Regional Focus: North East – Industry an angel in the North

Posted on 12 Nov 2010 by The Manufacturer

The latest of our Regional Focus articles, in association with EEF, focuses on the North East.

North East Manufacturing – At a glance

● Manufacturing constitutes 19% of the North East economy, which compares to a national average of 12.4%.

● Manufacturing accounts for about 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.

North East economy – at a glance

● Manufacturing, business services and the public sector are the dominant sectors of the North East region.

●There are approximately 4,000 manufacturing companies in the North East.

● Manufacturing excellence is at the heart of the region’s economic growth with North East England producing one in every five cars made in the UK.

● Nissan’s Sunderland plant has been the largest car plant in the UK for the past 12 years, and the largest exporter for 10 years.

● The world’s largest offshore wind turbine has been developed in the North East, at the New and Renewable Energy Centre (NaREC).

● A third of all the country’s pharmaceutical production is carried out in the area

● One North East has invested £30m in the new MASNEPA programme.

● The North East has relatively fewer people working in the higher skills and knowledge groups.

● Universities in the North East act as net importers of students; graduate retention in the region is close to the national average.

● The North East has the highest per person emissions of carbon dioxide of any English region.

●There are more high technology start-ups in the North East than anywhere else in the UK outside London.

Great things have come from the North East of England. George Stephenson’s steam locomotives, the RMS Mauretania, Sir Bobby Robson, the Nissan Micra, Newcastle Brown Ale and Alan Shearer all call the North East their home. Durham’s rich coalfields, the Tyne shipyards and the steel and chemicals industries of Teeside produced a manufacturing-heavy economy and a strong skills base, fed by hard grafting local men and women with a world famous sense of fun. The demise of shipbuilding, coal and steel left high unemployment but skilled people, one of the attractions for Japanese car giant Nissan when it selected Sunderland for a car plant in 1984, which went on to become the UK’s biggest.

While those traditonal industries have fallen away, and some big companies like ICI and Swan Hunter (the design office remains) were taken over or left the region, the rise of other sectors means that manufacturing in the North East comprises 19% of the region’s economy, 6.6% higher than the national average. These include a very big process industries sector, representing 58% of the UK’s chemicals industry, automotive and now ultra low carbon vehicles, and new sectors like offshore wind, biotechnology, biofuels and a digital economy.

Certainly Newcastle and the North East have a growing reputation as a world leading centre for ultra low carbon vehicles – both research and, with Smith Electric Vehicles and Nissan’s new battery plant and LEAF model on the horizon, manufacturing – as well as renewable energy, especially offshore wind.

Business support
Look at the North East and it’s hard to find another English region which has, or had, more support from government agencies and trade associations.

Regional development agency One North East, has developed a hub for inward investment,, which details key sectors and opportunities for investment in growth projects in areas like low carbon vehicles, offshore wind and digital business. The RDA’s activities have been winding down for several months since the announcement of the replacement by a Local Area Partnership.

Manufacturers’ organisation EEF North East moved to new, 10,000 sq ft offices in the Team Valley business zone in September. EEF North East is tasked with setting the regional policy agenda with the help of a body of 30 influential manufacturers and lobbying political figures independently, and collectively with influential business bodies. It also provides advice, training and consultancy to over 1,500 of the region’s manufacturers.

The Manufacturing Advisory Service North East was formed in October 2008, combining the original MAS-NE and the North East Productivity Alliance or NEPA, and is now operated by PA Consulting.

MAS North East has improved the competitiveness of hundreds of local business, and claims to have safeguarded over 3,000 jobs, trained over 8,500 people, saved companies over £50 million and reduced carbon emissions by 25,800 tonnes in the last five years. It is funded by One North East and the European Regional Development Fund, so there are question marks over its future funding, which will be clearer when the Manufacturing Framework is published later this month.

“In the first quarter of this financial year, April to June, the gross value added of MAS North East was £4.5m compared with a regional average [across English MAS regions) of £4.2m,” says Neale Ryan, national network manager for MAS.

“This builds upon MAS North East’s impressive year (2009/2010) which saw a 43% increase in the number of manufacturing reviews conducted , an 11 per cent increase in ‘impact’ and a 16 per cent increase in GVA, year-on-year.” NEPIC is the North East Process Industry Cluster, see below, and several other sectoral business groups operate.

Despite this support, total investment in research and development within manufacturing in the North East is half the national rate, according to One North East.

Key people

Phil Kite, managing director Astrum and chairman, 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 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 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.

One to Watch – Caterpillar Peterlee

Caterpillar’s Peterlee factory builds all Caterpillar’s articulated trucks, from 230kW to 350kW gross power.

In early 2006 it was the first UK CAT factory to embark on Caterpillar Inc’s enterprise-wide site assessment scheme, the Caterpillar Production System (CPS). This assesses 15 core principles, which measures each on scales of safety, quality, velocity and cost. Before CPS, Peterlee had different versions of best practice measures, but these were self-certified. Operations manager Mel Curry says that to score ‘5’ on the scale, for customer shipment delivery the site has to hit 98% OTD targets for five out of six months.

