Bring it on!

Posted on 18 Aug 2008 by The Manufacturer

Andy Reynolds Smith, chairman of the CBI’s Manufacturing Council, and executive director of GKN, talks to Gay Sutton about his work to boost the strength of UK manufacturing and repair its outdated image

Ask a busy man to do something and he will create the time in which to do it. At 42, Andy Reynolds Smith is a busy man, and one engaged in the battle to promote UK manufacturing and boost its competitiveness. In his ‘day job’ he is executive director of global aerospace, automotive and off highway giant GKN, with £4.3 billion sales in 2007, 42,000 employees and around 200 manufacturing locations around the globe. He sits on the group board and is responsible for a portfolio of businesses including powder metals, the off highway business and industrial distribution.

In addition, he has recently accepted group executive responsibility for China. “We currently have nine operations in China, we’ve just announced our 10th, with plans to grow to 15 in the next three years. We felt it was time to take a coordinated approach to the Chinese market so we are properly leveraged on a resource, government and customer relationship basis, and can get the best positions from a people perspective. Obviously, recruiting as a group of 15 plants in China rather than recruiting as a single plant makes a very big difference to attracting and retaining talent over there.” And, he assured me, the challenges of retaining talent in that hugely competitive and growing marketplace are enormous.

In July last year, life became that little bit more interesting for him. He was appointed chairman of the CBI’s Manufacturing Council, and he sees this leadership role as pivotal. “We find ourselves in challenging times economically. There are clear issues around global liquidity, commodity and utility costs, and weakening market conditions in some areas of the world. Difficult times call for some bold and challenging actions.”

The timing of the appointment was immaculate for a man who passionately champions the cause of manufacturing. Hot on the heels of his appointment, the Government announced a review of its manufacturing strategy and he now sits on the ministerial advisory group advising DBERR on the review, due to be launched later this year.

The first Government Manufacturing Strategy, launched in 2002, led to some truly effective initiatives such as the Manufacturing Advisory Service (MAS). “But while the strategy had very powerful content, its deployment was not as strong as we would have liked. Now, given the changes in market conditions: very strong globalisation and a very strong focus on the low carbon economy,” he said, “the timing is right for a serious review and refresh of the strategy.”

The strength of UK manufacturing should not be underestimated, he believes. We have the advantage of a flexible labour environment, which we must maintain. The UK provides open access to other global markets through various historical and business links, and we have a strong science and innovation base.

GKN is very active in promoting engineering, and it sponsors the Science, Engineering and Technology Awards, “and what a super event that is,” he said. “You go along and recognise the brilliance of the student base, and the level of technology they’re studying at.” But our weakness, he explained, includes very poor links between that brilliant innovation base and industry, “the availability of skills at the right levels. Getting the right policies in place to support innovation, the strong perception of the increasing regulatory burden versus some of our developed country competitors, and we’ve got to say image.” He is working to tackle all these issues in the strategy review.

The first area of focus – creating the right environment for manufacturing to flourish – has long been a bone of contention for manufacturers who see the road and rail system failing industry, and the burden of regulation and taxation stifling its competitiveness. Here the group is looking at a broad range of topics including the infrastructure for industry, and is focusing particularly on the regulatory environment. “Creating a level playing field from a regulation perspective,” he explained. “If I could give an example: business tax. It’s clear there is a belief among business leaders that the UK’s corporate tax regime is more burdensome than it was five years ago. And… current trends show that, relative to other developed economies, it could deteriorate further in the next two to three years.”

On the issue of skills, “simplification is where we need to be,” he said. “The problem isn’t a lack of total funding. I’d be very happy if we took the funds available and deployed them in an effective way. It’s how we can focus the funding and direct it through a simplified structure.”

The recent years have seen a proliferation of Government skills bodies, beginning with the Learning and Skills Council which was set up in 2001, and culminating in the Sector Skills Councils and the recently launched National Skills Academy for Manufacturing. Each one of them was expected to solve the skills problems. I wondered whether he expected to see some pruning of these very heavy and overlapping administrative structures. “We’re certainly reviewing that. But at this stage I don’t want to prejudge it. We’re currently at the stage of agreeing the scope, the objectives the deliverables, and the timeline for the strategy.”

However, he pointed out that the issue was not just about further or higher education. “It goes straight the way back into primary and STEM skills in schools, getting people understanding and excited about engineering sciences and mathematics early enough, and then taking that through further education and vocational training with, of course, clear support from businesses. I think business understands that it has a key role to play here,” he said, “particularly in vocational and, to a certain extent, further education. Both sides have to play the game.

