Does the UK need a manufacturing strategy? Lively debate splits panel

Posted on 22 May 2013

The 2013 National Manufacturing Debate provided consensus on key needs for a manufacturing strategy but divided the audience on other points in a lively debate that asked “Can the UK reach 20% of GDP from manufacturing by 2020?”

In the fourth round of the National Manufacturing Debate, hosted by Cranfield University, head of manufacturing Professor Raj Roy posed whether a ‘real manufacturing strategy’ is necessary and could achieve 20% GDP from the sector by 2020.

Lord Alec Broers opened the debate by saying that the Royal Academy of Engineering, of which he is a past president, had researched the role of government procurement in manufacturing and had concluded that excess bureaucracy recently has held investment back.

This view was supported in a seminar from Martin McKervey, partner at event sponsor Nabarro LLP, who said that the UK interprets the EU procurement rules “too literally” and unlike Germany and France, fails to take the local economic and societal benefits of a domestic bidder into account when tendering for infrastructure contracts.

Lord Broers added that large companies do most of the research and development and it was not government’s job to spend money on R&D. Looking at Britain’s trade deficit on goods of about £9 billion he said “Overall we quite simply need to made more goods.”

Professor Roy stuck his neck out by challenging the UK to become the best place to manufacture niche products using local manufacturing resources, become the number one in the world for foreign direct investment and to encourage far more people to work in the sector, on top of his 20% GDP target. “It’s controversial but we need to be far more ambitious,” he told the audience.

Business and energy minister Michael Fallon ran through several forms of government assistance intended to boost manufacturing, including the Advanced Manufacturing Supply Chain Initiative, £600m for The Eight Great Technologies provided in the Autumn Statement and the Regional Growth Fund. Round One of the AMSCI fund – £125m to boost supply chains by linking primes to UK suppliers – has already been tapped and a second round for £120m would be released soon.

Mr Fallon said while new market countries like Brazil, South Africa and Mexico were moving up the value chain and threatening British companies’ competitive advantage, they also created new export opportunities.

The minister said that the UK offers strong fiscal stability to encourage investment, listing: competitive business taxes to attract FDI and keep foreign companies here, a ringfenced science budget and financial backing for those who introduce new technology, and a strong export drive, where the UK is on track to “double our international trade by 2020 and increase the number of exporting companies.”

Inspire the kids: Maggie Philbin, chair of the NMD 2013, explains how TeenTech links schoolchildren with engineering projects

On the need for a manufacturing strategy, Mr Fallon said the UK has an industrial strategy, launched by Business Secretary Vince Cable in September, which the CBI, the trade unions, Lord Heseltine and all political parties had verbally supported.

Sub-sector strategies had since been launched for the oil and gas and defence sectors, while aerospace had already benefited from a £1 billion investment from government in the Aerospace Growth Partnership last year.

Mr Fallon accepted that government could do more in the field of procurement to ensure economic factors were considered alongside price.

Stephen Odell, president of Ford Motor Company Europe, said regulation in the automotive industry was important to reduce carbon emissions and improve safety. But he warned that the bureaucrats in Europe are not assessing the effect of new regulatory changes on the total cost of the unit car, threatening competitiveness. “We estimate that the total cost of all forms of EU regulation doubles the retail price of some car models,” he said.

In the afternoon panel debate, chair Maggie Philbin explained how her organisation, TeenTech, is improving the experience of engineering and science for school children through visits and hands-on science projects. Some children had learned how to make a crude 3D printer.

Dick Elsy, CEO of the High Value Manufacturing Catapult, said he was convinced that a strategic approach was right for growing manufacturing, citing his organisation as a good example. The Catapult, devised by BIS agency and event sponsor the Technology Strategy Board, helps companies to reach higher ‘technology readiness levels’, proving their inventions at key manufacturing stages to make them practical for market and investable.

“We’ve shown, with companies from SMEs like Barkley Plastics to multinationals like Rolls-Royce, that the anchor point is the knowledge for how to manufacture something better. This knowledge keeps manufacturing in the UK, as with the Rolls-Royce advanced disk machining process.”

Peter Marsh, author and ex-manufacturing editor of the Financial Times, was not convinced the UK needed an overarching strategy that applied across manufacturing. Rather, he said, “we should identify what companies in the UK are doing right, and focus on these things. To a point, that is what government has done in some cases, but it needn’t be organised under the heading of ‘strategy’.”

