
Sales and Customer
Service Occupations.
149.1
16
45
61
Machine and Transport
Operatives
52.9
4.2
18
22.2
Elementary Occupations
62.6
-8.5
19.7
11.2
Total
619.4
-12.9
202.3
189.4
Occupation
Source(s): SSDA Working Futures II and OPERA Employers’ survey - 2006 Cambridge Econometrics.
The forecast fall of 13,000 in total employment during 2004-14 is relatively small. Substantial
replacement demand however is forecast to be required to replace those that retire or leave the
sector for other reasons.
For each occupational group of the Automotive Skills footprint, the total requirement during the
period 2004-14 is positive. By occupation, the largest total requirement is for 60,000 additional
recruits in sales and customer service occupations during 2004-2014, representing around 40%
of those employed in these occupations in 2004. In managerial and senior official occupations a
total requirement of 38,000 is forecast, because the requirement to replace existing workers is
expected to more than compensate for the decline in the share of these occupations. For each of
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the associate professional and technical and skilled trades occupations, the total requirement is
projected to increase by 15,000.
6.1.4
Anticipated changes to pattern of skills requirements and skills
In terms of patterns of qualification requirements:
•
Qualification levels in the sector are relatively low, especially for managerial and senior
official occupations. Therefore, marked increases in the expected levels of qualifications
required of those employed in each occupation are projected to increase qualifications
levels in the sector.
•
The largest incremental demand, of 110,000, is expected to be for NVQ level 3
qualifications.
Demand is expected to increase in all occupations with the largest
increases in sales and customer service, managerial and senior official and skilled trade
occupations.
6.2
Scenario Planning 125
This Sector Skills Agreement is a long term programme, lasting for as long as ten years. It is
obvious that during this time, skills needs are likely to change greatly through a combination of
technological developments, legislative changes, economic effects and consumer demands. It is
likely that in ten years time the motor industry will be a very different place to what it is at this
point in time.
It was therefore deemed appropriate to conduct a series of futures workshops with key industry
personnel from the sector. These workshops utilised members of the employer / industry panels
along with other sector experts to examine how the industry may change and develop. The
workshops had a holistic focus on the industry whilst at the same time looking at specific issues
that may affect specific sub-sectors.
Attendees to the workshops were asked to think of all the possible influencers on skills needs for
the future and to try and gauge both their degree of influence and their level of importance. There
were many commonalities between how attendees grouped these influencers. Figure 34 shows
how they were combined into clusters.
125
All of the information in this section is taken from Scenario Planning Futures Workshops
Report. Turquoise, December 2005.
Page 87 of 134
July 2006
Figure 34: Future influencers on the motor industry by clustered
COSTS
FUEL
Cost of vehicles
Cost of repairs
Cost of using roads

INFRASTRUCTURE

PERCEPTION
Alternative fuels
Oil companies
Oil reserves
Oil price

LIFESTYLE
Roads
Local Councils
Public transport
Local planning

TECHNOLOGY
Work/life balance
Migration of skills
Internet shopping
Working from
home

Materials used
Expectation of invention
Technological advances
New construction
techniques
MANUFACTURE
LEGISLATION

Esteem of trade
Consumer expectation
Recycling
Environmental issues
Licenses to practice

Manufacturers
Competent
manufacturers
The figure highlights the ongoing importance of some factors that have already been discussed in
this report. It was noted in the section on drivers of skills demand how important issues such as
legislation and technology are to the industry at present.
This figure shows their ongoing
importance.
From the clusters above, employers were asked to nominate three that they felt were the most
important. The following three clusters were suggested:
•
Legislation
•
Technology
•
Fuel
From this discussion, four scenarios of the future were developed, all concentrating on one
particular theme. These will now be outlined briefly. Put simply, scenarios are different views of
the future – they are not predictions. Thus, the following pages give four different views of the
future motor industry.
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6.2.1
Scenario 1 – Legislation and Infrastructure
This is a scenario that can have four possible extremes. In the future, there could be:
•
Maximum infrastructure and Maximum legislation
•
Minimum infrastructure and Minimum legislation
•
Maximum infrastructure and Minimum legislation
•
Minimum infrastructure and Maximum legislation
Respondents were asked to suggest which one of these scenarios was most likely to take place
in the future. The scenario considered most likely to happen was the first of the extremes above.
The following figure shows how the scenario develops. If there is maximum legislation and
maximum infrastructure, we see a world where public transport is dominant with very little private
car ownership. The opposite of this (Minimum legislation and minimum infrastructure) is a world
of ‘grid lock’. The result would be a low emphasis on skills development in new technologies and
types of industry.
Figure 35: Maximum infrastructure and Maximum legislation
What does this look like?
What happens as a result?
What skills are required?
•
•
•
•
•
•
•
•
•
No private car use
Carbon taxing
Car park pricing
Free public transport
•
•
•
Limit of car use
Increased technology –
hybrids etc
Lower wear rates
Less manufacture
Large increase in public
sector technology and
manufacture focus
Electronics
New materials
Modern material repairs
This scenario is looking at an extreme case. However, it can be observed that some of the
themes coming through in this scenario have been seen before in this report. For example, when
looking at innovation in section 4, it was suggested that skills in electronics would be required in
the future as the manufacture of vehicles gets more innovative and complex. This is linked in
Page 89 of 134
July 2006
with increases in technology, such as hybrid vehicles. This may come in as government tax
schemes make the purchase of hybrid vehicles more attractive.
This scenario would also suggest that servicing and repair of vehicles would see a small decline
in volume of cars serviced. This would be due to cars being used less, leading to lower wear
rates and thus less need for servicing.
6.2.2
Scenario 2 – Technology and fuel
The four possible extremes to this scenario are:
•
No change in the quantity of fuel, maximum development of technology
•
No change in the quantity of fuel, minimum development of technology
•
Fuel runs out, maximum development of technology
•
Fuel runs out, minimum development of technology
Scenario workshop attendants felt that the third of these scenarios was the most likely future
development.
The following chart shows how the scenario builds. If there are maximum
technological advances and fuel reserves are exhausted, we see a world where new fuel sources
will dominate the future. The opposite quadrant to this world (Minimum technological advance
and fuel doesn’t run out) is seen as the status quo but with little new technology.
Figure 36: Fuel runs out, maximum development of technology
•
•
•
•
•
•
•
•
•
•
Alternative power
sources
Hybrids
Current developments
in the uses of fuels
•
New manufacture
Specialisation
More selective
recruitment
Requirement for new
skills
Wider capability
Electronics
Communication
The Automotive Skills Employer Validation Survey also indicates that technical skills will be
required in the sector in the future. When asked if ever increasing technology and complexity of
Page 90 of 134
July 2006
vehicles will result in a considerably increased need for new training and up-skilling, 89% of
employers responding definitely agreed that it would.
A need for skills in electronics as technology gets more advanced is highlighted once again.
6.2.3
Scenario 3 – Employees and Cost of Ownership
Attendees to the later workshops took a slightly different approach. This approach was centred
more on employees and the costs of vehicle ownership. The four scenarios available under this
heading are the following:
•
Employees well motivated, low cost of vehicle ownership
•
Employees well motivated, high cost of vehicle ownership
•
Employees unmotivated, low cost of vehicle ownership
•
Employees unmotivated, high cost of vehicle ownership
Perhaps unsurprisingly, discussions concluded that the fourth of these scenarios is the most likely
to happen. The next figure again shows how the scenario builds. The possibilities generated in
this scenario were in many ways the most pessimistic of all. If, on the other hand, employees are
really well motivated/remunerated, even with costs of ownership being high or low, we see a
world where expectations and reliability/prosperity issues dominate.
Figure 37: Employees unmotivated, high costs of vehicle ownership
•
•
•
•
•
•
General industry decline
Problems with staff
reliability
•
•
•
•
Low respect of industry
and staff
More home workers
High staff turnover
Difficult recruitment
Industry moves off shore
Page 91 of 134
Man management
Customer handling
Basic engineering skills
July 2006
The Automotive Skills Validation Survey shows that 62% of employers definitely agree that it will
be necessary to have a broad range of career paths laid out if the sector is going to attract and
retain more high-quality recruits and apprentices. Many employers have expressed a desire to
access HR toolkits to help them deliver the kinds of development and training larger employers
with HR functions already do.
In a sense, the evidence is that this is a scenario which is already happening – the extent to
which it carries on and develops may be down to how the industry responds.
6.2.4
Scenario 4 – Government and vehicle technology
For this scenario, there are four possibilities:
•
Maximum government interference, maximum vehicle technology
•
Maximum government interference, minimum vehicle technology
•
Minimum government interference, maximum vehicle technology
•
Minimum government interference, minimum vehicle technology
The assumptions made in this scenario are that government will legislate and interfere with the
market to maximum effect, coinciding with significant advances in technology. The scenario is
mapped out below. If the government legislates to the full and technology advances as well, the
scenario is a world dominated by high end design and skills. The opposite of this is to keep the
status quo, with pollution having a high impact.
