UK manufacturing steps up pace

Posted on July 27, 2012

As Britain launches into the fevered razzamatazz of the Olympics, the country’s once-mighty manufacturing sector looks as though it might be cranking up – in a less overstated way – into a sustained period of overdrive.

While the broad economic data for the industry have been far from wholly encouraging, with official figures indicating that the sector is still in a recession along with the rest of the economy, the pointers from many individual companies have been much more positive.

    Lord Bhattacharyya, director of the Warwick Manufacturing Group, says: “Competitive conditions for industrial companies in the UK are as good as any time I can remember over the past 40 years.” He believes that one of the keys to this is an emphasis on “engineering-led” manufacturing, with increased focus on development of innovative products sold globally.

    However, Vicky Pryce, a former joint head of the government economic service, says the changes in UK industry have been as much about processes as products. “A lot of UK companies have moved ahead in terms of being flexible enough to fit into supply chains around the world and new ways of working with customers,” she says.

    The UK’s car industry – now almost completely foreign owned – has led the way in terms of upbeat messages.

    Thanks to a series of investments in production methods and new models, the signs are that Britain this year will produce a trade surplus on cars for the first time since the mid 1970s.

    As a result of £5.8bn of planned spending by companies such as Nissan, Toyota and Honda – all Japanese owned and which have been building up their UK factories since the 1990s – the car industry is likely to add roughly 12,000 new manufacturing jobs over the next 18 months.

    This week, Jaguar Land Rover – part of India’s Tata industrial group – announced it was adding 1,100 further production posts in the Midlands. Of the company’s 22,000 UK staff, about 5,000 are engineers – of whom roughly half have been recruited in the past three years.

    Elsewhere in the manufacturing sector, Princess Yachts – a maker of luxury boats – has been in the vanguard of new growth projects.

    Since 2009, the Plymouth-based company has added 500 new jobs as part of a £40m four-year expansion plan. About 90 per of Princess’s expected £250m revenues this year are likely to be exported.

    Chris Gates, Princess’s managing director, acknowledges that sales conditions for most manufacturers are “far from easy”. But he adds: “UK products are associated with good quality. There are lots of opportunities for manufacturers to do well over the next few years.”

    Behind such sentiments are indications that the whole of UK manufacturing has gone through a process of “reinvention” over the past 40 years.

    Few companies now base their output around “commodity” items – products made to standardised formats and which can be easily replicated by competitors in low-cost countries.

    Instead, the focus has switched to unusual or hard-to-make items that command a price premium. Higher prices make it possible for companies to base their manufacturing in higher cost countries, such as Britain, rather than emerging economies such as China or Brazil.

    A broad look at the economic data since the 2008/09 financial crisis paints a fairly favourable picture for UK factories.

    Since a low point around the middle of 2009, manufacturing has picked up faster than the economy as a whole, showing growth of 3.7 cent over this period, or twice the figure for gross domestic product.

    However, the figures should not detract from the fact that manufacturing output has – since June last year – fallen for four quarters in a row, as the whole of the economy has slid into a “double-dip” recession.

    Trade trends provide some grounds for optimism, though. Since the autumn of 2009, manufactured exports to the rest of the European Union have risen 20 per cent in value, while those to the rest of the world have climbed 48 per cent.

    In the car industry, the UK is now the world’s second-biggest maker of “premium” or higher-value cars after Germany, according to Professor David Bailey of Coventry University.

    Investments at the assembly end of car making are also triggering plant expansions at suppliers. Parts makers such as Lander and Cab Auto of the UK, Germany’s Schaeffler and Calsonic of Japan have announced plans for boosts in production.

    Mike Baunton, an industry veteran who is now the chairman of the Industry Forum, which provides training and consultancy for vehicle and component makers, suggests that past eras were not necessarily the “golden periods” that some remember. While, in the 1970s, UK manufacturing seemed superficially healthier, he argues that many of the companies were woefully uncompetitive.

    Exemplifying some of the trends is the UK arm of Yamazaki Mazak, a large Japanese machine tool builder, that employs 500 people in its plant in Worcester.

    A key part of the workforce are 140 design engineers who both devise new product families and are responsible for “configuring” current versions of products to fit in with customer requirements.

    Opening an exhibition at London’s Science Museum to showcase UK-made products, Vince Cable, business secretary, said this week that, given the recent trends, he could envisage the proportion of manufacturing in the economy “edging up to the mid-teens” in the next 5-10 years.

    Others say it will require a lot more government assistance, in the form of a state-backed industry bank.

    However, hopes remain high that, over the next decade, manufacturing in the UK could once again become a vital growth driver for the economy.

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