He referenced the politburo of the old USSR, saying the danger with obsessing about defining a “five-year plan is that you spend too much time doing it, meanwhile the country crumbles”.

Mr Marsh warned that arbitrary targets for GDP or employment were questionable in their rationale and difficult to achieve. Delegate Stephen Bramley of Gambica agreed, saying that the inherent problem with setting targets is that politicians feel the need to “play with the rules” to achieve them, thereby potentially bending the definition of manufacturing to cover manu-services, maintenance and other activities that might not be defined as manufacturing gross value added, just to hit a number.

National Manufacturing Debate 2013
Question time: The audience tackles the panel on whether the UK needs a manufacturing strategy

Martin Rigby, head of manufacturing at Barclays, supported a manufacturing strategy concept. He said that access to finance remains a key barrier for manufacturing growth and agreed that there should be more competition in providing finance. He queried how debt, or borrowing, was being redefined in the new economy. “At what point do you transition between debt and equity finance?” he asked. “Some equity funders now offer products more akin to senior debt,” and he pointed to the Business Growth Fund as an equity finance model that was gaining in popularity, but did not provide any statistics.

Adding a splash of colour to the debate, John Elliott, founder and chairman of dehumidifier manufacturer Ebac, said a strategy was OK but UK manufacturing needed to get back to basics, urging the audience to look at domestic demand for consumer goods.

“I would ban innovation for a year, to focus on the basic things first like exchange rates and trade tariffs,” he said. “We have to get global trade back on a level playing field. When you buy a cheap product from China, you have saved money from a more expensive British-made product but the total saving is less because that hair dryer or pair of trousers is one less job in the UK that we have to support via social security.”

Mr Elliott’s company is about to start producing washing machines, the first washing machine manufacturer in the UK for four years since Hotpoint closed its South Wales factory. He is confident that British companies can successfully make more consumer goods, like washing machines, profitably, and forecasts that Ebac’s breakeven point is 50,000 units. “You don’t always need to make on a vast scale to be profitable.”

Brian Holliday, a director of Siemens Industry UK, was supportive of a strategy and emphasised that his company tries to support UK manufacturing in many ways. He said the UK’s problem, compared with our world peers, is our levels of investment in automation and robotic equipment to increase productivity, and reduce carbon emissions, is very low, which is holding back growth. “China, where people perceive factories are run on slave labour, is investing huge amounts in fully automated factories. We are being left behind.”

He acknowledged an article in the Financial Times in February by ex-CBI boss Richard Lambert that said a true growth strategy needs to pur resource into three parts in equal measure; people, infrastructure (or capex & plant) and innovation.

Mr Holliday applauded the Government’s £7m competition fund for demonstrating benefits from an automation and robotic system, but decried the “woefully short window in which companies could apply for the funding.” He added that instead of appointing a chief scientific officer, government should consider renaming the role chief science and engineering officer, or even create a new chief engineering officer position, to reflect the importance the government claims it bestows on engineering.

National Manufacturing Debate 2013
Jaguar Land Rover's Bob Mills tells the National Mfg Debate that JLR's HR department tackled gender imbalance, raising the ratio of women to 12% from "about zero".

Professor John Nicholls, a material scientist, agreed that a form of manufacturing strategy is useful but focused on the science and collaboration component. “Lanthanite, a rare earth metal, allows you to accurately measure temperature changes at very high temperatures. When we’ve combined this with crystalline amorphous systems, working with SMEs on key stages of this project gives us the ‘value add’ model of the future.”

Mark Claydon-Smith, head of manufacturing at the Engineering and Physical Sciences Research Council, said the EPSRC had recognised the need to inspire children into science early on and had embarked on a schools engagement programme and competition. This complimented Cranfield University, the hosts, who launched National Apprenticeship Competition before the Debate.

Mr Claydon-Smith approved of a strategy but, in reference to the current industrial strategy, cautioned that “the strategies that the government has identified are the low handing fruit. We need to look at the medium to long term needs of industry. Instinctively I don’t think domestic manufacturing, or buy British only, is the right way. During World War II we nearly starved – we need to accept and use globalisation.”

More comments from the panel and audience at the 2013 National Manufacturing Strategy will follow.

A report on the NMD will be published with TM with the July issue.