Figure 38: Maximum government interference, maximum vehicle technology
•
•
•
•
•
•
•
•
•
•
•
Emphasis on public
transport
Skilled repairer
Fewer private cars
•
Fewer older cars
More congestion charging
Technology and skills
increase
Greater investment in
manufacturing
Page 92 of 134
Electronics
Legal skills
Telematics
Emission control
technology
July 2006
6.3
Summary
The scenarios above all incorporate themes that have been running through this Skill Needs
Analysis:
•
The need for management skills, including man-management
•
The importance of technical skills as vehicle technology increases
•
The importance of improving the image of the sector
•
The need for soft and customer facing skills.
Not only are these skills currently needed, but may also prove essential to the future development
of the motor industry.
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July 2006
7 Geographic perspectives
7.1
Country perspectives of future skill needs
This section continues to present forecasts in employee numbers and required qualifications
levels, concentrating specifically on Northern Ireland. Other country dimensions will be given for
reasons of comparison.
Similarly to the previous section, the quantified analysis presented here builds on the work
undertaken by the Warwick Institute for Employment Research and Cambridge Econometrics and
published in SSDA’s Working Futures 2004-2014. The results are based on the use of a regional
multi-sectoral dynamic econometric model of the UK economy, combined with occupational,
replacement demand and qualification modules.
The results take account of data from the
Census of Population 2001 and other sources including the Annual Business Inquiry and the
Labour Force Survey.
Forecasts of employment by status and gender are provided by the multi-sectoral dynamic model
which incorporates an input-output framework to represent how industries are inter-related
regionally. The analysis estimates the numbers employed in each occupation in order to assess
the required demand for skills in the sector. Future patterns of occupational structure and of
demand for skills (as measured by qualifications) are then calculated using the occupational,
replacement demand and qualification modules. The econometric model is, generally speaking,
based upon quite sophisticated econometric analysis of long time-series data sets.
It is
characterised by many feedbacks from one set of equations to another. By contrast, the other
sub-models relating to occupational employment and replacement demands are based on much
more limited data and do not feed back into the main econometric model.
The forecasts are for the period 2004 to 2014 and the summary points cover the sector within
each country, with comparisons made where relevant for the UK average for the sector.
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July 2006
7.2
Introduction
Variations in the data between countries arise primarily due to the supply of labour and the ability
to employ suitably qualified workers, and not differences in the trends in demand. These
variations are likely to be greater at the local level than the regional level.
Trends in the availability of workers of school-leaving age are determined by a number of factors
including demographic and social change. In each of England, Wales, Scotland and Northern
Ireland, the population of school–leaving age (16-17) is projected to decline between 2004 and
2014. Of school-leavers, the proportion entering employment is typically higher in Scotland than
in England, Wales and Northern Ireland.
The qualification levels of the working-age population vary by region and devolved administration,
with London having a higher proportion of highly qualified residents (i.e. qualified to NVQ level 4
and 5 or equivalent) than any other UK region in any country (in 2005). This regional variation in
qualification levels reflects the specialisation of activities and occupations in the different
countries and the greater mobility of highly skilled labour.
However, the workforce of the
Automotive Skills footprint is typically less mobile than other sectors.
What is possibly more relevant for the sector is the educational attainment of local school-leavers
and those leaving further education.
Variation in local educational provision and attainment
produces distinct differences in the size and quality of labour force available to the sector. For
example, amongst English Learning and Skills Council areas, the proportion of working-age
population with no formal qualifications in 2004 is estimated to have varied between 8% in Surrey
and 23% in Greater Merseyside.
The greatest variation across regions and localities arises in the extent of opportunities for
competing employment in, for example, other skilled trades and personal services. In the long
run, competition for skilled workers comes not merely from other companies in the sector but from
other sectors competing to employ skilled workers and offering higher wages.
This section will now consider the Northern Irish context before looking at some sector specific
data.
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July 2006
7.3
The general Northern Irish context
Similarly to other parts of the UK, the structure of the Northern Irish economy has shifted towards
the service sector.
The relative importance of both manufacturing and construction has
diminished over recent years. Belfast is significant in terms of employment, but the projected rate
of unemployment in Northern Ireland exceeds the UK average. The labour force is expected to
grow at a similar rate to the UK, while workplace employment is expected to grow more slowly
than across the UK as a whole.
Professional occupations account for the largest single projected employment increase of any
SOC Major Group over the period to 2014.
Significantly for the retail automotive sector,
Managers & officials and associate professional & technical occupations account for the next
largest gains. Worryingly for the sector, Skilled trade and elementary occupations dominate
projected job losses. However, projected replacement demands are such that even in those SOC
Major Groups expected to see job losses, total requirements are positive.
The total population of Northern Ireland is projected to increase only marginally between 2004
and 2014, to reach over 1.7 million. This represents a rate of population growth of 0.1 per cent
per annum, which exceeds that projected across the UK as a whole.
The 16+ population is expected to grow by 2.6 per cent over 2004-09 and 2.3 per cent over 200914. This is less then the UK average, and is brought about by below average male population
growth between 2004-09, and below average female population growth between 2009-14.
The working age population is projected to increase by just over 20 thousand between 2004 and
2014, whilst the workforce is projected to increase by less than 40 thousand, to reach around 875
thousand in 2014. The labour force is projected to increase by a modest 35 thousand between
2004 and 2014. Females account for the bulk of this increase.
Having looked at the Northern Irish context, sector specific data will now be considered.
Page 96 of 134
July 2006
7.3.1
Northern Ireland
In Northern Ireland sector employment is forecast to increase, compared with a fall at the UK
level. As in the UK, the proportion of males in the workforce is high and is likely to remain so.
Compared to the UK average for the sector, in Northern Ireland there is a relatively low proportion
of employment in managers & senior officials and machine & transport operatives occupations.
The proportion in skilled trades occupations is similar to the UK average for the sector. In sales &
customer service occupations the proportion is relatively high.
Although the increase in total employment in the sector in Northern Ireland is expected to be only
modest, substantial replacement demand is forecast to be required to replace those that retire or
leave the sector for other reasons. It is projected that 35% of the sector’s 2004 workforce will
need to be replaced during 2004-2014; this compares with 30% for the sector at the UK level.
For each occupational group in the sector in Northern Ireland the total requirement (expansion
demand plus replacement demand) is projected to be positive. For the largest occupational
groups the forecast total requirements are:
•
2,900 in sales & customer service (53% of those employed in these occupations in 2004);
•
900 managers & senior officials occupations (29%); and
•
300 in skilled trades (14%).
Compared to the UK average, the sector in Northern Ireland has a marginally lower proportion of
employees with qualifications levels equivalent to NVQ level 4 and NVQ 3. The proportion is
relatively high for NVQ 2, NVQ 1 and those with no qualifications.
Marked increases in the expected levels of qualifications required of those employed in each
occupation are projected to increase qualifications levels in the sector. The largest incremental
demand, of 9,900, is expected for NVQ level 3 qualifications, representing around 20% of those
employed with these qualifications in 2004 (62% for the UK).
Positive incremental demand is projected for the higher qualifications levels (NVQ level 5, 4, and
3) falling demand is projected for the lower qualifications levels. This means that
Data for other countries of the UK is given for reasons of comparison:
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July 2006
7.3.2
England
Employment in the sector in England is forecast to fall slightly between 2004 and 2014. By
occupation, the level of employment is expected to increase in professional, personal service,
sales and customer service and machine operatives occupations. It is expected to decline in
managers and senior officials, associate professional, administrative, skilled trades and
elementary occupations.
Although total employment is expected to fall slightly, substantial replacement demand is forecast
to be required to replace those that retire or leave the sector for other reasons. It is projected that
around 30% of the 2004 workforce in the sector will need to be replaced during 2004-2014. This
compares with 40% for the economy as a whole. By occupation, the largest total requirements
are projected in sales and customer service and managers and senior official occupations.
Qualifications levels in the sector are relatively low, especially so for managers and senior official
occupations. Fewer than 10% of those employed in 2004 had qualifications of NVQ level 4 or
higher compared with 30% for the economy as a whole.
occupation are projected to increase qualifications levels in the sector. In all regions the largest
incremental demand is expected to be for NVQ level 3 qualifications. In England as a whole,
demand is expected to increase in all occupations with the largest increases in sales and
customer service, managers and senior officials and skilled trade occupations.
7.3.3
Wales
In Wales Sector employment is forecast to increase, compared with a fall at the UK level. As in
the UK, the proportion of males in the workforce is high and is likely to remain so.
Compared to the UK average for the sector, in Wales there is a relatively low proportion of
employment in professional and associate professional & technical occupations. The proportions
in managers & senior officials, skilled trades and sales & customer service occupations are
similar to the UK average for the sector.
The proportion in machine & transport operative
occupations is higher than the UK average for the sector.
Although the increase in total employment in the sector in Wales is expected to be only modest,
substantial replacement demand is forecast to be required to replace those that retire or leave the
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July 2006
sector for other reasons. It is projected that 37% of the sector’s 2004 workforce will need to be
replaced during 2004-2014. This compares with 30% for the sector at the UK level.
For each occupational group in the sector in Wales the total requirement (expansion demand plus
replacement demand) is projected to be positive.