“But it’s impossible to disconnect skills and image,” he continued. “And one of the key issues for manufacturing today is improving the sector’s bad image. There has been a much quoted piece of research done in one of the major newspapers where they asked people to rank where they thought the UK would be in global terms from a manufacturing perspective. The answer came back as 25th, whereas the reality is that we’re the 6th largest manufacturing nation globally.”

Changing this negative perception of manufacturing is one of the core pillars of the strategy review. “If you get the image right and well understood at all levels,” he believes the relevant skills will follow.

“There’s also a really strong recommendation in place that we proceed quickly with the Manufacturing Media Centre that is aligned across manufacturing and engineering industry,” he continued. The Media Centre is likely to be similar in nature to the Science Media Centre, which has had a great impact on the image of science. “One of the areas currently being looked at is the possibility of aligning the two,” he said.

He did agree that changing the image of manufacturing is not something that can be done single-handedly by Government initiative, though. “No, indeed not. One lesson that I’ve learned recently is to talk to 16 to 18 year olds who are in the process of making core decisions about their study and careers development. If every one of our business leaders went along to one of the evenings and spent an hour presenting what’s going on in their businesses, and answering questions, we’d have a huge impact on a large population of [young people]. Thousands of students and thousands of companies would be impacted.”

The fourth pillar – innovation and technology – is clearly vital to the future of manufacturing, and the Technology Strategy Board, established in July 2007, is already providing leadership in this area. “A number of positive things are happening from a Government perspective with the Technology Strategy Board. Fundamentally we have a strong science and innovation base, but we need to link it more strongly with the industrial base that drives innovation and technology. We also need [clarity] in the policies around innovation and technology – for example R&D tax credits.

“The Government is clearly listening,” he commented, “and wants to create the right environment for a sustainable, strong, innovative UK manufacturing sector. That’s a very clear recognition in my mind of the importance of manufacturing to a strong economy.”

Governments come and go, however. And the current incumbents are looking increasingly rocky. I wondered if Reynolds Smith felt that a new incoming Government would be as positive for manufacturing, and if the Manufacturing Strategy would be robust enough to survive a change in political leadership. “The strong focus of the brief around the Manufacturing Strategy Review is to develop a set of actions, areas of policy and policy intervention that are enduring – enduring because they’re basically right beyond any incumbent government or any changing agency structure. This is something that needs to endure and provide sustainability and has to transcend any changes,” he said.

Change is one of the very few constants that we know we can rely on. To the current issues of rocketing input prices and financial volatility, can be added the rapidly changing dynamics of the global marketplace. Reynolds Smith believes very strongly that the future success of the UK depends on how successfully companies take advantage of the expanding market and manage their extended value stream and supply chain on a global basis.

In spite of the challenges, there are some wonderful opportunities for UK manufacturing, he believes. “We have an environment of increasing demand on a global basis. Take our off highway business for example, (which is based on construction and agriculture) there are more mouths to feed and more construction projects on a global basis. While you have differentials as one country is up and one is down, the global view is progressively up in demand terms, which creates lots of opportunity for innovative products and innovative processes.” And the opportunities are more readily accessible for the manufacturing sector than they are for say the financial or services sector.

GKN, of course, is a highly competitive global player, and for many years has been positioning itself to take full advantage of the growth in new and expanding world markets. “China, for example, is not a major export base for GKN. Most of the business we do in China (in excess of 90 per cent) is supplied to companies in China. Because of the nature of manufacturing, there’s an opportunity to move into those markets and take advantage of their growth, as opposed to competing on a pure labour and cost basis.

“Global supply chain dynamics are also changing quickly,” he continued. “There was a time when the cost of labour was the most important piece of the puzzle. The cost of labour is still important, but the cost of shipping, for example, or the right design at the right place at the right time is equally important. And it’s likely to become increasingly important as commodity and utility costs change the way they’re likely to.

“We shouldn’t underestimate how strong the manufacturing sector already is. We’ve been through lots of change and improved our competitiveness. The environment is challenging, but presents more opportunity in terms of taking advantage of developing global value streams and developing demand. I have a high degree of optimism for the future. Meanwhile, it is the responsibility of all of us to present manufacturing as an exciting place to be. I don’t want to suggest that people aren’t doing this, but it’s hitting me, the more I do it, the importance of finding time in the busy schedule which we all have, fighting the day-to-day battles, to get out and each of us speak to a group of 16 to 18 year olds in the next 12 months.” Judging by the enthusiasm with which he speaks about this, it is also a rewarding thing to do.

“If you look at the basic statistics, output is up, productivity is up,” he finished. “Are there challenges? Yes. Manufacturing matters to the UK economy, with increasing recognition of why. And we should be very proud of it, I certainly am.”