Britain clocks off: why the car plants of tomorrow are being driven abroad

The launch of the funky new Mini only masks the decline of our motor industry

There is no doubt about the "British" car of the summer. It is the new Mini, produced at a new plant on the Cowley site in Oxford. Acclaimed in the motoring press, the small British bulldog with one wheel at every corner has scarcity value. Not because the Mini will not sell. That seems most unlikely. But because it is a new car made in Britain, built in a new facility, admittedly with German expertise and money. The £500m project has been financed and managed by BMW.

But an analysis by Germanyspellsbusiness.com and the Independent on Sunday has found that Britain is losing when it comes to new car-making projects. Toyota and Peugeot will next week announce where their plant for a European small car will be built. The short odds are on a site in northern France.

BMW is looking at a new factory where it can meet demand for its hugely successful 3 Series. Longbridge in Birmingham does not feature on the shortlist. Augsburg and Halle in Germany and sites in the Czech Republic are being discussed for the £500m investment. Whichever wins stands to gain 10,000 jobs.

Last week, Ford announced that mass production of the new Fiesta would start in Cologne in November. The previous Fiesta was produced in Dagenham. That is closing with the loss of 2,000 jobs. Ford has invested around $500m in the Cologne site, integrating component supply into car assembly through an on-site suppliers' park. The investment will raise car production by 45 per cent to 400,000 cars a year. No additional jobs will be created. Instead, the workforce is expected to work flexibly, in three shifts.

At General Motors, it is a similar story. The German plant – in this case, Rüsselsheim near Frankfurt – has won out at the expense of the British plant – in this case, Vauxhall at Luton. That too is closing. GM announced this month that some $500m is being invested in a new facility for the new Vectra – previously built in Britain. But British plants other than Cowley have also benefited from new investment. Halewood, where the new baby Jaguar X-Type is being produced, has been transformed by Ford – and £350m – from a disaster area into an industrial miracle. Land Rover in Solihull has had £4.8bn investment in the past eight years and is to produce a new offroader developed under BMW in 2002. It is clearly difficult for the car companies to invest in Britain. And it is not just a question of inefficiency or skills shortages, although these persist. (BMW is flying 100 German workers a week into Cowley.) Keeping the new Nissan Micra in Britain required a £50m government subsidy, otherwise it would have gone to Flins, north-west of Paris, where costs are 35 per cent lower. Yet Nissan's Sunderland plant is, in fact, the most efficient in Europe. However, it suffers from the weak euro, like other efficient, Japanese-owned plants in Britain.

AT Kearney, the consultancy, believes mass car production in the UK is doomed. Phil Dunne of AT Kearney said: "We have passed the point of no return in terms of volume manufacturing." The crucial reason is the decision to stay outside the euro-zone, AT Kearney believes. Currency fluctuations have destroyed margins. This is what finally broke BMW's commitment to Rover and rendered many of the Japanese-owned plants in Britain barely profitable.

True, there is a revival at the specialist end of Britain's market, notably at Jaguar. The BMW Mini should help. And Nissan, Honda and Toyota will raise production. This should take UK car production from 1.6 million units in 2000 to 1.9 million in 2005. German car production is expected to reach five million vehicles this year and will rise further as new plants at Ford, GM and, probably, BMW and Volkswagen come on stream.

And the British content of UK-produced cars is declining dramatically. It will halve at the Japanese-controlled plants to 35 per cent. BMW's new Rolls-Royce will be almost entirely non-British. All of Ford's mass car production in Europe is based in integrated plants, at Genk, Saarlouis, Valencia and, now, Cologne. This cuts costs and raises productivity. But there are few British champions other than GKN who are world-ranking players.

The large question mark over Rover symbolises the problem. The one-time British flagship has seen its market share fall to 2 per cent. It will need new plant and new products to be a successful niche player, let alone a volume car producer. It was beyond BMW. Another international buyer will be needed to make Rover succeed; there are few takers.

Internationalisation has saved the British car industry by bringing new money, new technology, new skills and new plants. BMW and Ford have invested heavily in high-quality products with a British feel. But the ineluctable trend is towards a screwdriver industry where the screwdriver is bolting foreign-made parts together. The new Mini was financed by Germans, conceived and designed by Germans and is driven by a Brazilian engine. It looks great. But is it British?

David Brierley is editor in chief of Germanyspellsbusiness.com