For the largest occupational groups the
forecast total requirements are:
2,200 in managers & senior officials (41% of those employed in these occupations in 2004),
1,700 sales and customer services occupations (27%) and
Compared to the UK average, the sector in Wales has a marginally higher proportion of
employees with qualifications levels of NVQ level 3 and NVQ level 4 equivalents. The proportion
is relatively low for NVQ level 4.
demand of 4,900 is expected for NVQ level 3 qualifications, representing around 67% of those
When expressed as a proportion of those employed with these qualifications in 2004, the
incremental demands for NVQ level 1 – 4 qualifications in the sector in Wales are projected to be
relatively high compared to the sector at the UK level.
7.3.4
Scotland
In Scotland Sector employment is forecast to fall a little faster than at the UK level. As in the UK,
the proportion of males in the workforce is high and is likely to remain so.
Compared to the UK average for the sector, there is a relatively low proportion of employment in
managers and senior officials and sales and customer service occupations. The proportion in
elementary occupations is higher than the UK average for the sector.
Although total employment is expected to fall slightly in Scotland, substantial replacement
demand is forecast to be required to replace those that retire or leave the sector for other
reasons. It is projected that 24% of the sector’s 2004 workforce will need to be replaced during
2004-2014. This compares with 30% for the sector at the UK level.
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July 2006
For each occupational group, the total requirement (expansion demand +/- replacement demand)
is projected to be positive (net). For the largest occupational groups the forecast for total net
requirements are:
•
3,700 in sales and customer services (32% of those employed in these occupations in
2004),
•
2,200 managers & senior officials occupations (22%) and
•
Compared to the UK average, the sector in Scotland has a marginally lower proportion of
employees with qualifications levels equivalent to NVQ level 3 and NVQ level 4. The proportion
is relatively high for NVQ level 1 and those with no qualifications.
demand of 7,000 is expected for NVQ level 3 qualifications, representing around 49% of those
When expressed as a proportion of those employed with these qualifications in 2004, the
incremental demands for all levels of qualification in the sector in Scotland are projected to be
relatively low compared to the sector at the UK level.
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July 2006
8 Summary and Priorities
This report has assessed current and future skill needs in the context of factors that are likely to
affect business performance and competitiveness in the coming years.
This section will
summarise some of the findings of the report, and thus consider some short and long term
priorities for the motor industry.
8.1
Short-term priorities
8.1.1
Management and Leadership Skills
It has been shown in this skills needs analysis that the proportion of managers in the sector
trained to NVQ Level 4+ is the lowest proportion of any sector in the UK economy. The number
of managers with no qualifications is also the third lowest of all sectors.
It is essential, however, that the industry has managers who are well equipped for the future. For
this reason, Automotive Skills have developed Automotive Retail Management Standards
(ARMS), a set of Level 4 (NQF Level 5) management and leadership standards which are
industry specific and now recognised by the UK regulatory authorities as a leading-edge
benchmark against which managerial performance can be measured. These can also be used as
a mechanism for management development enabling organisations and training providers to
develop first class management training provision based upon their content.
It will be important for Automotive Skills to promote this tool to existing managers as well as those
that join or are promoted from within the industry. This will contribute to reducing the skills gap
that currently exists within this occupation.
8.1.2
Employability and Life Skills
Relatively high staff turnover and a shortage of employability skills have also been attributed in
part to poor people-management skills by employers taking part in this research.
The
improvement of management skills will help to improve the motivation and performance of the
existing workforce.
A more professional image in the long-term will help to attract the right kind of employee. Only
through creating a more professional image will high calibre candidates with the necessary life
skills wish to join the sector. Automotive Skills must also work with key partners to improve the
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July 2006
training supply, thereby helping to ensure that current employees have access to the training they
need to improve the skills that need improving.
8.1.3
Targeting of specific groups
The scenario planning work conducted by Automotive Skills for this Skills Needs Assessment
concluded that a short-term priority for the industry was to forge stronger links between education
and industry.
As a solution to this problem, the Young Apprenticeship Scheme was launched in 2004 by the
government in England. The programme offers 14-16 year olds the chance to follow an industryspecific programme on top of the core national curriculum. It is being run across a number of
industrial sectors, one of which is the retail motor industry. Within the retail motor industry,
partnerships in the first year of the scheme were developed between employers, schools and
learning providers in East Sussex, Bournemouth, Leeds and Nottingham.
Over the last year, approximately 450 employers in the automotive sector have been participating
in the Young Apprenticeship programme. The number of partnerships has increased to nineteen,
all working with Automotive Skills and the Learning and Skills Council to see if the YA scheme is
the right programme to meet the needs of employers in the sector.
National data sources have also highlighted the lack of representation of women and ethnic
minorities within the retail motor industry.
The number of females working in the motor industry
needs close attention, as it is very different from the proportion of women in the labour market
across all sectors.
Automotive Skills will continue to work closely with partners to assess
whether or not this solution is helping to increase the number of these people entering the
industry.
8.2
Long-term priorities
8.2.1
The image and reputation of the sector
The lack of management and leadership skills in the sector has possibly contributed to the poor
image the sector has in the wider public. It was shown earlier that the sector still faces the threat
of a super complaint by the National Consumer Council because of concerns about poor
consumer protection across the service and repair sector.
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July 2006
Automotive Skills has welcomed the recent news that the National Consumer Council has
delayed its threat of a super complaint against the motor industry. The NCC has recognised the
significant investment in skills-based initiatives taking place in the sector, including those led by
Automotive Skills and the Institute of the Motor Industry.
This decision by the NCC gives a strong signal that the industry is moving in the right direction.
However, as part of its route map unveiled at the time of their announcement, the NCC has
highlighted a range of motor industry initiatives it would like to see taken forward to continue
efforts to raise standards of consumer care.
With these initiatives, a more professional image will be portrayed to customers and potential new
recruits to the sector. This is a long-term priority, with action already being taken to implement
the changes required.
8.2.2
Technical skills
Advances in vehicle technology will have implications for both short and long-term skill needs of
the sector. Data presented in this Skills Needs Assessment has shown that technical skills are
considered difficult to obtain now. This is a situation that is only likely to get worse with future
technological advances.
Employers in the sector have argued that the motor industry needs to embrace new technology,
rather than withdraw from it. Having up-to-date technical skills is hugely important to the sector’s
productivity and profitability, given that there is almost twice as much employment in this
occupational category than any other.
Technical skills are at the heart of the apprenticeship scheme, and yet there is still a shortage of
them in the sector. Thus, it will be the job of Automotive Skills to make sure it consults widely
with employers to make sure that the outcomes of qualifications are what the industry demands
and needs.
8.2.3
Government policy
In the same way that the industry will need to keep abreast of technological change, government
policy will also have to be monitored to make sure that the industry is prepared for any changes
that may change working practices within the sector.
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July 2006
This report has shown how this operates at both a governmental and supranational level.
European competition laws, for example, have recently changed, and the industry must make
sure that it is flexible enough to respond to any other changes in law to affect business practice
that might be proposed. This is particularly true of the Block Exemption Regulation, which is
reviewed periodically, and will continue to have a significant impact on the business structure of
new car sales and after-sales.
Further, employers have argued that the industry must engage fully in the debate on emissions
policy. This is both a short-term and long-term priority, with perpetual possible amendments to
government policies and priorities.
Page 104 of 134
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Appendix 1 – The passenger car supply chain
Figure 39: Passenger car supply chain
Breakdown Recovery
Operators
OEM
Modules, Components & Parts
Daily Rental
Contract Hire &
Vehicle Leasing
Vehicle
Supermarkets
Vehicle Manufacturer
Non-OEM Modules,
Components & Parts
Fast Fit
Franchised Retailer
Auctions
Independent Retailer
Body Repair
Independent
Aftermarket
Restoration
Services
Independent M&R
Valeting &
Preparation
MOT Testing
This graph illustrates the complex inter-relationship between different parties of the supply chain
that reach in and out of the footprint.