“We are targeting a score of 60 over 15 principles on the assessment for 2011,” he says. “If we hit that, Peterlee will be the only site in the UK and probably Europe achieving this score.” Peterlee employs 800 people, 600 in manufacturing, but is not operating at full capacity (>1,000). The factory has doubled its output in the last four months since the global construction industry recovery has worked through.

Process industries
The process and chemical industries form the most extensive manufacturing sector of North East England. More than 1,400 companies, generating over £26bn in annual sales, are involved directly or in the supply chain within the North East. Employing 24 around 190,000 people, the sector exports products worth about £12bn a year. The NE is home to 58% of the UK’s petrochemical industry.

Contributing to over 30% of the region’s industrial economy, the sector attracts some of the chemical and process industry’s world leaders, including Sabic UK Petrochemicals, global chemical processor Dow, bio-diesel producer Petroplus and pharmaceutical manufacturer sanofi-aventis which has two locations in the North East.

At the heart is Wilton International on Teeside, one of the few sites in Western Europe with special development status that enables it to be used for chemical processing, the region is home to several innovative projects such as SABIC’s world-scale Cracker plant and the UK’s first large scale biomass power station of its kind developed by Semcorp Utilities UK.

Biofuel and bio-refining
The North East’s reputation as a green manufacturing hub has gained further momentum with its growing biofuel industry. NEPIC has nine members in the sector including Ensus, which opened a £300m bioethanol processing plant on Teeside earlier this year.

NEPIC – The North East of England Process Industry Cluster (NEPIC), based at Wilton at the site of the old ICI plant, is a stand-alone company that was created and is owned by its member companies to represent the companies and supply chain of the Process Industry in the region. It represents over 500 companies in process manufacturing, which directly employ about 40,000 people, by promoting collaborative development between businesses and helps identify opportunities to compete in the global market or build supply chain relationships.

A third of all the UK’s pharmaceutical production is located in the North East. Big names Glaxo SmithKline, Procter and Gamble and Sanofi-Aventis have sites in the region. SSL International, one of the biggest pharma companies in the area, has just completed its sale to Reckitt Benckiser. The site currently makes a large range of products including Scholl footcare.

Food and drink
Scottish and Newcastle was bought by Heineken and Carlsberg in April 2008 but still brews Newcastle Brown Ale at the Newcastle Federation Brewery at Dunston. Other big food companies based here include bakery group Greggs, Findus and Marlow Foods, which makes Quorn and KP Snacks in Billingham. Nestle, which manufactures several confectionery lines at its Fawdon site. Nestle Fawdon is three years into a rigorous internal business improvement process, called NCE.

One to Watch – Aesica

Created in 2004 by a management buyout of BASF’s Northumberland site, Aesica offers primary and secondary contract manufacturing services with the capabilities to develop products from early-phase clinical stages to commercial supply.

The company tripled its sales to £100m and employee headcount to 700, from 2004 to 2010. It was recently placed 50th in Deloitte’s Buyout Track 100, a league table of the fastest growing, private equity-backed British companies, measured by Ebitda. The survey praised Aesica for raising profits 49% yearon- year. Between 90% and 95% of Aesica’s product is exported.

Automotive and engineering
Low carbon revolution
The North East’s stand-out automotive company is Nissan Motor Manufacturing UK (NMUK).

Established in Sunderland in 1984, NMUK grew to become the largest car factory in the UK and at one time the most efficient plant in Europe. In August it switched production of the award-winning Micra for the Juke. Line One, which also makes the Note, now runs on two shifts, while the hugely popular Qashquai (Line Two) runs three shifts a day.

Production is running at about 330,000 cars per year, and headcount at the plant is 4,900, up from 2009 levels when it had to shed about 1,200 mainly temporary workers.

Touring the plant is an education in lean manufacturing. The kanban system for fitting out the car bodies using sloping racks runs like clockwork, as fleets of material handlers race around the plant delivering stock in a relentless chain. Since 1984, £2.68bn has been invested in NMUK. This excludes the new battery factory being built, which is using £420m of Nissan, BIS and European Investment Bank money, and will be in production by 2012. Batteries will be used for the new LEAF electric model. In March NMUK won the contract to manufacture LEAF from other European plants.

NMUK takes on about 30 to 35 apprentices a year, maintenance technicians and admin staff.

Its Fast-track programme trains local long term unemployed people who are either offered a job or put on a waiting list at the end of training. Over 1,000 apprentices and 374 graduates have been recruited to date at NMUK.

Other automotive and mechanical engineering companies in the region include Caterpillar (Peterlee), Cummins (Darlington), Rolls-Royce, BAE Land Armaments and Astrum, which operates in the defence, earth moving, intermodal and general engineering sectors under the stewardship of MD Phil Kite. A key supplier to the British Army, Astrum exports around the world including track systems for Main Battle Tanks and Armoured Personnel Carriers. Exports have grown to over 25% of turnover and the company sees further overseas sales growth in 2011, targeting Asia, Europe and the Middle East. In 2009, Astrum became one of only a handful of companies to receive an award under the A|D|S SC21 supply chain improvement programme.

