Special section – Sparking ideas for UK manufacturing
With concerns about the state of UK manufacturing, Meagan Ellis takes alook at niche fields where UK firms are making a name for themselvesand the challenges that lie ahead.
Last month saw the UK television premiere of ‘Made in Britain’, a documentary following comedian Dom Joly as he attempts to equip his entire home with UK-made products. While he had expected to only have to give up his more elaborate electronic gadgets, Joly watched in horror as his house was emptied of two-thirds of its contents, including German appliances, a Japanese television and Taiwanese clothing. Even his bed and wife’s make-up were removed.
Like many people in the UK, Joly had no idea how much his local manufacturing industry had shrunk. Competition with foreign technologies and lower cost bases has seen production sites for items that were once the stalwart of British manufacturing flee abroad.
However, those companies that remain have managed to make a name for themselves in niche fields. With the current economic difficulties, there are concerns that these industries could be irrecoverably damaged, but there are signs that the industry is rallying. According to the Manufacturing Optimism Index produced by UK accountancy firm BDO Stoy Hayward, ouput increased by almost three points between April and May, and with it has risen manufacturer confidence.
So what more should producers do to ensure survival in these difficult times? The answer, says John Parker, Chief Executive of the UK Cast Metals Federation, is the same thing they have been doing for several years.
‘In times gone by, when we had recessions not nearly as bad as this, we’ve had some big casualties,’ he explains. ‘But we’re much more resilient now.’
The past decade has seen casting companies compete with developing countries, particularly China, who are producing the high volume, low value parts that were previously a staple of UK industry. While many firms went under, some adapted strategies to produce complex, high integrity parts that were not made overseas, such as thinner-walled castings. This has involved experimenting with different metal alloy chemistries and investing in new skills and machinery.
The UK’s 400-plus foundries are now considered experts in power generation products, such as turbine blades, as well as investment casting used for high integrity, tolerance and surface finish items, including medical tools. Parker says his members receive requests from customers around the world.
‘Clearly, some have had to reduce working times [and] some have had to make redundancies, but they’re better equipped now than ever before to respond to that.’
Addressing a niche market is key, agrees Graham Dewhurst, Director General of the UK Manufacturing Technologies Association.
‘I don’t think the UK will ever get back into making toys. That is forever going to go to a low-cost economy type of manufacturing. The UK is now involved in the very high-end of technology, at least, that’s what our members have done since the late 1990s. They are [now] under threat, not just from low-cost economies, but economies that have decided they are going to chase technology also. The Russians, for example, have always been high technology-led, but we’re still capable of supplying into their country at the top end. And that’s what we aim to do.’
Members of the Association specialise in the use of five- or six-axis machinery to produce complex shapes in exotic materials. Those who are supplying to markets that have not been as widely affected by the recession – such as the medical, defence and aerospace sectors – are performing quite well, says Dewhurst.
One area of the UK market that is experiencing severe problems is automotive manufacture. However, for those focusing on specialist products within this field, the economic effects have not been so widespread.
Spray coating specialist Zircotec, based at the Harwell Innovation Centre in Didcot, has seen its business grow over the past five months, and is making plans to move to a larger location later this year.
‘We put that down to the fact that we don’t do mass-market production cars,’ explains Managing Director Terry Graham. ‘We sell to the high performance, premium car market, such as Lamborghini.’
The Zircotec plasma-spray ceramic coating has been adapted from the nuclear industry. The technology is said to offer good thermal barrier and wear resistance properties, and has proved popular for Formula 1 race cars.
‘We have two or three patent filings now, and quite a lot of intellectual property. That puts us in a strong position.’
Maintaining this edge requires constant innovation, he adds. The company has just launched an off-the-shelf flexible ceramic coating. The 100µm-thick SuperFlex can be moulded to irregular shapes, says Graham, and will allow customers to apply the coating in-house.
Investing for the future has become a habit for bpi.films, a division of British Polythene Industries that manufactures pallet stretch, shrink and converter films. The company recently spent £10m to upgrade its Leominster factory to increase production of its seven micron stretch wrap. The firm says it is the only film producer in the UK to offer a five-layer cast film line.