Page 105 of 134
July 2006
Appendix 2 – Top 50 franchised dealers
Company
Latest Turnover
Pre-tax Profit
£ (000)
£ (000)
Return on Sales
Pendragon
3,168,200
65,400
2.06
Arnold Clark
1,591,250
57015
3.58
Reg Vardy
1,717,921
43787
2.55
Sytner Group
1,414,001
31479
2.23
lookers
1,093,752
26383
2.41
European motor holdings
800,000
20000
2.50
JCT 600
453,000
10100
2.23
Camden motor Group
1,155,000
9804
0.85
Porsche Retail Group
226,846
9621
4.24
Agnew Group
276,000
9200
3.33
Marshall Motor Holdings
438,961
8743
1.99
Listers of Coventry (Motors)
390,000
7500
1.92
Stoneacre Motor Group
133,469
6511
4.88
Perrys Group
359,702
6159
1.71
Helston Garages Group
267,000
6000
2.25
Williams Motor Co (Holdings)
220,006
5705
2.59
TC Harrison Group
177,000
5700
3.22
Bristol Street Group
554,220
5581
1.01
Lind Automotive Group
372,000
4941
1.33
Parks of Hamilton
213,993
4881
2.28
Ryland Group
501,121
4860
0.97
Dutton Forshaw Group
300,327
4674
1.56
Greenhous Group
483,200
4667
0.97
RRG Group
191,259
4584
2.40
Addison Motors
300,519
3967
1.32
CEM Day
145,000
3800
2.62
Meteor Group
174,100
3700
2.13
Caffyns
155,684
3303
2.12
Sinclair motor Holdings
146,593
3179
2.17
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July 2006
Company
Latest Turnover
Pre-tax Profit
£ (000)
£ (000)
Return on Sales
Halliwell Jones
104,803
3136
2.99
Dick lovett
206,000
3120
1.51
Currie motors UK
164,000
3019
1.84
Renault Retail Group
643,000
2800
0.44
Wood Group
102,104
2568
2.52
Norton Way Motors
125,000
2500
2.00
74,751
2482
3.32
127,212
2254
1.77
92,562
2140
2.31
149,572
2127
1.42
WJ King (Garages)
63,696
2114
3.32
RH Patterson & Co
190,856
2110
1.11
McLean & Appleton
105,000
2050
1.95
Hendy Holdings
177,479
2031
1.14
89,753
1826
2.03
133,000
1800
1.35
Hughes of Beaconsfield
97,000
1800
1.86
Lifestyle Europe
75,972
1770
2.33
Westover Group
112,133
1764
1.57
Charters of Aldershot
46,609
1728
3.71
Hawkins Motors
38,850
1670
4.30
Speeds Motor Group
Macrae & Dick
Godfrey Hall
Donnelly Bros Garages
(Dungannon)
Gates Group
Beadles Group
Average profit
2.20
Source: AM Online
Page 107 of 134
July 2006
Appendix 3 – Capital developments
DATE
COMPANY
MARQUE
S
LOCATION
SIZE
COST
SOURCE
£3.7M
WWW.AM-ONLINE.COM
2.08
ACRES
24/03/0
6
SYTNER
BMW,
MINI
LOUGHTON,
ESSEX
18
S/ROOM
60 USED
12
W/BAYS
211
PARKING
24/03/0
6
M-B
BISHOPS
STORTFO
MERCED
ES-BENZ
BISHOPS
STORTFORD
12
S/ROOM
40 USED
12
W/BAYS
BENTLEY
SEVENOAKS
AUDI
BMW,
MINI
REDEVELOPM
ENT
WWW.AM-ONLINE.COM
N/K
£1.2M
WWW.AM-ONLINE.COM
CARDIFF
5 ACRES
19
S/ROOM
65 USED
£7M
WWW.AM-ONLINE.COM
BLACKPOOL
5 ACRES
£6.5M
AM MAGAZINE
24/02/06
N/K
WWW.MOTORTRADER.
COM
£2M
WWW.MOTORTRADER.
COM
RD
10/03/0
6
10/03/0
6
24/02/0
6
09/02/0
6
JARDINE
MOTORS
JD
CLEVERL
EY
DEREK
WOODMA
N
SYTNER
MERCED
ES-BENZ
SMART
CRIBBS
CAUSEWAY
AUDI
PERTH
03/02/0
6
CAMERON
27/01/0
6
MOTORSA
VAUXHAL
LES
L
27/01/0
6
27/01/0
6
DELMORE
CARS
ANDREW
ROWLEY
S
27/01/0
6
BRISTOL
HONDA
26/01/0
6
JENNINGS
MOTORS
26/01/0
6
SHERWO
17/01/0
6
CD
BRAMALL
17/01/0
6
LANCAST
12/01/0
6
05/01/0
6
16/12/0
GUY
SALMON
PENTAGO
£2M
5 ACRES
24
S/ROOM
125 USED
30
W/BAYS
TWOSTOREY
8 S/ROOM
60 USED
£500,000
HARLOW
N/K
REDEVELOPM
ENT
SKODA
INVERNESS
N/K
£1M
TOYOTA
WATFORD
N/K
£2.5M
HONDA
CRIBBS
CAUSEWAY
2 ACRES
10
S/ROOM
8 W/BAYS
80
AM MAGAZINE
27/01/06
AM MAGAZINE
27/01/06
AM MAGAZINE
27/01/06
N/K
WWW.AUTOWIRED.CO.
UK
N/K
£5.5M
WWW.AUTOWIRED.CO.
UK
N/K
£100K
REFURBISHM
ENT
WWW.AUTOWIRED.CO.
UK
£1.5M
WWW.AUTOWIRED.CO.
UK
£1M
WWW.AUTOWIRED.CO.
UK
PARKING
OD
FORD,
MAZDA
VAUXHAL
L,
CHEVRO
SUNDERLAND
NORTHALLERT
ON
LET
ER
N
PENTAGO
IVECO
LIVERPOOL
BENTLEY
SEVENOAKS
LAND
ROVER
KNUTSFORD
TOYOTA
DONCASTER
MERCED
PORTSMOUTH
1.25
ACRES
SHOWRO
OM + 20
USED
CARS
N/K
33,000
SQ FT
25
Page 108 of 134
£3M
£2.5M
N/K?
WWW.AUTOWIRED.CO.
UK
WWW.MOTORTRADER.
COM
WWW.AM-ONLINE.COM
July 2006
DATE
COMPANY
5
N
16/12/0
5
16/12/0
5
JOHN
CLARK
MOTOR
GROUP
SPECIALIS
T CARS
(JCMG)
MARQUE
S
ESBENZ,
CHRYSL
ER AND
JEEP
LOCATION
SIZE
MOTOR PARK
VEHICLES,
COST
SOURCE
£2.5M
WWW.AM-ONLINE.COM
£1.5M
WWW.AM-ONLINE.COM
£12M!
AM MAGAZINE
16/12/05
£10M
WWW.AM-ONLINE.COM
£7.5M
WWW.MOTORTRADER.
COM
22
W/BAYS
60 USED
CARS
AUDI
DUNDEE
AUDI
ABERDEEN
SLOUGH
8 CAR
S/ROOM
14
W/BAYS
TWO
16/12/0
5
GREENOA
KS
MERCED
ES-BENZ
5/12/05
RICHVILLE
MULTI-
NORTH
TYNESIDE
HR
OWEN
BMW
WESTERN
AVENUE,
LONDON
N/K
28/11/0
5
JACK
BARCLAY
BENTLEY
CENTRAL
LONDON
N/K
18/11/0
5
ALAN
MILNE
29/11/0
5
(REF
OPEN
STORIES
16
W/BAYS
8
FRANCHIS
ES ON 8
ACRES
WITH 700
CARS*
03/05)
18/11/0
5
15/11/0
5
08/11/0
5
RMB
AUTOMOT
PEUGEO
T
TOYOTA
IVE
BRAMALL
& JONES
ELGIN, MORAY
25/10/0
5
25/10/0
5
ON
MOTOR
GROUP
RMB
AUTOMOT
NORTHALLERT
ON
AUDI
DERBY
TBC
SNETTERTON
FORD
SHIREMOOR,
NEWCASTLE
IVE
WATERS
GROUP
TOYOTA,
LEXUS
RENAULT
STORIES
PARKING
6 CAR
S/ROOM
7 W/BAYS
80 USED
CARS
3.5 ACRES
50 USED
CARS
3 CAR, 5
MOTORCY
CLE
SHOWROO
MS
T/O £22M
1,800 N/U
AM MAGAZINE
18/11/05
£2M
AM MAGAZINE
18/11/05
N/K
WWW.AUTOWIRED.CO.
UK
£15M
WWW.AM-ONLINE.COM
£1.4M
WWW.AUTOWIRED.CO.
UK
£4M
WWW.AUTOWIRED.CO.
UK
£4M
WWW.AM-ONLINE.COM
CARS PA
BOWESFIELD
FARM,
STOCKTONON-TEES
ST ALBANS
8-CAR
S/ROOM
80 USED
CARS
WWW.MOTORTRADER.
COM
£1.5M
142
PATTERS
31/10/0
5
REFURBISHM
ENT
1.6 ACRES
TWO
MOTORSP
ORT
VISION
£2M FOR
10
W/BAYS
24/10/0
5
FRANCIS
MOTOR
GROUP
HONDA,
HYUNDAI
THORPE
ARNOLD, NR
MELTON
MOWBRAY
2 ACRES
£2.5M
WWW.AUTOWIRED.CO.
UK
24/10/0
5
SINCLAIR
MOTOR
HOLDING
MERCED
ESBENZ,
SWANSEA,
BRIDGEND
2 SITES
£9M
WWW.MOTORTRADER.
COM
Page 109 of 134
July 2006
DATE
COMPANY
S
21/10/0
5
JCT600
MARQUE
S
LOCATION
SIZE
COST
SOURCE
£5M+
AM MAGAZINE
21/10/05
AUDI
PORSCH
E
LEEDS
1.8 ACRES
32K FT2
30-CAR
S/R
17
W/BAYS
100
PARKING
21/10/0
5
13/10/0
5
26/09/0
5
LOOKERS
RENAULT
ALTRINCHAM
10
W/BAYS
£1.1M
CHARLES
HURST
CHRYSL
ER JEEP
BELFAST
150M2 S/R
£1.75M
INCHCAPE
MERCED
ES-BENZ
NOTTINGHAM
65K FT2
35-CAR
S/R
22
W/BAYS
100
PARKING
1.7 ACRES
6-CAR S/R
9 W/BAYS
20 BMWS
10K FT2
MINI
£7.5M
WWW.AUTOWIRED.CO.
