Regional focus North East – Forecast good, backing North-Easterlies

North East Manufacturing At a glance ● Manufacturing constitutes 19% of the North East’s economy, which compares to a national average of 12.4%. ● Manufacturing accounts for around 150,000 jobs in the region, some 14% of the regional workforce (10.1% nationally). ● Total investment in research and development within manufacturing in the North East is half the national rate (Source: One North East). ● Exports of physical goods in the region exceed imports by over 30%. 58% of the UK’s chemical processing industry is in the North East. ● The chemicals, chemical products and man-made fibres industry produced 22% of the total GVA of the manufacturing industries in the region in 2007. ● The healthcare and life sciences sector has an annual turnover of more than £4bn and employs over 170,000 people within the region.

Things are changing for manufacturing in the North East of England. What once was a hub for heavy industry is quickly turning into a forge of innovative technologies, with an increasing focus on carbon reduction.

These changes have never been more evident than today, with traditional sectors losing ground and new industries attracting investment and gaining momentum.

Ship building and coal mining have left the North East, and steel production is decreasing.

Renewables and technology-intensive industries are emerging as new grounds on which to build future growth. Tony Sarginson, EEF’s head of external affairs in the North East, says: “The jobs we lost in the more traditional sectors we made up for with jobs in emerging industries.” A sign of the evolving structure of the local economy is perhaps the situation of the steel industry. In May Tata Steel announced it might axe up to 1,500 jobs in the North East following a slump in sales.

One to watch – Tharsus Founded in 1964, Tharsus is a North East born and bred company that has transformed itself from a sheet metal fabricator to a highly specialised designer and manufacturer of complex electro-mechanical products. The business was recently awarded a grant of almost £700,000 as part of the Regional Growth Fund which will be used to continue its rapid expansion plans. Over £1m was recently invested in a new 31,000 square foot site which will house the assembly of Tharsus’ fully finished products and new high tech machinery. The company employs 100 people across its headquarters at Hebburn and its Blyth plant; the third site will be open later this year. Managing director Brian Palmer said: “The new factory will further enhance our ability to work with clients who need a new product developed and manufactured in the most efficient and cost effective manner. Further expansion on the site in the future will allow us to deliver even larger more complex orders and of course create new jobs in the process.”

According to Tata Group, demand for structural steel in the UK is two-thirds of the 2007 level and this will not change over the next five years. The company will therefore concentrate on products that create value, and this strategy “includes a proposal to close or mothball parts of the Scunthorpe plant and puts at risk 1,200 jobs at Scunthorpe and 300 jobs at its Teesside sites”, according to a company spokesperson.

Things got worse when Indian tycoon Ratan Tata was quoted by The Times newspaper as saying that his British staff are lazy. His denied the allegation, explaining how he was voluntarily misinterpreted and he was actually talking about management practice before he took over Corus and Jaguar Land Rover.

Debate aside, this is bad news for the region, with Teesside constantly seeing its jobless count rise. The Northern Echo reported that Thai steel giant SSI, which acquired Tata’s plant in Redcar in March and is now in the process of hiring 800 steelworkers, is likely to receive several applications from workers facing the cuts Tata Steel has announced.

A change is necessary, and many sectors, even the most ‘old-fashioned’, understand this. Even automotive and oil and gas, which are still strong in the region, are transforming themselves into highly innovative industries: car companies like Nissan are looking at developing ultra low carbon vehicles, while the subsea sector is turning to more sophisticated, safer equipment now that more expensive forms of extraction are considered viable options and the oil fields in the North Sea are becoming desirable.

