Takeovers and the state of UK manufacturing

Materials World magazine
1 May 2006

In recent columns in Materials World, I have bemoaned the relative decline of British manufacturing and its associated R&D, and the extent to which our industries have been taken-over by foreign companies. In a letter in the April issue, David Taplin chastises me for being so pessimistic and suggests that the British are a skilled and fulfilled people with innovative industries in health, lifestyle, aerospace, creative entertainment and materials.

Areas of growth in British manufacturing

Britain does indeed have many strengths and, as pointed out by journalist David Smith, the Office of National Statistics (ONS) has compiled a list of the top 10 areas which are expanding and within which Britain are succeeding. These are – computer services, other business services, insurance and pension funds, recreational services, owning and dealing in property, letting of dwellings, market research and management consultancy, construction, hotels and catering, and retailing.

However, when we come to examine the 10 industries identified by the ONS as having declined most sharply a different picture emerges. The list is – leather goods, textile fibres, clothing and fur, footwear, knitted goods, man-made fibres, non-ferrous metals, insulated wire and cable, iron and steel, and coal extraction. The second half of this list is of particular interest to our Institute.

It is often claimed that as traditional markets disappear Britain compensates by producing high technology products. However, Michael Saunders of Citigroup points out that whereas in the period 1992-97 there was a marked shift in Britain to manufacturing high-technology products, high-technology has declined since then at a faster rate than its lower-technology equivalents.

Takeovers of British industries

Turning now to the related topic of takeovers of British industries, I once had lunch with Sir Alastair Pilkington who gave me a fascinating account of the development of his process of obtaining optically flat glass by solidifying it on pools of molten tin. Pilkington has always been an innovative company and when, some twenty years ago, it was threatened by a takeover bid, there were demonstrations in the streets of St Helens, its home town. A few months ago, Pilkington was sold to the Japanese glassmaker, Nippon Sheet Glass, with hardly a murmur of protest – such has been the change in culture.

Foreign sales of our industries continue apace – what McMillan would have called ‘selling the family silver’. Now that Corus has sold its aluminium interests, it is more vulnerable to a takeover and its shares have risen in anticipation.

The fear that Matthew Gemmill wrote about in our January issue has come to pass. BNFL has indeed sold (to Toshiba) Westinghouse – the American company it owned – which was poised to sell its world-quality PWR in the world market following the expected renaissance of nuclear power. In like vein, BAE plan to sell its 20% share in Airbus at a time when the European company is beating Boeing with an order book for 2,000 planes worth US$220 billion.

The government’s purpose in allowing our companies to be sold in the world market is the hope it will improve efficiency. In fact a recent study at the University of Manchester has demonstrated that big mergers and takeovers have no improving impact on companies’ performances, but they do increase senior executive’s salaries...

Who is in the right, Panglossian Taplin or Cassandra Harris? Another letter in April’s Materials World was from Jane Goodman who gained a 2.1 in Metallurgy and Materials from Cambridge, and tells us that she has failed to find a job. In desperation she is thinking of becoming an accountant! Jane has said all that needs to be said. Hers is the still small voice.

Further information

Office of National Statistic