UK
£4.5M
WWW.MOTORTRADER.
COM
£2M
WWW.MOTORTRADER.
COM
WWW.AM-ONLINE.COM
27/09/0
5
SYTNER
LEXUS
MILTON
KEYNES
16/09/0
5
DAVID
PRENTICE
BMW
PORTADOWN
30/08/0
5
JOHN
ROE
MOTORS
TOYOTA
HESSLE, HULL
15K FT2
£2M
POLAR
FORD
WARRINGTON
2,000M2
£3M
30/08/0
5
26/08/0
5
03/08/0
5
29/07/0
5
PATTERS
ON
CHARVILL
S
SYTNER
L
SHIREMOOR,
TYNESIDE
BISHOP’S
STORTFORD
AUDI
HARROGATE
FORD
VAUXHAL
WWW.AUTOWIRED.CO.
UK
WWW.AUTOWIRED.CO.
UK
WWW.MOTORTRADER.
COM
AM MAGAZINE
N/K
£1.4M
3-STOREY
SUBSTANTIAL
23/08/05
WWW.MOTORTRADER.
BUILDING
3.5 ACRES
TWO
STORIES
8 CAR
S/ROOM
INVESTMENT
COM
£4.4M
AM MAGAZINE
29/07/05
£12M
AM MAGAZINE
29/07/05
£4M
AM MAGAZINE
17/06/05
15
W/BAYS
50 USED
CARS
29/07/0
5
BCA
17/06/0
5
BENFIELD
AUCTION
S
TOYOTA
NR BEDFORD
WAKEFIELD
25 ACRES
2 HALLS
100
STAFF
420 CARS
120 CVS
3 ACRES
*each franchisee with a 2,100sq ft showroom and 2,700sq ft ancillary PDI/service unit plus space to display between 77
and 98 cars externally.
Page 110 of 134
July 2006
Appendix 4 – Selected news
Dealers struggle with out-of-date PCs
26 April 2006
Old computers are leaving dealers struggling to make the most out of any investment they make
in new software.
Dealer management system specialist Pinewood says that the IT hardware in use in many
dealerships is so out of date that it is of little more than ‘junk’ value. The problem was identified by
Pinewood research, which covers 1,040 dealers using its own and other dealer management
systems. Instances were identified in at least 58% of the dealers surveyed.
Geoff Miller, sales manager at Pinewood, said: "The problem of outdated hardware takes two
forms. The first is when the dealer is using old hardware and old software. Here, the technology
will simply be very out of date, probably holding back the business, and the whole system liable to
break down regularly. The second is when an investment in software has been made but not on
hardware. Sometimes, this can work but more often, the old computers clip the wings of the new
DMS. The potential of the new technology is compromised."
Pinewood's research into dealer IT hardware follows last month's survey into dated DMS
systems. Research conducted by the company found that the average age of the core software
behind the dealer management systems in use in franchise dealers was more than 10 years old.
Miller said: "This statistic places the dealer sector firmly in the dark ages in IT terms and years
behind the software technology used in other retail industries."
Source: www.am-online.com
Page 111 of 134
July 2006
Number of new car dealers hits record low
6 April 2006
The number of franchised new car sales outlets in the UK has fallen to the lowest amount in 30
years, according to the latest Sewells Franchise Networks report.
It shows there were 5,644 new car sales outlets last year, compared to 5,927 in 2004.
“Although the demise of the MG Rover network has seen many dealers leave the trade
altogether, it does present remaining sites with the opportunity to develop a franchise with other
ambitious marques. In this respect, Franchise Networks includes research on open points that
vehicle manufacturers wish to fill throughout the UK,” said Sewells.
Sewells reflects on the loss of the MG Rover dealer network and its influence on the overall fall in
the total number of franchised dealer points. However, existing MG Rover dealers are not
included in the report, as the network can only be described as one which sells nearly-new or
used cars. Franchise Networks 2006 also provides an overview of the new and used car markets,
for both the UK and for Europe. For new cars, the UK statistics include analysis by make, car
segments, top-selling makes and models, fleet sales, and car parc. Similar statistics are also
included for Europe.
Pendragon strengthens its grip
Who Owns Who, the Sewells dealer directory, and Franchise Networks reveal how the structure
and shape of the ‘top 20’ UK dealer groups continues to change as acquisition and organic
expansion ensured growth in 2005. The ‘top 20’ groups now control 1,255 new car franchise
points compared with 1,252 at the end of 2004.
Pendragon stretched out its lead over the rest of the ‘top twenty’ with the acquisition of smaller
operations in 2005. However, Pendragon’s recent purchase of Reg Vardy is not included because
this happened in early 2006. When Reg Vardy is integrated within Pendragon, the group will have
over 300 sites, 350 franchises and a turnover of over £5 billion. The report notes that Pendragon
will then have increased its vehicle manufacturer partnerships considerably. For example, the
group will account for a third of Jaguar’s dealer network and half its sales volumes as well as 45%
of Land Rovers’ distribution network.
Page 112 of 134
July 2006
No explosion of authorised repairers since BER changes
At the end of 2005, there were 616 ‘authorised repairers’ in the UK. It was hoped that changes to
Block Exemption would create an explosion of authorised repairers, but the number at the end of
2005 had only increased by 105 sites on 2004.
High volume marques continued to attract approved repairers as they offer larger car parcs and
the opportunity of enough business to justify the cost of meeting vehicle manufacturer’s exacting
standards. Citroen, Ford and Vauxhall dominate the ‘top 10’ authorised repairer networks, with
Citroen leading with seventy-three authorised repairers.
Dealer quarterly report Q1
3 April 2006
Here are the latest trends reported by consultancy firm, Network Automotive in the first quarter of
this year.
New and used car sales
Dealers are not even attempting to achieve sales targets which they believe the have no hope of
reaching, following slow new and used car sales. Many are finding the whole situation very
discouraging but most are taking some action to fight back against the problem.
The availability of manufacturers' budgets to help with incentives that could alleviate the problem
is limited, and most are also reluctant to commit to any long-term spending that could bring about
structural improvements, says Network Automotive.
As a result of these factors, we believe that further reductions in new car prices during the next
quarter and the rest of 2006 are unavoidable as part of the quest to encourage customers back
into the showroom, and this will have an inevitable knock-on effect on nearly new and used car
prices.
One developing trend is that much retail new car competition seems to be occurring more on a
local basis, with customers looking to get the best deal on a type of car from a number of dealers,
Page 113 of 134
July 2006
rather than wanting a particular model and trying to buy this for a good price. This is perhaps an
indication of a "bargain hunting" mindset that can only make life tougher for dealers.
The most proactive dealers are switching much of their attention to after-sales in the expectation
that higher margins can be achieved there than in car sales. Dealers who take a more reactive
stance are in for a bumpy ride throughout the rest of the next quarter and the rest of the year, we
expect.
On after-sales, the report continues:
After-sales
Many forward-looking dealers are viewing after-sales, parts and rental as their best chance of
achieving profitability in 2006 and we agree with this approach. Dealer activity in this area is
proving to be quite varied but tends to be based on extracting the maximum return from existing
resources.
So, for example, customer databases are being used for direct marketing purposes to ensure that
a larger number are captured for service and maintenance, while dealers who operate rental
desks are working to establish better links with local businesses. Also, efforts are being made to
increase parts sales - if people are hanging on to their existing car for longer, dealers believe,
then there will be more demand for service, maintenance and parts.
Bodyshops operated by dealers are also finding life tough, with most hoping simply to break
even. This remains an extremely competitive area, with both independent and dealer repairers
struggling equally.
Sellers' market for dealers looking at acquisition
CHARTERED ACCOUNTANTS, Trevor Jones, surprisingly reports that more dealers are looking
to expand.
"With average dealer profitability as a percentage of turnover finishing on 0.5% for 2005 it was
expected that there would be a large number of dealers looking at exit strategies," said business
Page 114 of 134
July 2006
development manager, David Kendrick. He added that for companies considering an exit
strategy, it appears to be a sellers market.
He bases his comments on the fact that 75% of registrants on the Stockport firm's
Dealermatch.co.uk service, are looking to grow their businesses.
DATE: Monday, April 03, 2006
Source: www.autowired.co.uk
Pendragon chief wants 10% of the retail market
PENDRAGON, currently in a hostile bid for the Lookers' Group, will go on acquiring UK retail
motor businesses until it has 10% of the market. Having acquired Reg Vardy Group, Pendragon
currently has around 5% of the market. A successful take-over of Lookers would take it to 6%.
"In the near term we would like to see Pendragon with 10 pct of the UK market," Pendragon chief
executive, Trevor Finn, said at the weekend. "It is a £100bn -a-year industry and it is very
fragmented but in 10 years' time there'll be four or five big dealerships," he said. "This is still the
beginning of the consolidation, not the end of it," he added, "and we are emerging as the clear
market leader."
The Pendragon chief was talking to the Sunday Telegraph.
Pendragon's hostile bid for Lookers, however, would be dealt a crucial blow if GE Capital,
Lookers' largest shareholder, rejects the bid. GE Capital has a 25% stake in Lookers and The
Mail on Sunday said yesterday that it was about to snub Pendragon's take-it-or-leave it offer.
