Toyota's expansion could herald car investment boom

The Government is hoping to attract a string of Japanese and American car component firms into the UK following Toyota's confirmation yesterday that it is to double production at its Deeside engine plant through a pounds 150m investment creating 310 jobs. Michael Harrison reports.

Trade and industry officials are confident of attracting fresh inward investment into the motor industry in the wake of the Toyota expansion in North Wales. Negotiations on a number of projects are thought to be at an advanced stage.

The Welsh Development Agency is ready to offer Ford an aid package to build engines for the new X400 baby Jaguar at its Bridgend plant in South Wales.

There are also hopes that the increase in production at Nissan's Sunderland plant to 300,000 cars a year with the introduction of a third model will tempt more suppliers of heavy, high-value components such as transmissions to set up in the UK.

Japanese car firms have now invested pounds 3.7bn in UK manufacturing facilities, creating 10,000 jobs. The latest Toyota expansion brings its UK investment to pounds 1.5bn. However, Britain has only been partially successful in attracting component firms. Only nine of Japan's 20 largest component suppliers have manufacturing operations in the UK.

The expansion of the Deeside site will double its output of engines to 400,000 a year and include a new castings plant. Negotiations are still going on over the level of aid Toyota will receive, although it is expected to be less than pounds 3m. The increase in engine production will enable it to supply both the Burnaston car plant in Derbyshire and the new small car assembly plant Toyota is building in Valenciennes, northern France.

According to some estimates, the new small car, based on the existing Starlet model, will contain up to 50 per cent British content.

The Deeside investment will take its workforce in North Wales to 600. By the time Burnaston begins production of a second model, the Corolla, late this year, the workforce there will have reached 3,000.

Speaking in Japan after meeting Hiroshi Okuda, the president of Toyota, the Prime Minister Tony Blair said: "It shows yet again the continuing confidence people have in the UK economy."

Margaret Beckett, President of the Board of Trade, who is on a trade mission to the Far East, said that following Jaguar's decision to build the X400 at Halewood, Toyota's announcement was "further endorsement of the UK as the number one location for automotive investment in Europe".

Officials deny that the strength of the pound or Britain's decision to stay out of the European single currency is deterring inward investors, pointing out that the UK continues to attract 40 per cent of all Japanese investment into the European Union.

Total Japanese investment in the UK stands at pounds 31bn out of a total inward investment stock of pounds 140bn.

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