This spring two major car manufacturers announced significant investment in car production within the UK, bringing with it a much-needed boost to jobs in the manufacturing sector.
In March, Jaguar Land Rover announced 1,000 new jobs at its Halewood plant on Merseyside due to strong demand for the Evoque and Freelander 2 models built at the site, and just recently Nissan announced 225 jobs are to be created at its plant in Sunderland that already employs over 6,000 workers.
These job announcements are a welcome shot in the arm to the UK economy, which has seen rapid declines in the manufacturing sector alongside alarmingly high levels of general unemployment amongst the population. Importantly, the impact of these two announcements goes well beyond the 1,225 new jobs in question.
(The chart below shows recent historic employment for motor vehicle manufacturing)
Any investment and job creation has a wider impact to the economy due to the multiplier effect. For these 1,225 new jobs many additional jobs are created as a result. For example, the components industries that supply parts for the production of the cars in question will need to increase output through creating new jobs, logistics companies who transport these components from the manufacturer to the car plant will carry greater amounts of cargo which will require more trips and therefore additional drivers, warehousing staff and so on. The multiplier effect doesn’t just take account of the supply chain; greater wealth amongst the local population from attracting new workers to the area or from employing previously unemployed people will also have a benefit to the local leisure and service sector. With a greater amount of disposable income spent in bars, restaurants and shops comes the need for more workers to serve these new customers.
These multiplier effects vary by industry and geographic location depending on the nature of the business involved, its importance to the local economy as a whole, its typical supply chain, and the wealth creation within its constituent jobs. EMSI’s Economic Impact module, which is part of Analyst can model the impact of job creation to understand the wider value these new jobs provide to the economy as a whole.
Based on the specific multiplier effects associated with the car manufacturing industry, the creation of these 1,225 new jobs is likely to create some 5,370 jobs in total across Great Britain, meaning almost 3½ new jobs will be created for every one job created in Halewood and Sunderland.
The sectors that are most likely to benefit from these additional new jobs are the retail and manufacturing industries, with over 2,000 new jobs in total – a figure that is even greater than the original number created at the two car plants in the first place (which are not included in the manufacturing sector totals).
The effect is not just felt in the locality of the car plants in question either. The benefits follow the supply chain, and work through company networks across local, regional, and national offices to create a ‘leakage’ effect, widening the benefit to neighbouring counties, regions and right across the country.
Below we have included two charts that show the potential impact of the new jobs. This was generated using our input-output model.
If you are interested in learning more, please contact Andy Durman.
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