Source: www.autowired.com , 13/03/06
West Midlands sites drive a profit
21 Feb 2006
The West Midlands is proving to be one of the most viable areas in the UK to build car
dealerships. According to research from property advisors GVA Grimley, dealerships in the West
Midlands have the advantage of low new build costs and strong property and land value levels,
allowing them to recover the costs of buying land. Amanda Barber, head of automotive and
roadside at GVA Gimley, said: “The West Midlands has the strongest automotive land values in
the UK outside London and the south east at just under £1m per acre.”
Page 115 of 134
July 2006
Source: www.motortrader.com
The big picture: The risk to the city retailers
13 February 2006
Within two years there might not be a single independent franchised dealer left within the M25.
Already a large proportion are owned by manufacturers – Mercedes, Renault, BMW, Peugeot and
Ford run their own businesses – while several companies, including Honda, Volkswagen and
Škoda, have acquired sites that are operated by dealers. Plcs dominate the balance.
The main reason is operating costs, in particular land and property – or rather, insufficient profits
to absorb these costs and allow reinvestment. Retailers have spoken out about the situation, but
carmakers have rejected all calls to raise margins in London. They claim it would result in unfair
trading conditions for dealers in other areas of the country.
The situation in London will be replicated in other big cities. For carmakers this will present
something of a dilemma. They want dealers to offer the best service in top quality showrooms,
which costs money. Already dealers are dropping out, including in recent weeks Nissan dealers
Dicksons of Forres and Barons of Bromsgrove, and Honda dealer Jim Russell, while the number
of business failures is accelerating.
The situation could become untenable for the less attractive franchises – those with falling sales
and poor retailer profitability. If dealers withdraw, what happens if others do not want to take on
the franchise? This is happening. There are carmakers with no presence in some big cities. They
will either have to change their retailer agreements or find new routes to market.
A few are now back-pedalling on key issues – including threat of termination – when challenged.
Dealers have become so desperate they are willing to risk termination by fighting back; it can be
the dose of reality that is needed to force carmakers to realize how much they need dealers and
how difficult – and costly – it is to find a replacement. For these dealers, the balance of power has
tipped ever so slightly – but it might just be enough.
Page 116 of 134
July 2006
Rising land values and rent costs hit retailers
7 December 2005
Author: Stephen Briers – AM Magazine
This year Sytner opened a new BMW dealership that cost £19m. Other retailers have opened
£10m-plus Mercedes showrooms; Glasgow Audi opened a £15m outlet in November 2004.
Even further down the scale, the cost of building a new outlet runs into millions of pounds. A
significant proportion of that cost is land values. Buying or renting land is becoming more
expensive – in some cases prohibitively so.
London obviously stands out: land values in the capital are typically £2m per acre. That’s way
ahead of the second-placed region, the south east, at around £1.2m per acre. It is forcing dealers
to reconsider trading within the M25: HR Owen is selling some of its sites, while Capital Chrysler
recently collapsed.
Demand from alternative land uses is also putting pressure on automotive land values, with the
West Midlands facing pressure in this respect. Values in this area are just under £1m per acre.
Compare that to the south-west of England and Scotland, where land values are just over
£300,000 per acre.
High build costs
Research compiled by property expert GVA Grimley shows that the cost of building the
dealership also varies, from around £725 per square metre in Wales and Scotland, to £940 in
London. Also notable are the south east (£861), East Anglia and the south west (both £805).
GVA Grimley points to the relationship between land value and new build costs, suggesting that
while new build costs are noticeably higher in the south, the land value differential of such
locations more than off-sets these higher build costs.
“One notable exception is the West Midlands, which has low relative new build costs but relative
strong land value levels. This helps demonstrate why there is strong demand for representation in
this location by dealers,” says GVA Grimley.
Dealers have mixed views when it comes to freehold versus leasehold. For smaller businesses,
freehold gives greater security and a potential nest egg for the future. Many larger groups have a
combination of both, with some groups selling freehold sites to raise capital for expansion.
Page 117 of 134
July 2006
Pendragon last month set up a joint venture property business with Royal Bank of Scotland,
which raised £98m. It now leases back 34 of its 250 sites, while the cash raised is currently
earmarked towards acquiring the Reg Vardy business.
Sytner chairman Laurence Vaughan firmly believes his group is a retailer, not a property agent.
Most of his 92 dealerships are leasehold. “We are in business to make money from selling cars
and servicing, not from buying property,” he says. “We don’t want capital tied up in bricks and
mortar.”
He is, of course, fortunate to have the backing of American giant United Auto Group, which frees
up funds for investment and can negotiate long-term lease agreements. “UAG’s view is that a
dealership needs to be fit for the next 25 years – they take a longer-term view than most
companies in the UK and they aren’t scared of making the capital investment,” adds Vaughan.
Others aren’t so lucky. Dixon Motors sold most of its property prior to the acquisition by Royal
Bank of Scotland in 2002, signing 30-year rental deals.
The bank sold the business to John Haines in September, although it retains a sizeable stake.
Insiders claim RBS’s preference was to close the retail business – Haines has already sold seven
sites and is in talks to offload four more, cutting turnover by £100 – but it would have faced a
huge bill from its landlords for 27 years’ outstanding rent. It retains the stake to give it some
control over the group’s strategy.
Former franchised dealers DC Cook and Appleyard were both burnt from sale and leaseback in
the past. As Guy Harwood, chairman of West Sussex-based Harwoods, says: “Freehold means
you control your own destiny. Ten or 20 years go by very quickly if you rent and then you are in
the hands of your landlord – especially if land prices go up.
“There’s a simple principle,” he adds. “If the site is going to increase in value, don’t sell. But if it
isn’t, then by all means lease.”
Over the past five years, property values across most parts of the country have escalated. GVA
Grimley’s research shows that automotive property can be an important investment sector in its
own right, with prime yields (return on capital invested against the risk of investment) shifting from
7.75% to 5.25%.
“The higher the risk of an investment, the higher the yield an investor would expect in taking this
risk,” says Kevin Marriott, GVA Grimley marketing communications manager. “Conversely, a
Page 118 of 134
July 2006
secure tenant or property location would mean the yield is lower as the income from the
investment is more secure.”
So what about those groups who prefer to rent? GVA Grimley’s rent index highlights prime rates
for selected towns dotted across the UK, and represents the best likely rent for a well located
modern dealership. It includes displays and parking.
Cost per square foot is, not surprisingly, highest within the M25 – Watford returned £20. The UK’s
next two biggest cities, Birmingham and Manchester, share second place on £15 per sq ft with
Bristol.
Rent in Bristol has risen due to competition from financial institutions looking for city centre sites.
That’s pushed dealers out to the giant Cribbs Causeway retail park, where they face competition
from high street shops, which forces rents up.
Page 119 of 134
July 2006
Page 120 of 134
July 2006
Appendix 5 – Urban/rural dynamic
From qualitative research conducted during the early part of Stage 1of the SSA it because clear
that there are some key differences in the employment and market dynamics for those employers
with an urban or rural customer base/location.
Employers advised that in more rural locations it was harder to attract employees, including
apprentices, where travel-to-work and travel-to-college times and means were restricted. At the
same time existing employee turnover was lower and staff were more loyal and the same was
true of the customer base. This appeared to reflect local market dynamics and the place the
workplace had in the community.
On the other hand employers in more urban environments tended to see higher staff and
customer turnover – in part a reflection of alternative employment opportunities and the more
transient nature of the local community. Finding new employees was said to be a little easier.
In the quantitative phase of the primary research for Stage 1 we asked employers whether they
considered themselves to have a primarily urban or rural marketplace, and the
Defra’s Rural Economy and Strategy (RES) unit were kind enough to process IDBR data by
aggregated SIC codes representing Automotive Skills’ entire footprint. An analysis of these data
by DEFRA's standard rural definitions has been carried out.
For more information on the
definitions please click here: http://statistics.defra.gov.uk/esg/rural_resd/rural_definition.asp
The charts which follow show the four-type morphology as defined by DEFRA based on the
postcodes of employers in the aggregated SIC codes covering the sector as a whole. The first of
these (Fig x) examines employment (employee volumes) showing the share of employment by
category of establishment location.
Page 121 of 134
July 2006
Figure 40: Proportion of Employers by Location Type – England 2005
Urban/Rural Employment - by Employer Location
6%
3%
5%
86%
Urban
Rural Town or Fringe
Rural Village
Rural Dispersed
Source: DEFRA Rural Statistics Unit – IDBR Class 4 Local Authority Data 2005
The second chart (Fig 36) highlights employer volumes broken down by size of workforce
categories.
Figure 41: Proportion of Employers by Size of Employment by Location Type – England
2005
100+
51-110
0
99
10
6
85
11-49
7
80
5-10
9
72
2-4
69
0-1
10%
20%
Urban
30%
40%
50%
Rural town or fringe
60%
Rural village
70%
7
9
13
80%
4
8
11
9
4
5
13
10
74
All
0%
100
90%
7
100%
Rural dispersed
Page 122 of 134
July 2006
A comparison of these two sets data highlights the overwhelming preponderance of
establishments employing >50 in urban areas and that employers with smaller workforces
account for an increasing proportion of businesses in rural areas.
