EEF blog

We are an SME based in Salford, employing 35 people and part of a multinational French-owned group which has a multifocal philosophy in that it allows its subsidiaries to run as autonomous profit centres and cater to local needs and customs, rather than imposing a centralised doctrine. We manufacture energy and data transmission systems for mobile equipment. With the demise of heavy industry we saw a dramatic decline in our traditional markets, principally the electric overhead travelling (or bridge) crane industry. We had to adapt or die; we chose the former option.

Ten years ago, although the fundamental business was sound, it was stagnating. It is not that we were short of ideas – far from it. However, creative thought often withered on the vine before a change of management liberated our engineers and allowed their considerable creativity to blossom as ideas were assessed, calculated but sensible commercial risks taken and, inevitably, survival and growth ensued.

We changed from being a mere supplier of components, a role which had brought considerable success for the past forty years, to a provider of solutions, listening to customers’ requirements and developing innovative solutions to their specific problems. This led to our designing safety systems for use in rail depots and to adapting our core product (insulated conductor bar) for use in the precious metal mines in South Africa.

When we did the maths on the rail contracts we had won, we discovered that the conductor bar portion (which, previously, would have been the only element we supplied) represented a mere 5 per cent of the total contract value. So, our conscious decision to change emphasis had a tangible and extremely positive effect on our business. Without that change, it is unlikely we would still be here today. 

Again – adapt, change, innovate or die.

The challenge now is the next generation of change to ensure succession and longevity of the business. We are embarking on a partnership programme with a highly technical and capable local University to seek out new opportunities, either for new products or new uses for existing ones – and that is the beauty of manufacturing. It is the ability to do something, to make a difference and keep the wheels turning.

It may be a simplistic view but I have always believed that someone has to create the wealth to sustain the nation and the safest and most fulfilling way to do that is to actually get off your backside and make things.

Alan Jones
Managing Director
Conductix-Wampfler Ltd

Numatic International Ltd is a British-owned company located in Chard, Somerset. We employ over 700 people in the design and manufacture of a wide range of cleaning equipment for the commercial and industrial markets.

Products range from a mop and bucket to a £10,000 plus ride-on Scrubber/ Dryer. Although commercial and industrial are our target markets, our best known product, Henry vacuum cleaner has made great advances into the domestic market as well.

The company was founded 40 ago years and has grown consistently every year, proving that manufacturers can be very successful in the UK.

Numatic passionately believes in UK manufacture and, wherever possible we source from the UK or Continental Europe. But today’s world is a truly global market place so we buy and sell in many countries.

More than 40% of our output is exported to markets throughout the world, either through agents or one of our four subsidiary companies. The factory is very far from being a ‘screwdriver plant’ where products are just assembled. Processes such as injection moulding, rotational moulding, laser cutting, robotic welding and powder coating are carried out in our modern factory covering a 25 acre site.

Such is the pace of change with new technology that we have to keep pace or lag behind at our peril. The skills, knowledge and experience of our employees are absolutely essential ingredients for our future.

Besides a very successful apprenticeship scheme we put great emphasis on developing and upgrading the skills of our entire workforce. We’re the second largest employer in the town and draw employees from a wide area so the skills and jobs we provide are vital to health of the local community.

We cannot see how the UK can possibly enjoy the high standards of living we do without a solid manufacturing base. We’re still the world’s 6th largest manufacturing nation and, with the right business environment and positive support from the media, there is no reason why we cannot maintain, even improve, on that ranking.

We see the key priorities for government are:

• Raise the public perception and awareness of the scale and importance of manufacturing (and not just new technologies) to our economic wellbeing.
• Encourage investment in both capital equipment and new product development, and not just for SME’s.
• Support skills development. Both the Manufacturing Advisory Service and the Train to Gain scheme have been very beneficial here.

Andrew Smith
Manufacturing Manager
Numatic International Ltd

NOTE: In a three-part series, Stephen Radley, EEF's Director of Policy and External Affairs, will assess the future for UK manufacturing. The first installment will look at how UK manufacturers weathered the recession, the second will look at the prospects for growth and the third - which will coincide with the launch of EEF's Manifesto for Manufacturing - will set out what the next government can do to rebalance the economy.

Like the rest of the economy, manufacturing has been through a tough time over the past 18 months. But more recent signs - including EEF's latest quarterly sruvey of members - suggest that the mood amongst manufacturers is changing.

But just because things are looking brighter for manufacturing, we shouldn’t be complacent.

The recession will have damaged supply chains, some companies will struggle to find the skills they need to meet increased orders and businesses will remain vulnerable if they cannot access the additional working capital they need in the early stages of a recovery.

But the more positive figures should also serve remind us of the major strides that manufacturers had made before the banking crisis hit. 

Even up to the middle of 2008, many manufacturers were reporting their best results for at least a decade: Investment intentions were strong. Profitability was soaring. And employment was expanding.

These gains were achieved on the back of a fundamental rethink of what UK manufacturers needed to do to compete in world markets. The recession of the early years of the last decade had shown that too few manufacturers had the right strategies to cope with the rise in competition from lower labour cost countries and with unfavourable movements in exchange rates.

One of the most significant changes has been a shift away from competing on costs.

EEF research in 2004 showed over a third of companies aggressively cutting prices in response to lower labour cost competition. By 2007, this proportion had fallen to just one in eight firms.  In addition, almost half of them had considered but rejected this option, recognising that this was not a sustainable response to low-cost competition. 