The North East is to have the first comprehensive network of electric vehicle charging points in the country and its vision is to become a world leader in research and development for the industry. It has the status of being the UK’s first Low Carbon Economic Area for Ultra Low Carbon Vehicles and when the LEAF rolls off the lines in 2012, some of the cars will join the region’s ULCV test programme.

One to Watch – Smith Electric Vehicles

There seems little that this company can do wrong.

From humble beginnings designing milk floats in 1920, Smith Electric Vehicles has become the world’s biggest manufacturer of road-going, zero emissions commercial electric vehicles. It fits electrical powertrains to proven chassis cabs like the Ford Transit. Headcount rose to 50 this summer, which is expected to reach 100 by early 2011.

The company owners, the Tanfield Group, set up a Smith US venture in 2009, which President Barrack Obama visited in July. Smith is ramping up production at the moment after recent big orders, including 176 orders from for Frito-Lay for the 7.5T Newton electric truck, and 41 Newton trucks for office stationer Staples. Growth in the US was helped by a $32m US Department of Enterprise grant to fund the deployment of 500 Newton electric trucks in national fleets.

President Obama said of Smith US: “You are doing more than just building new vehicles. You are helping to fight our way through a vicious recession and you’re building the economy of America’s future.”

Energy and renewables
“Huge offshore wind farms planned for the North Sea have placed North East England in an ideal position to manufacture large numbers of turbines for these farms,” says One North East’s investor portal. But this has been a long time coming. The North Sea is a natural resource, and the region’s technical skills base is also a given. What has been missing is an industrial strategy and nucleus of investment sufficient to tempt the big wind turbines OEMs to set up shop. However, the infrastructure for large wind systems in the NE took a big step forward in 2002 with the creation of the National Renewable Energy Centre, NaREC, in Blyth. The centre develops prototypes, tests renewable devices to international standards, and is involved in installing low carbon technologies.

In October NaREC held the The Future of Offshore Wind conference, bringing together companies from across the region, the UK and from countries including Japan, the USA and Norway, to discuss the next actions to establish offshore wind research and manufacturing in the North East.

The region’s wind industry got a shot in the arm in October when the Government confirmed the £60m port development fund to upgrade sea ports to handle the biggest offshore wind turbines. The fund had been languishing in limbo pending the Spending Review, but Prime Minister David Cameron went on to endorse the money as central to the UK’s low carbon economy strategy.

Following the pledge, Siemens, closely followed by GE, reinforced their intention to build wind turbine factories in the UK, and Spanish wind developer Gamesa also got in on the act. Siemens confirmed it has a number of preferred sites on the East and North East coastline under consideration.

US company Clipper Windpower has a factory on the Tyne which is soon to start manufacturing prototypes of the world’s biggest wind turbine blades. In September, Clipper released a trading update that raised concerns about its ability to continue in business amid a slump in the wind turbine market, which said that alternative funding streams needed to be explored for the company to remain a going concern. Since then the word from Clipper UK is that it is ‘business as usual’ and production is due to start before year end.


In June subsea equipment manufacturer Soil Machine Dynamics won a contract from i-Tech to supply 20 QX-Ultra work class remotely operated vehicles, with options for a further 10 units. The contract is SMD’s single biggest ROV to date.

JDR Cables is a global provider of subsea power cables, offshore umbilical systems and specialised marine cables. In September it was awarded the contract to supply subsea power cables for the first phase of the London Array offshore wind farm, which will deliver enough power for approximately 470,000 homes.

In October, International Innovative Technology (IIT) launched a new patented milling technology which is capable of grinding soft‚ medium and hard materials to 90% of the material passing 45 microns and below. The m-series features an advanced modular design and low energy consumption in a compact body.

Teeside – a haven for green power
A flurry of green energy manufacturing broke out on Teeside in the summer. Sembcorp announced £200m of green power scheme plans for Wilton in August, and MGT’s £500m Teeside Renewable Energy Plant is due to come on-stream in early 2011. Two examples in a pipeline worth an estimated total £4bn of major green energy projects determined to make Teesside their home. Last year SITA UK invested £70m expanding its energy-from-waste plant at Haverton Hill.

Don’t forget oil and gas
Business turnaround specialist Contitech Beattie, which makes hose assemblies and systems for offshore oil and gas applications, has a message about the North East energy market: don’t write off oil and gas. In the North Sea there is somewhere between 11bn and 24bn barrels of recoverable oil reserves, says managing director Andrew Esson.

“Whether or not the 24bn upside is reached will depend on taxation regimes and the technology availability. However, encouragingly, the DECC currently sees oil and gas as a key part of the energy mix, and are actively working with the industry to formulate a plan to maximise hydrocarbon recovery from the North Sea,” he says. “This augurs well for the strong cluster of specialist oil and gas equipment suppliers based in the North East, which collectively employ around 10,000 in the region.”

Useful contacts
One North