Overall three-out-of-four businesses are located in urban areas, compared to six-out-of-seven
employees, which goes to support the hypothesis that larger employers dominate urban
environments.
These outputs support anecdotal evidence gathered in the qualitative phases of Stage 0 and
Stage 1. Although rural (3) morphologies account for one-in-four businesses they do account for
a significant minority or organisations that are spread across
Figure 42: Businesses with Employees
East
East Midlands
London
North East
North West
South East
South West
West Midlands
Yorkshire &
Humber
Total
Employment
Total
Number of
Businesses
76%
83%
100%
93%
93%
83%
77%
91%
87%
0-1
2-4
5-10
11-50
51100
101+
62%
67%
99%
77%
83%
69%
62%
78%
56%
59%
99%
70%
79%
62%
57%
72%
59%
66%
99%
77%
83%
66%
59%
76%
70%
76%
100%
86%
88%
77%
70%
84%
80%
83%
100%
84%
91%
82%
73%
92%
100%
100%
100%
100%
100%
97%
100%
100%
n/a
100%
100%
n/a
100%
100%
100%
100%
76%
69%
74%
81%
87%
96%
100%
Page 123 of 134
July 2006
Appendix 6 – Block exemption regulation
Distribution and Servicing of Motor Vehicles in the European Union
Commission Regulation (EC) No.: 1400/2002 of 31st July 2002
Essentially ‘Block Exemption’ it is permission granted by the EC for categories of agreements and
concerted practices in the motor vehicle sector (the Block) to be exempt from the EU Treaty
under Article 81(3) – hence ‘Block Exemption Regulation’ (BER).
The BER exempts the
distribution, sale, maintenance, repair and other related after-sales activities associated with
passenger cars, from EC competition rules.
The BER enables car manufacturer national sales organizations to create networks of ‘selective’
or ‘exclusive’ dealership networks.
This BER has been granted by the European Commission Directorate General for Competition
(DG IV) and is covered by the following legislation in the UK:
EC Competition Law (Articles 84 and 85) Enforcement Regulations 2001
Regulation 17 of the 1998 Competition Act
The current BER replaced a previous one (No.: 1475/95).
The new BER came into operation on 1st October 2002, but the majority of the provisions did not
come fully into effect until October 2003 following a one-year transition period.
There is a clause which bans ‘location clauses’ – this limits the geographical scope of dealer
operations – and the industry was unhappy about its introduction. To reflect this, this element will
st
come into effect two years later than the rest of the reforms – on 1 October 2005.
In addition from October 2005, dealers could set up secondary sales outlets in EU countries other
than their own. This is designed to increase competition between dealers across the Single
Market and help to ensure that consumers get a better deal.
The new BER is intended to ensure that:
Page 124 of 134
July 2006
Dealers are now able to operate in different areas and EU countries
Sales/after-sales activities for different franchises are allowed from the same premises with fewer
restrictions.
Non-franchises dealers and brokers will be better able to compete
Greater servicing and repair market competition
Lower costs
After-sales activities can be carried out by any retailers (whether franchised or not) provided the
retailer abides by manufacturer-approved standards
Independent retailers/suppliers will have access to necessary technical information, including
diagnostic equipment and software.
The Supply of New Cars Order 2000 was introduced following the Competition Commission (CC)
monopoly inquiry into the supply of new cars. The CC found that private car buyers in the UK
were paying about 10% too much for the average car, taking account of discounts, trade-ins and
finance deals.
The CC found the operation of the selective and exclusive distribution system permitted by the
European Union's Car Block Exemption rules to be the root cause of the increased cost of new
cars in the UK, and made a number of recommendations for fundamental changes to this system.
The CC also made a number of recommendations for immediate action, which resulted in the
introduction of the Order in September 2000. One of the main provisions of the Order requires
suppliers to offer dealers who purchase volumes of cars outright equivalent discounts to those
offered to fleet customers who purchase similar volumes. The intention of this provision is to
close the price gap between cars offered to fleet customers and those offered through dealers to
private buyers.
The new EC Cars BER is intended to help reduce UK prices, or at least lead to a levelling out
across Europe of pre-tax prices, by increasing competition and providing greater freedom to
import cars from other member states. There is evidence that the process of levelling prices
across the EU has been proceeding.
st
Since 1 October 2005 there has been little evidence of changes in distribution networks across
the UK. There are risks attached to moving into another dealer’s territory, especially given the
slim margins in the sector. Many buyers are prepared to shop over a wide area to get a good
deal, a task made much easy over the internet.
Page 125 of 134
July 2006
There are a number of possible approaches that a retailer (or retailing group) could take including
delivery points in city centres.
Such approaches will require strong marketing skills and brand recognition to give consumers
confidence.
UK retailers are in a strong position to take advantage of the scrapping of the clause. The
consolidation that has seen the likes of CD Bramall, Reg Vardy and potentially Lookers
swallowed up by Pendragon has not taken place on the continent
In 2004 registrations per new cars per site totalled 444 in the UK, 330 in Italy, 236 in Spain, 173
in Germany and just 158 in France. New car dealerships on the Continent tend to be smaller and
greater in number and industry commentators suggest that similar consolidation is likely there too
over time. There is a possibility that UK-based businesses may wish to take part in any such
consolidation.
“This overlooks one important fact: Britain is a small island, most mainland countries are
far bigger with a much wider population spread. France is more than three times the size
of the UK, with roughly the same size population. City centre locations will be attractive,
but it will be piecemeal expansion. Unless consumers are willing to travel for several
hours to buy a car, these smaller dealerships will remain: consolidation does not work in
this model.”
Source: Department of Trade & Industry, AM magazine, The Society of Motor Manufacturers and Traders, The Office for
National Statistics, Automotive Skills.
Page 126 of 134
July 2006
Block Exemption rules clarified
7 April 2006
Author: Tim Rose
The European Commission has given dealers the green light to question some of the demands of
car manufacturers regarding showroom design and performance targets.
Separate investigations into complaints against BMW/Mini and General Motors from dealers
concerned about their freedom to multi-franchise (AM, March 24) have prompted Brussels to
issue an important clarification on the 1400/2002 Block Exemption Regulation.
It advises that dealers can refuse to implement a manufacturer’s branding in parts of the
dealership not dedicated to that brand, are not forced to use a manufacturer’s recommended
dealer management system, and that sales or performance targets must not restrict a dealer’s
ability to sell another brand.
“This is a classic example of European legislation being used in a purposeful way,” says Neil
Baylis, competition specialist at City law firm Kirkpatrick & Lockhart Nicholson Graham LLP.
“The European Commission and the courts are determined to ensure that the aims of this law are
achieved. Many of the points included in the Block Exemption Regulation have needed some
interpretation in order for dealers and manufacturers to be able to put them into practice. This
case could have a significant impact on dealers because it clarifies exactly where they are able to
save on costs with their multi-franchise businesses.”
Memo 06/120 has been issued by the Commission following complaints from the European BMW
Dealers’ Association and French, German, Spanish and Italian Opel dealers’ associations. Both
BMW and GM have agreed to remove certain elements from their franchise contracts that the
Commission determined were restrictive.
The Commission also identified a potential deterrent to multi-branding in the way carmaker’s set
and evaluate sales targets and dealer performance – one of GM’s measures was based on a
comparison of a dealer’s local market share with the brand’s national market. GM has now
agreed targets will be mutually agreed with dealers, subject to arbitration if a dispute arises.
“The changes ensure that dealers and repairers are not restricted in selling or servicing cars of
competing brands (multi-branding) and that all repair-shops who fulfil the necessary quality
standards can become members of the authorized network,” says a Commission spokesman.
Freedom for repairers
While Block Exemption regulations already allow any workshop to join a carmaker’s authorized
repairer network providing it meets the requirements, the Commission has reminded
manufacturers that these standards should be based on quality of repair and service, not quantity
and capacity.
Both GM and BMW have now introduced an ‘opening clause’ to servicing contracts telling
repairers that they are free to source all workshop equipment, tools and IT systems from
alternative suppliers providing that equivalent functionality and quality is assured.
Page 127 of 134
July 2006
It also makes explicit that repairers are free to cooperate in joint initiatives concerning spare parts
purchase and warehousing in order to save costs. This follows the Commission’s clarification that
carmakers can only require repairers to keep stocks of fast-moving replacement parts on their
premises.
Main points of Memo 06/120 at a glance
Manufacturers must accept the non-exclusive use of all facilities other than the part of a
showroom, which is dedicated for the sale of their brands
Dealers can use generic IT and management systems across all brands to save costs, providing
those systems have equivalent functionality and quality as those recommended by the carmaker

Sales and performance targets must not restrict a dealer’s ability to sell competing
brands. Targets agreed with a solus dealer can be reviewed if that dealer later multifranchises
Contracts for authorized repairers cannot include restrictive quantitative criteria, such as
minimum turnover targets and minimum throughput capacity demands, minimum stock
and warehouse capacity
Source: www.am-online.com 7th April 2006
Page 128 of 134
July 2006
Appendix 7 – Validation survey results
Figure 43: Employers Validation Survey Results Summary
Employers Validation Survey
1. If businesses are to become more prof itable, t he proportion of managers qualified to degree level (or above) will need t o
increase f rom it s current very low level.