‘You have to change faster than the competition,’ says Dr David Pendlebury, Managing Director of bpi.films. ‘In my career, the weight of the plastic used to package a loaf of bread has come down by a third. This is how we innovate. We look at our customers and try to figure out what they will want in the future.
‘But to do that we have to put the investment in. We put our depreciation into buying new machinery and modifying existing machines so that we can survive. We have the ability to make very thin films with accurate gauge controls. Customers come to me and I can take their film down from 35µm to 25µm, which gives them some savings.’
Aiming your product at the right market is important, he adds. ‘I look for who is still going to be here in 10 years’ time. It was fairly obvious that Dyson wasn’t going to keep making vacuum cleaners in the UK, because the maths just didn’t work compared to putting them together in Malaysia. So you know you would only be supplying to this type of customer on a short-term basis.’ Pendlebury’s main buyers are in the UK agriculture, food and drink, health services and construction sectors – creating items that cannot easily be produced abroad.
He adds, ‘Could someone import my product from China? Yes. But they haven’t got my machines, they can’t give the product control, and they can’t meet the market demand where everything is wanted in six to seven weeks’.
Filling the skills gap
The greatest threat to bpi.films right now is not the recession or varying customer demands, but finding the right people to work with the increasingly high-tech machinery, explains Pendlebury.
‘When I started in plastics they employed people with big muscles. These days the robots do everything,’ says Pendlebury. ‘It is getting harder and more expensive to get the technicians I need to run fully automated £4-5m investment lines. It is difficult to convince maintenance and electrician graduates to work shifts, so you end up paying them higher salaries. That is an issue I certainly wouldn’t have in China.’
Retaining skilled workers is a common problem, notes Dewhurst. ‘One of the issues we had in 2008 was a skills shortage. The fact that our guys are now working with lower turnovers hasn’t alleviated this.’
Many hard-hit companies still refuse to lay-off hard-to-replace employees, and have implemented other cost-saving actions. A June survey by the Keep Britain Working campaign found that 54% of UK workers have experienced a pay cut, a reduction in hours or a loss of benefits.
Parker worries these actions are still too expensive for those companies with empty order books. He would like to see the Government bring back the short-time working subsidies it offered in the early 1980s.
Dewhurst believes there should be more support for funding training and recruitment. This would go hand in hand with financing start-up firms. ‘We have a huge number of small companies working in the high-end aerospace sector, Formula 1, oil and gas – the bedrocks of British manufacturing,’ he says. ‘All of them are technologically capable but are struggling to find finance to support them for the next two to five years. With the right finance in place, it will encourage them to have a long-term view. And once you have a long-term view, you can train and you can invest.’
Pendlebury agrees that the money should not go to established manufacturers like bpi.films, but young, creative companies. ‘I think [the 2009 UK Budget] offered around £750m for emerging technologies. They should quadruple it. What we need is the next Apple Corporation, people who will make things and be innovative in the UK. We need embryonic companies which are going to employ a lot of people, because they are also going to buy packaging from me.’
Further information: Cast Metals Federation, Zircotec and bpi.films
China – danger zone or land of opportunity?
Barwell, a UK equipment manufacturer for the rubber industry, announced in May that its production capabilities have been transferred to a site in Shanghai, China. This move is just part of a recent trend. In 2007, global financial services firm Deloitte & Touche reported that China was the number one destination for global manufacturing operations. In the UK, fears remain that the Chinese will completely replace all local production capabilities.
However, several UK companies are reporting an uptake in orders from customers that had previously bought from China. ‘We have feedback from members saying they won business back from China for a number of reasons – logistics, quality and cost,’ says John Parker, Chief Executive of the UK Cast Metals Federation. The high cost of materials has driven up prices for all countries, he adds.
The UK Government is now encouraging an increase in UK exports, including to China. In March, 50 Chinese executives signed trade agreements with UK-based companies, including a £1.2bln deal for Rolls-Royce engines and another for 13,000 Jaguar Land Rover vehicles.