Key people Phil Kite, managing director at Astrum and chairman of EEF North East Regional Council Phil Kite FCA was elected regional chair for EEF North East in 2009. He is the managing director of Astrum, a leading designer and manufacturer of track systems and running gear for armoured fighting vehicles, in Stanhope, Co Durham. Astrum also supplies to companies in the earthmoving and general engineering markets. From 2000 to 2006 he was a board director of the William Cook Group with operational responsibility for the Global Defence Sales and Group Health & Safety. In 2006, he led the MBO of the Group’s defence business and the company was renamed Astrum (UK) Ltd. Tony Sarginson, North East Region head of external affairs, EEF Tony Sarginson is head of external affairs for EEF in the North East, which provides professional services to around 600 engineering and manufacturing companies in the region. He supports the EEF Regional Council, is EEF’s regional spokesperson and works closely with regional media. Tony represents business on the European Programme Evaluation Group, the regional STEM Board and is a member of the Manufacturing Advisory Steering Group in the region. Previously Tony worked for BT for 35 years and was the BT regional manager for the North East. He has served on the board of the Government Office (NE) as a non-exec director and four years on the board of NEXUS.

The North East, where manufacturing accounts for 19% of the economy (compared to 12% nationally), is a net exporter of manufactured goods. Sarginson confirms: “Manufacturing is the most important part of our economy, and our products are very successful.

Our diversified economy makes us more resilient, as we don’t depend on a few key sectors anymore.”

Siemens Wind Power Training Facility Based at Siemens Integrated Energy Service Training Centre at Shields Road in Newcastle, the wind power training facility was established in 2009 to meet the growing needs of the renewables sector for skilled wind power service technicians. The centre expects to train over 1,000 technicians in 2012 (570 in 2011) and along with the company’s decision to build a wind turbine assembly plant in Hull, it is the strongest evidence of the UK’s conviction for a wind power industry. The centre trains Siemens and third party companies to maintain and repair wind turbine nacelles up to 3.6MW, currently Siemens’ largest turbine, using a 2.3MW on-site training nacelle. By spring 2012, it will have a 3.6MW training nacelle installed, the next step towards training on the gigantic next generation 6 MW nacelles – these turbines stand up to 120m. The centre currently uses two training towers of 10m and 16m. Training includes technical product training and health and safety training as part of Siemens’ zero harm safety policy. As well as repair and overhaul, safety is a very large component of the training. A five-day Advanced Rescue course trains technicians to evacuate injured personnel from awkward and difficult to access areas of a wind turbine in the event of injury or illness. The facility is used by Siemens’ technical partners including universities and the plan is to make it available for training by electricity utilities. Through-put of technicians trained to the Level 1 competence, specified by Siemens in Denmark, is about 12 per month. The centre will provide training for all Siemens Wind Power workforce – a round the clock service given that the company has about 7,000 turbines installed onshore and offshore in the UK to date.

Several companies are making innovation their leitmotiv, and this is starting to reflect on the image of the region as a whole, which is more and more perceived as a stronghold for what’s new in engineering and technology. Commenting on the latest product the company launched (see box), IIT’s chairman Tom Wilkinson says: “The North East continues to be at the forefront of engineering innovation in the UK, developing cost effective solutions with the potential to deliver benefits to global markets.”

Revolutionising automotive and engineering
One in three cars produced in the UK in 2010 came out of Nissan’s Sunderland plant, the biggest car plant in the nation, employing almost 5,000 people. From 2013 the facility will also produce the revolutionary 100% electric car, LEAF. In addition, construction work is progressing well on a new battery plant in Sunderland, which will produce lithium-ion batteries for the Nissan LEAF.

The successful performance of Nissan Motor Manufacturing UK is reflecting on the local supply chain. Parts supplier R-Tek, for example, saw sales increase by 35% to £64m last year and its workforce grow by 10% to 336 people.

Traditional sectors (which include companies like Rolls-Royce, Caterpillar, Astrum and Cummins) are going through deep changes to respond to new market conditions in the area, and this is probably part of the overall transformation the North East is experiencing.

Others are trying to do the same. In the North East, defence giant BAE Systems manufactures armoured combat vehicles and munitions for the British Army. The company has been gradually reducing its workforce at the Newcastle site in a bid to reduce costs. Following the end of Terrier production in 2013, the Newcastle factory has no new-build work lined up and an industry insider regards its future as uncertain. Meanwhile support operations are being moved to the company’s Telford site.