17. The need f or fitt ers and basic maintenance and repair mechanics is unlikely t o decline from present levels.
5. Employees will universally see an increase in the qualit y and quantit y of t raining as an additional benef it, over and above basic
pay and bonuses.
11. Smaller employers will need the HR/ personnel management tools already being used by larger, bett er-resourced employers.
22. Spending more money on training will lead t o a noticeable increase in profit ability.
15. The increasing complexity and changes in body st ructure designs, mat erials and technology will completely alter t he skills
needed in bodyshops.
9. Pay and condit ions will need t o catch up with other sectors if we are going to retain employees.
19. To gain successf ul ent ry into the sect or, school leavers will need f ar bet ter lit eracy, numeracy and lif e skills than today’s school
leavers.
10. M ore employees will need t o be welcomed f rom out side the mot or indust ry if we are going t o get all t he high-quality recruits
we need.
7. In addition t o a motivated workf orce, t here needs to be f ar more honesty and integrity right across t he workf orce.
21. Unless Further Education colleges raise the standard and the method of training delivery, manufact urers and other private
t raining providers will dominate training provision for the sector.
20. To meet the needs of employers, t he f unding of apprenticeships must chang to f ocus on improving t he qualit y of t raining
delivery.
6. It will be necessary to have a broad range of career pat hs laid out if we are going t o att ract and retain more high-quality recruits
and apprentices.
14. Increasing numbers of vehicles with hybrid and alternatively-fuelled engines will need more highly-trained t echnicians to carry
out t heir maint enance and repair.
3. The breadth of training and development of skills will need t o grow beyond what is currently f unded.
4. Employees will need t o respond more to cust omer needs than t o short -t erm targets.
8. It will be up to the sector itself t o take responsibility f or behaving more prof essionally in order t o improve its image and
reput ation.
2. M anagers in t he sect or will need far bett er developed leadership skills.
16. The ability t o use diagnost ic IT equipment will be an absolut e minimum requirement in all aft ersales operations.
18. Capabilities in generic skills like communications, t eam working and problem solving will need t o increase significantly for
businesses wanting t o stay compet itive.
12. New employees will increasingly need the right att itude and mot ivation over and above just t he hard, technical skills.
13. Ever increasing technology and complexity of vehicles will result in a considerably increased need for new training and upskilling.
0%
10%
20%
Definitely Agree
30%
40%
Tend to Agree
50%
60%
70%
Tend to Disagree
80%
90%
100%
Definitely Disagree
Figure 44: Employer Validation Survey Respondent Geographical Breakdown
SAMPLE
ENGLAND
SCOTLAND
WALES
NORTHERN IRELAND
LOCATION NOT GIVEN
TOTAL
N
83
9
7
3
18
120
PROPORTION
69%
8%
6%
3%
15%
100%
Page 129 of 134
July 2006
Appendix 8 – Technical appendix
The final version of the technical appendix will go here.
Page 130 of 134
July 2006
Appendix 9 – Bibliography
A.M. Top 100, December 2005. AM Magazine, 2006.
‘Fairer deals for women workers’. AM Online, 17th March 2006.
Rising land values and rent costs hit retailers. AM Online, December 2005.
Dealers hit by troubled consumer finances. AM Online, May 2006.
Location Clause is no more. Did the earth move for anyone? AM Online, October 2005.
Automotive Skills Needs Survey, Automotive Skills, 2005.
Automotive Skills Employer Validation Survey. Automotive Skills, 2005.
Bodyshop Sub-Sector Research. Automotive Skills Ltd, July 2005
Graduate and Extra-Sector Experience Research, Automotive Skills, January 2005.
Lookers' qtr 1 results well ahead of expectations. AutoWired, 18 April 2006.
Carmakers eye dealers for profit chop. AutoWired, 09 June, 2006
Better used car demand cuts rates of depreciation. AutoWired, October 2005.
Grant-less green cars difficult concept to sell. AutoWired, June 2006.
6-months paternity leave will be too costly. AutoWired, October 2005.
Engines, prestige and niche models is way forward. AutoWired, June 2006.
Kia dealers to get honest appraisal of performance. AutoWired, May 2006.
RMIF car dealer attitude survey says manufacturer standards cost too much. Auto Industry, April
2006.
Equal Opportunities Statement. CITB-ConstructionSkills, June 2006.
Debt facts and figures. Credit Action, June 2006.
The car service and repair market in the UK – 2005. Mfbi, CMS 2005.
Britain’s Automotive Industry Leads the World. Carsource, 2006.
‘Five year strategy for children and learners’. Department for Education and Skills, July 2004.
Page 131 of 134
July 2006
Super-complaints Fact Sheet, the Department for Trade and Industry, 2005.
The 2006 Budget Changes to Cost of Vehicle Tax, the DVLA 2006.
Scottish Employer Skills Survey, FutureSkills Scotland and is for 2004.
Welsh Employer Skills Survey, Future Skills Wales, 2005.
Diversity and the Skills for Business Network – How the Sector Skills Councils are Addressing
Diversity and Some Good Practice case Studies. GHK Consulting, January 2006.
The World Economic Outlook Database, International Monetary Fund, April 2006.
Working Futures II, January 2006. Institute for Employment Research and Automotive Skills
Needs Survey 2005.
Sectoral Management Priorities: Management Skills and Capacity. Research report prepared for
the Sector Skills Development Agency by the Institute for Employment Research, January 2005.
Working Futures National Report 2003 – 2004. R. Wilson, K. Homenidou and A. Dickerson,
Institute for Employment Research, University of Warwick.
Working Futures 2004-2014 (SSDA WF2), Institute for Employment Research and Cambridge
Econometrics.
Dealer Consolidation - When size matters for the watchdogs. The IMI Magazine, 2006.
National Employer Skills Survey 2003, the Learning and Skills Council.
Dealer profitability slumps to record low. Motor Trader, 20 March 2006
Franchised dealers embrace technology. MotorTrader, 21 Apr 2005.
Skill and Training Requirements in the Vehicle Maintenance Industry in Greater Manchester &
Devon and Cornwall. Geoff Mason and Matt Osborne, National Institute of Economic and Social
Research, London. Prepared on behalf of Sector Skills Development Agency and Automotive
Skills, October 2004.
Skills Monitoring Survey, NISRA 2003.
Page 132 of 134
July 2006
Employment Outlook 2006, The Organisation for Economic Co-operation and Development, June
2006.
The Economic Survey of the United Kingdom 2005. The Organisation for Economic Co-operation
and Development, 2005.
Economic Outlook No. 79.
The Organisation for Economic Co-operation and Development,
2006.
International Comparisons of Productivity, The Office for National Statistics, February 2006.
Annual Business Inquiry, 2004. Office for National Statistics, updated 15th June 2006.
Labour Market Statistics Group the European Labour Force Survey. Office for National Statistics,
March – May 2005.
The Labour Force Survey, Office for National Statistics, 2006.
Economic Trends, No.631. Office for National Statistics, June 2006.
Quarterly national accounts briefing note: 2005Q3. The Office for National Statistics, 2006.
Acquisition of Reg Vardy PLC. News, Pendragon Plc, 2006.
Abolition of location clause under block exemption regulation draws near.
Pricewaterhouse-
Coopers LLP, 2005.
Old computers leave dealers struggling to make the most of their software investment. Pinewood
Research, on www.pinewood.co.uk, 11/04/2006.
Forward Drive. RMSI, Issue 09, April 2006.
Dealers Wave White Flag On Manufactuer Standards. RMIF, 2006.
SME Statistics UK, 2005. The Small Business Service, February 2006.
Skills Pay: The Contribution of Skills to Business Success, SSDA Research Report 5, September
2004.
The UK Skills and Productivity Agenda: The Evidence Base for the SSDA’s Strategic Plan 20052008. Campbell, M and Garrett, R, SSDA Research Report 6, 2004.
Page 133 of 134
July 2006
EU Productivity and Competitiveness: an industry perspective. O’Mahoney and van Ark 2003,
quoted in The UK Skills and Productivity Agenda: The Evidence Base for the SSDA’s Strategic
Plan 2005-2008. Campbell, M and Garrett, R, SSDA Research Report 6, 2004.
Sectoral Management Priorities: Management Skills and Capacity. Research report prepared for
the Sector Skills Development Agency by the Institute for Employment Research, January 2005.
The Retail Motor Industry Pay Guide 2006. Sewells Information & Research, 2006. Featured in
article ‘Car Sales Execs Feel Pain In The Wallet’, Retail Motor Industry Federation 2006.
Motor Industry Facts and Figures 2006. SMMT, 2006.
The Automotive Industry Handbook 2005. Sewells, 2005.
Bodyshop Opinion Survey. Sewells, 2004 as featured in Sewells - The Automotive Industry
Handbook 2005.
Starting up in 2006 - Business start-up trends. Start-ups.co.uk, 2006.
The UK Car Body Repair Market 2005. MFBI (A division of Trend Tracker Limited), Report
reference 143, 2005.
Scenario Planning Futures Workshops Report. Turquoise, December 2005.
Enterprise and Innovation, HM Treasury, 2006.
Shaping a Fairer Future, Women and Work Commission, February 2006.
Page 134 of 134
July 2006