The Midlands is fast becoming the home for inward investment in advanced manufacturing from China.
KPMG Corporate Finance recently announced two corporate acquisitions by Chinese buyers, the sale of eXception PCB Solutions Limited to FastPrint Hong Kong., Ltd and the sale of Covpress International Holdings Limited to Shandong Yongtai Chemical Group Limited. Both of these transactions present a platform for the Chinese investors to establish a European hub for international growth.
Simon Heath, who leads KPMG’s automotive M&A team, comments:
“There are a number of factors supporting the increasing trend for Chinese investment in the UK such as low corporation tax rates, the lowest labour rates in Western Europe, good R&D and universities and a heritage in the manufacturing industry, particularly the automotive sector. Additionally, UK acquisitions provide international credibility to Chinese manufacturers as demonstrated by Shandong Yongtai’s investment in Covpress.”
These transactions are complementary to existing Chinese car manufacturers located in the Midlands. SAIC has invested in the former Rover site at Longbridge and Chang’an Automobile Group has created over 200 jobs in Nottingham.
The Midlands connection is further enhanced by the continuing success of Jaguar Land Rover (“JLR”) and its new Shanghai plant scheduled to open in 2016. The high profile growth of JLR has promoted the UK’s automotive capabilities globally and is another high-end brand to complement the successes of Aston Martin. KPMG is witnessing an increasing number of Chinese companies seeking to acquire businesses within the JLR supply chain in order to become a Tier 1 or Tier 2 supplier to JLR in China, which is the world’s fastest growing car market.
The UK’s buoyant automotive sector is also supported by Government backed initiatives such as the
recently established Automotive Investment Organisation, a body led by Joe Greenwell, the former Chairman of Ford Europe, specifically focused on attracting overseas investors into the automotive supply chain.
Outbound Chinese investment is in its infancy, however there is an increasing internationalisation of Chinese corporates seeking to acquire overseas, sponsored by the Chinese government’s commitment to growing the automotive sector. Understanding the cultural and regulatory challenges in relation to these transactions is critical to achieving a successful transaction. The Chinese state is required to approve all outward investments through Regional, State and Ministry of Commerce approvals.
Additionally, there are also controls on foreign exchange currency transfers.
The underlying strength of the Midlands automotive industry is attractive to inward investment in the medium term and provides new entrants with access to the wider European markets.
John Leech, Head of Automotive UK at KPMG, concludes:
“The UK automotive sector continues to be the driving force in Europe. Car output in the UK rose 7% in July and is up 1.9% so far this year. Manufacturer forecasts are for UK car production to rise from 1.5 million cars in 2013 to 1.9m in 2016. This forecast growth rate is higher than the UK’s Western European rivals.”
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Notes to editors:
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 12,000 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2012. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 156 countries and have 152,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.