But BAE Systems is not leaving the North East. Investment is being channelled in the construction of a modern, highly automated, energy-efficient facility for the production of munitions at Washington. This will house workers who are currently employed in BAE Systems’ vintage shell factory in Birtley.

Process manufacturing, the Northern star
The process and chemical industries form the most extensive manufacturing sector of North East England, representing more than 1,400 companies, employing around 190,000 and generating over £26bn in annual sales. The North East of England Process Industry Cluster (NEPIC) is owned by its member companies and represents over 500 businesses in the process industry The biggest names in the chemical and process industries are present here, from Saudi giant Sabic UK Petrochemicals to global chemical processor Dow, from bio-diesel producer Petroplus, the largest independent refiner and wholesaler of petroleum products, to Ensus, which operates one of the world’s largest cereal grain biorefineries in Wilton.

Each year, Ensus refines locally grown wheat to produce over 400 million litres of bioethanol, 350 thousand tonnes of high protein animal feed, and 300 thousand tonnes of carbon dioxide for use in soft drinks and food production.

Another big player in the process manufacturing sector in the region is the pharmaceutical industry, with Glaxo SmithKline, Procter and Gamble, Sanofi-Aventis and SSL International all running operations here. A third of all the UK’s pharmaceutical production is located in the North East.

Finally, the food and drink sector is another important asset to the region: Greggs, Findus, Nestle and Marlow Foods are some of the companies that chose the North East for their sites.

Renewables: the future of the region?
Power is a big concern for many companies in the North East, especially for the most energy-intensive ones. They were the first to complain when the government presented the 2011 Budget, the measures of which, they feared would push their energy costs too high.

Carbon-cutting policies further penalise CO2 emitters and tax the oil industry, which invests extensively in the North Sea; therefore, the North East of England. These sectors warned that the measures could cost the region hundreds of jobs and millions of pounds.

It’s no surprise, then, to see how much emphasis is put on renewable energy in the North East, where companies like Clipper Windpower operate.

A US-based wind business that was recently acquired by United Technologies Corporation, Clipper Windpower will build turbines for offshore wind farms.

There are several projects that would make the Teesside area in particular a hub for green energy: Sembcorp and waste management firm SITA UK announced a £200 million waste-to-energy facility at Wilton, while MGT will build a 300MW biomass power station, the Tees Renewable Energy Plant, that will burn woodchip and generate electricity for 600,000 homes.

PYReco will have Europe’s first large scale tyre pyrolysis plant fully operational by the end of the year, on Teesside.

The company received £2m from the £60m Tees Valley Industrial Programme (TVIP); it will initially process 60,000 tonnes of tyres per year, reaching 360,000 tonnes once at full capacity. Thanks to the pyrolysis technique, PYReco will turn tyres into high tensile steel, diesel oil, carbon black and syngas without creating waste and achieving 100% reuse of the material.

Don’t miss out on the Manufacturing Forum Manufacturing companies in South Tyneside who want to keep a finger on the business pulse are being encouraged to join the South Tyneside Manufacturing Forum, as a way of ensuring they are not missing out on new developments in the region. Set up in 2007, the South Tyneside Manufacturing Forum offers members a wide range of business advice and signposting services. This vital framework of support also extends to monthly meetings on a range of topics, where members can network and exchange best practice in a climate of trust. Forum manager, John Wood said “We ensure our meetings provide real benefits and look for speakers who can offer genuine and relevant business opportunities and information to our members.” Over the past three years the forum has grown steadily in size and reputation and now represents most sectors of manufacturing with large, medium and smaller employers all working together. “We are continually looking to expand the Forum, therefore over the coming months we would like to offer manufacturing companies who have not attended one of our events the opportunity to come along and find out how we can support them,” said John. The Manufacturing Forum encourages collaborative working with membership open to non-manufacturing companies who can bring added value, knowledge and expertise to other members. It has also forged strong alliances with local education and training organisations, to promote manufacturing as a worthwhile career and encourage manufacturing companies to offer job opportunities to apprentices. For more information on the South Tyneside Manufacturing Forum please visit www.st-mf.co.uk. To find out more about membership services, please contact forum manager, John Wood on 0191 427 2324 or by emailing [email protected] Made in South Tyneside: ● Leather tablemats & coasters supplied to Marco Pierre White’s restaurants ● 3,300 wax jackets per week ● 40 tonnes of pork products in a week ● Precision components made for every helicopter gear box made in the UK this century ● Black Jack gaming tables used in Las Vegas ● 70,000 sunscreens exported to 56 countries ● Personal health records for every newborn child born in the UK ● Half of all electronic signs on the motorways and trunk network in Britain ● World’s leading independent cigarette filter manufacturer

