The Government has launched several important strategies to support industry in the last 18 months, targeting areas where UK plc has comparative advantage and growth potential. Malcolm Wheatley asks how can manufacturers and tax-payers measure the value for money of these strategies.
Back in July, with much fanfare, the Government announced an advanced manufacturing initiative aimed at helping manufacturers to seize the opportunities provided by emerging technologies.
Announcing investments totalling £151.5m, Business Secretary Lord Mandelson stressed the value that the government placed on the manufacturing sector.
The targeted initiatives in up-and-coming manufacturing technologies — such as in plastic electronics, aerospace, and silicon design — would provide, he said, “the support needed to create jobs in Britain, and export the best of British manufacturing design, technology, skills and innovation around the world.” More examples came forth in abundance.
A £12m expansion of the Printable Electronics Centre in Sedgefield, which focuses on display technology, would create up to 1,500 jobs by 2014.
The Technology Strategy Board, too, would invest a further £5m in collaborative R&D projects as part of its High Value Manufacturing competition, in addition to the £24m invested earlier this year. And a £4m expansion of the Manufacturing Advisory Service (MAS) would help it provide a wider range of businesses.
Rolls-Royce fared especially well from the launch. It received £45m in funding to create four new advanced manufacturing facilities in the UK, creating and sustaining around 800 jobs.
Separately, it was involved in leading a programme, also valued at £45m, to support research and technology critical to the development of low carbon aircraft engine technology.
And finally, the company was once again involved in leading a collaborative programme to accelerate the development of specific manufacturing and product technologies.
Going under the acronym Samulet — Strategic Affordable Manufacturing in the UK through Leading Environmental Technologies — the programme was intended to focus on productivity and environmental improvements, including more efficient advanced manufacturing processes. Government support in Samulet totals £40m — £28.5 m from the Technology Strategy Board, plus a further £11.5m from the Engineering and Physical Sciences Research Council.
Tracking the ball
While noteworthy for the scale of the sums involved, this initiative was far from the only one launched by the Government in the past 18 months. Beginning with the principle Manufacturing Strategy in September 2008, an Advanced Manufacturing Marketing Strategy administered by UK Trade & Investment designed to boost overseas sales of British advanced manufacturing companies was announced in March, then the Low Carbon Industrial Strategy in July, followed by a composites strategy and plastics electronics strategy towards the end of 2009. Most recently, in January, came Going for Growth – yet another ‘big picture’ industrial initiative.
In short, after years of relative neglect in terms of direct support, the Government has returned to 1960s-style activist industrial policies, a move that The Economist newspaper puts squarely at the door of Lord Mandelson. Government, it quoted him as saying, must no longer “simply stand on the sidelines.” Instead, it must actively foster and nurture the growth that it seeks.
But is the Government getting value for money? How well does that investment translate into jobs, exports, and real competitive edge? Which companies truly benefit, and what evidence is there that industrial policies like these really make a difference to the broader manufacturing sector?
The answers are by no means obvious. Take Rolls-Royce for example, which has been a big beneficiary of this government largesse. Over six months on, and arguably many more, given the pre-planning and negotiations that must invariably precede investments on this scale, what has the company actually achieved? How far advanced are the four manufacturing centres, or merely the plans for them, and how many new jobs are involved? If Rolls-Royce knows, it is remaining tight-lipped.
While anxious to avoid being seen as stonewalling enquiries with a bland ‘no comment’, the company manages to achieve much the same impression by emphasising that there isn’t yet much to report.
Updates on some parts of the £151m project will not be available “for some months.” It is a fair to say that these high spend projects are long term, where accurate monthly reports are not always practical.
The Department for Business, Innovation and Skills, which awarded the funding last year, has said the location of the civil nuclear factory will be in South Yorkshire. A site is mooted for location in Washington in Tyne & Wear. A new factory to build military fan blades for the Joint Strike Fighter assembled at Rolls- Royce Barnoldswick is part of the plan, although it’s not clear if the new facility will be built alongside the Barnoldswick site or elsewhere.
Nor, it transpires, can government bodies such as the Technology Strategy Board cast very much light on Rolls-Royce’s progress with Samulet either, despite holding some of the purse strings, and despite pointing to sophisticated and mature project management processes that should surely see metrics, which are return on investment-centric, pulled together.
Given that Rolls-Royce is in direct receipt of around £90m of taxpayers’ money, with a lead role in more, is it appropriate that there is little else to add on the detail? At the very least, it’s not hard to construe an argument that companies should be obliged to be a little more open about how effectively they are spending government money.
More worryingly, when the company is tasked with using public money to lead collaborative programmes involving suppliers and other manufacturers, why should it be so difficult to find out which other businesses that company is reaching out to, and the broader benefits in the supply chain that are emerging?
