AS THE British pound has become stronger, the competitiveness of UK suppliers has weakened. Lower costs were once the UK's best competitive weapon in the marketplace.
General Motors says the difference is hundreds of dollars per car in favor of continental sources. GM is shifting some contracts to the mainland and asking UK suppliers to become more efficient.
Toyota may use fewer UK suppliers for its Valenciennes, France, plant than expected. Its engine works in Wales will be expanded for the new French plant, but tires, glass and other components will probably be purchased on the continent.
Nissan's UK suppliers will do less business with the company's plant in Barcelona. Ford will build a new Jaguar in Halewood, UK, but not an Escort-based multi-activity vehicle, with its lower profit margins.
Carmakers today have flexibility to shift sources quickly. Suppliers are a pressure-release valve when currency values shift. Firms in the wrong location will suffer. The new scenario underscores why the UK needs to be in the European Monetary Union.