In contrast, nearly six in ten manufacturers had taken action to increase focus on innovation with a further 30% either planning to or considering it.  Companies also reported that they were seeking to compete by developing niche products and service offerings. Reflecting these changed priorities, more manufacturers reported that design and development rather than production and assembly would be a key source of competitive advantage in the future.  

Their commitment to these strategies is illustrated by last year’s annual EEF Innovation Monitor which showed that despite the recession, manufacturers reported an increase in most forms of innovation and expected this to continue. Our research also showed that companies were taking a longer view of investment with payback periods lengthening and were increasingly focusing on more intangible forms of investment such as research and development, design and marketing and organisational change. 

This change of tack has already started to deliver results.

After lagging behind the rest of the world’s major advanced economies in the 1990s, UK manufacturers were second to only the United States in improving productivity in the years before the recession. And despite the biggest contraction in world trade since the last world war, a recent EEF survey showed that over a third of manufacturers had managed to expand their exports, with a further 16% maintaining export volumes. Indeed, some 15% recorded an increase of 10% or more in exports. 

We are also starting to see some manufacturers starting to bring production back from abroad. Our most recent research showed one in seven firms doing this, in part reflecting disappointment with the cost savings and quality standards achieved by their investment abroad and concerns over getting products to market fast enough.

But it also demonstrates that more manufacturers have found that they can compete from a relatively high wage cost location like Britain...and it's why UK manufacturers are leading the economy out of recession.

JJ Churchill Ltd. is a 72-year old precision engineering business. Looking forward, as a family business of 100 people, perhaps the most straightforward course of action during the recovery would be to either to not take too many risks by continuing in our current markets (aerospace, diesel engines, defence and cutting tools), or to give-up and sell-out. 

But neither of those options would see the company getting close to what it could achieve with a little investment, vision and decent strategic planning.

So instead, we’ve recognized what were good at – innovation – and are using it to our advantage.  On the one hand, SME or not, we compete in a global environment and our customers usually have choice of supplier, but at the same time we operate in a high labour cost economy and are not about to re-locate to China.  So unless we know we can be the cheapest (we aren’t), innovation is our only way forward.

Of course, as a sub-contractor it would be easy to assume that as the designs we manufacture to aren’t ours, we can’t innovate – but this is lazy. 

We’ve made massive strides forward in process improvement, we’ve identified the markets in which we really have an advantage and we’ve invested aggressively to move up both the technology and value-add curves.  To have the confidence to do this – and that’s meant substantial counter-cyclical capital investment – we needed a rolling strategic plan that looks forward 5 years and sets our stall out.

This, I think, is what makes the difference: a good plan gives management confidence and clarity of purpose, it is the standard to which all investment decisions are assessed.

But just as important, it provides the foundation for regular communication with the bank (through good times as well as bad).  After all, the banks are also a business, and for them, a credible business plan is a lower lending risk – and that should equal a lower interest rate. 

My plea then is that every manufacturing business, no matter how small, should invest real effort ensuring they have a decent strategic plan, that it has resonance with their stakeholders and that it really is going to take them to where they should be aspiring.

Andrew Churchill
Managing Director
JJ Churchill Ltd

With all the talk of rebalancing, Robert Allen at Oxford University takes a look back into history and asks why the first industrial revolution took place in 18th century Britain and not elsewhere.

His answer? Britain was a high wage, cheap energy economy that encouraged investment in technolgoy rather than labour:

"It is still not clear among economic historians why the Industrial Revolution actually took place in 18th century Britain...Answers to this question have ranged from religion and culture to politics and constitutions....[But in reality] the British Empire’s success in international trade that created Britain’s high wage, cheap energy economy, and it was the spring board for the Industrial Revolution

The technologies of the Industrial Revolution were only profitable to adopt in Britain, that was also the only country where it paid to invent them. The ideas embodied in the breakthrough technologies were simple; the difficult problem was the engineering challenge of making them work. Responding to that challenged required research and development, which emerged as an important business practice in the eighteenth century. It was accompanied by the appearance of venture capitalists to finance the R&D and a reliance on patents to recoup the benefits of successful development. The Industrial Revolution was invented in Britain in the eighteenth century because that was where it paid to invent it."

So now that we're in a high wage, expensive energy economy will we really see another industrial revolution?

Yes, but as Allen suggests, only if it pays to invest in technology and develop innovations in the UK.

The £1.5 trillion question is does it pay to be a manufacturer in the UK as opposed to any other country in the world?

Probably, but not nearly as much as it used to. And that's the challenge facing our economy today.

A few month ago, I spoke at a North West RDA's launch of its Manufacturing Strategy. My talk was on innovation in manufacturing, but during the panel debate afterwards, I got a fairly pointed question:

"Do the politicians get it?"

The answer I gave was a resounding 'No'. Beyond Lord Mandelson, there's little understanding of what makes modern manufacturing successful.

The audience grumbled, so I pressed them: Why, did they think, did finanical services get a light-touch regulation over the past 20-plus years? Because they stood up and asked for one. They argued fairly persuasively that the UK needed to move to a 'post-industrial' economy, and the politicians gave them what they wanted.

While the devastating depth of the recession has proved the City wrong and got people talking about manufacturing again, where are the manufacturers standing up, demanding to be at the heart of a healthy economy?

At EEF, we're doing our bit - our Manufacturing. Our Future. report was the first step in a campaign to shout about what manufacturers need to be successful.

But as an election draws closer, it's time for manufacturers themselves to stand up and get engaged.

That's why we've started our 'We ♥ Manufacturing' campaign. It's not really driven by EEF, but by manufacturers talking about why manufacturing matters. The audiance is prospective MPs and the public. If you support manufacturing, then tell us why. 

How else are the politicians going to 'get it'?