Blog
Unit 3 Micro: Motorsport Valley and External Economies of Scale
12th July 2011
The occasion of the 2011 British Grand Prix at Silverstone in Northamptonshire is an opportunity to showcase the extraordinary growth and success of the motorsport industry in the UK. It is a classic example of the benefits that can flow from external economies of scale, and also of the way in which genuine competitive advantage in the global economy can be built and nurtured.
(Source: Independent, 9 July 2011)
Of the 12 teams in the 2011 Formula One world championship, eight are based in the UK (the exceptions are BMW-Sauber, Ferrari, Toro Rosso and HRT).
From Mercedes in Brackley and Force India at Silverstone to Renault and Williams in Oxfordshire and Redbull in Milton Keynes in Buckinghamshire - there is a particular cluster in Northamptonshire and Oxfordshire consisting of over 2,500 performance engineering and services companies employing thousands of people (including 25,000 engineers) and contributing over £2 billion to UK exports! Many of these businesses are at the leading edge of motorsport technology with over 30% of their turnover devoted to research and development.
According to the Motorsport Industry Association “The companies found within this motorsport cluster provide performance engineering solutions and act as a global centre for the production of performance cars’ chassis, engines, braking, suspension, transmission and telemetry components. A supporting services industry offering specialised legal, financial and insurance capabilities, has also built up around these world-class design and manufacturing businesses.”
The multiplier effects of the expansion of Motorsport Valley are considerable - extra income and jobs are created in events management, public relations, marketing, sponsorship businesses and local retailing and tourism.
The continued success of this high value-added industrial cluster cannot be taken for granted. Look east for evidence of emerging competitive challenges in the international motorsport sector with China investing vast sums in developing the capacity, technology and engineering skills-base to grow a motorsport sector of its own.
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.