Grass roots experience
While it is not simple to deliver the updates on strategy spending that some people demand, there is another point about the make-up of the strategy itself. Talk to some observers of British manufacturing industry, and it’s not difficult to come across criticism of the way that the allocation system works.
“The Government is well-meaning, but how many times do you see the same big engineering employers involved when a manufacturing initiative is announced?” says Terry Watts, chief executive of Proskills, the Sector Skills Council for the process manufacturing sector. “These are good companies, but they are only a part of manufacturing industry, not all of it. I’ve argued that there should be a moratorium on working with these companies, and future new money given to new names.” Paul Foot, a patent attorney at patent and trade mark attorneys Withers & Rogers, is equally critical of the government’s approach – especially when it comes to benefits spilling down to smaller companies.
The game, he alleges, is quite simply rigged towards favouring a select few large manufacturers.
“When bid applications are being assessed, there are usually a set of predefined criteria that often won’t be clear to the typical smaller company. But if you’re one of the ‘magic circle’ that knows what those criteria are, then writing the bid and getting the money is straightforward,” he says, referring to companies who are more often on the government’s radar for targeted support.
Steve Kelly, chief executive of high-tech printed electronics start up SmartKem, agrees.
After eight years heading a venture capital-backed manufacturer in the North West, he thought that obtaining grant funding would be straightforward – especially for a manufacturer working in printed electronics, one of government’s advanced manufacturing hot target industries.
Drawing a complete blank, he was forced to relocate the entire company 90 miles across the Welsh border, in order to secure equity funding from Finance Wales and grant aid from the Welsh Assembly. Both were made available in a matter of a few weeks.
“Government schemes fundamentally tend to reward safe ideas rather than lateral thinking,” he charges. “They tend to reward companies that know how to prepare documents and business cases in the right way, rather than ground-breaking, innovative ideas.” This view can be countered by some elements of the Advanced Manufacturing strategy, which have supported projects like the Technology Strategy Board’s High Value Manufacturing competition, benefiting businesses such as Martin Goosey Ltd, a small electronics development company that has received £67,000 from the competition towards a £135,000 project that will develop a lower-energy process for the manufacture of printed circuit boards, using ultrasonic technology.
Not everyone shares Steve Kelly’s view. “It is easier to work with and support larger companies such as GKN, Airbus and Rolls-Royce,” observes Dr. Andrew Mair, chief executive of industry forum the Midlands Aerospace Alliance, which represents the interests of 260 aerospace firms in the Midlands.
“And in doing so, the government hopes that the benefits will trickle down the supply chain.” Even so, he acknowledges, the reality is that many of those firms won’t directly see that help, even though they might ultimately experience a higher level of order intake: the time lags involved are too remote, and the linkage too diffuse.
“Government needs to find a way of helping these smaller companies as well,” says Mair.
“It can be done, but there needs to be a better understanding of just how to help them.” For its part, of course, government would point to very specific help targeted at smaller companies, in the form of yet another expansion of funding for MAS, contained within the announcement that brought Rolls-Royce its largesse. This was £4m to help a wider range of businesses improve efficiency and increase orders, in addition to the £4m expansion announced as part of the Low Carbon Industrial Strategy a few months earlier.
And although the gap between Rolls-Royce’s near £100m and the sums given to MAS are almost risible, there’s little doubt that MAS is skilled at squeezing a lot of value out of the funds that it does receive.
Measuring return on investment
In terms of advanced manufacturing, for example, MAS national network manager Roger Parr points to work undertaken with Cambridge based touch screen technology manufacturer Visual Planet. The outcomes: a reduction in cycle time of 10%, an improvement in productivity of 20%, and a reduction in failures of 8%. Ironically, Lord Mandelson visited the manufacturer as part of the launch of the Advanced Manufacturing initiative after this work had been done.
Such successes don’t grab headlines but, measured as pound for pound ROI, the MAS example seems to be a stronger measure of the fund’s success.
And Visual Planet is just one example. Throughout 2009, points out Parr, MAS dealt with 12,200 enquiries, conducted 6,000 manufacturing reviews, set up 600 events, and achieved £145m in gross value added. Overall, he reckons, MAS has delivered an ROI of £7 for every £1 spent from the public purse.
Of course, Rolls-Royce — and other large beneficiaries of government funding to support the manufacturing sector — may yet deliver ROI that is as great, or even greater, than the MAS examples.
And the company is doubtless correct in saying that it is only part way through a long term programme.
Feasibility studies and planning for four new factories do not happen overnight.
Even so, taxpayers, SME manufacturers and all those interested in seeing value for money in government-industry collaborations can be forgiven for thinking that a little more clarity in the reporting of what is being spent, how it is being spent and what the results might be would be welcome by many, if they are not technically a duty of care.