A matter of skills
Manufacturing in the North East has to cope with an ageing, lowskilled workforce: about 40% of staff are in low-skilled operator roles.

According to a recent EEF survey on skills in North East England (see our lead story for details), over two-thirds of employers in the region need their staff to acquire new skills, both engineering and management ones, within the next year.

One to watch – IIT Gateshead-based International Innovative Technologies (IIT) is a North East success story. A specialist in the design, precision engineering and manufacture of high output mills, classifiers and cyclones, the company has recently pioneered new technology for the grinding of bulk raw materials into fine powders. The m-series is thought to have the potential to bring significant cost and production benefits for a wide range of global industries. The new vertical milling system combines low energy consumption with a compact size to provide a highly efficient and versatile grinding system for a wide range of minerals processing applications. It can also convert what might currently be regarded as waste material into a commercial product. The machines are suitable for the milling of a wide range of natural raw materials and other industrial products. Tom Wilkinson, chairman of IIT, said: “It has significant potential in traditional materials processing markets and also has new and unique recycling applications, for example, by turning materials such as glass reinforced plastic scrap into a reusable product.”

If the North East wants to reap the benefits of its investment in innovation, sustainability and renewable energies, the need for a highly skilled workforce must be addressed. Thousands of middle and high level jobs in engineering will be required to meet future demand. Growing sectors like plastic electronics and industrial biotechnologies are promising, but will need a highly trained workforce if they are to bring benefits to the regional, and national, economy.

Low carbon industries have the opportunity to create over 16,000 new jobs in the region. By 2019, however, the off-shore wind industry will need 3,000 skilled engineers: to meet this requirement, one in three engineering graduates should enter this sector.

Just like the rest of the UK, North East England faces a widening skills gap as new support for manufacturing and engineering apprenticeships struggle to plug the skills shortfall. Unless this problem is addressed, the region won’t be able to fully exploit the opportunities that new, lucrative sectors have to offer. EEF’s Tony Sarginson says: “If we are serious about rebalancing the economy, we have to do something about the small proportion of engineering-related apprenticeships offered in the North East.”

One to watch: GT Group The GT Group, based in Peterlee, County Durham, specialises in environmental engineering, exporting products and services to over 60 countries worldwide. With its head office in the North East, the group covers a diverse range of engineering activities including automotive products, project engineering and fabrication, composite mouldings, seals, process controls and coatings. GT has recently secured a £50m contract with Russia’s leading automotive manufacturer, GAZ Group, to which it will supply exhaust gas control systems for a new range of heavy duty diesel engines. The deal, which will comprise 100,000 systems a year at full production, might allow GT to achieve its programme of growth and bring its workforce level to 500 (it’s now 300). Geoff Turnbull, GT group chairman, said: “This prestigious contract with Russia’s leading manufacturer will further cement GT Group’s rapid growth and its reputation as one of the principal suppliers of engine brakes and exhaust gas control systems for the heavy duty diesel engine markets.” Having worked for the last four years with GAZ on Euro 3 standard engines, the new engines will meet the latest Euro 4 and Euro 5 emissions standards.