The South West of England is famous as a popular holiday destination and some may see its main economy based on tourism and farming, rather than busy factories and manufacturing. But Jane Gray discovers that the South West supports a large and vibrant industry characterised by the aerospace sector, advanced manufacturing and food and drink, while renewable energy has potential but needs much more work.
Fast facts and figures
(All figures are for 2008)
Number of manufacturing enterprises:
Regional manufacturing gross value added:
Number of manufacturing employees:
Largest sub-sector by employment:
Sources: ONS and EEF
In addition to the tertiary sector organisations involved in tourism and leisure, there is much for the manufacturing industry to celebrate in the South West. Indeed the South West’s varied manufacturing base, with its unusually high proportion of SMEs across a broad range of sectors, has been a saving grace for the region throughout the recession and the slump in manufacturing.
With the lowest number of large company headquarters compared with any other UK region, the South West is a good example of why government is trying to encourage entrepreneurial start-ups and grow small businesses. That is, a broad-based economy with a thriving network of smaller companies is far less prone to the ravages of economic collapse than one which is dependent on a handful of multinational firms in one or two sectors, providing those smaller firms are not over-reliant on a very small number of large customers.
Terry Slater, Director, EEF South West
Paul Goodhand, managing director, Knorr-Bremse Rail Systems (UK) Ltd
Beginning his career with Hiti International, Paul worked in UK, Korea, Japan and Hong Kong, in 2000 becoming MD of Knorr-Bremse Asia Pacific for three years. He joined Bruel Kjaer AS, the instrumentation subsidiary of Spectris plc, as vice-president before returning to the Knorr-Bremse Group in 2009, to take up his current position.
The South West region covers the Isles of Scilly and Cornwall right through to east Wiltshire, and Herefordshire and some of Oxfordshire at its northern limits. Apart from aerospace and defence manufacturing that combined is the largest subsector in the region (18,000 full-time employees in the region in aerospace alone), there is also a very strong food and drink sector, and the region is excelling in the emerging sectors of biotechmanufacturing for the biomedical and marine biotechnology markets.
Across these sectors, statistics from manufacturer’s organisation EEF, the Manufacturing Advisory Service (MAS) South West, the South West Investment Group and other bodies show that the positive trend in the region reported by The Manufacturer in October 2010 has continued over the last six months. The manufacturing barometer taken by MAS South West reported last month that 63% of companies have experienced increased sales in the last six months and that 60% expect to see the same pattern continue. Furthermore 43% of manufacturers, across all sectors in the region, are planning to hire more staff in the near future with 50% anticipating that employment will remain stable.
One to watch: Yeo Valley Organic
Yeo Valley Organic, the dairy products company based in the eponymous Somerset valley, is today a household name after humble beginnings back in the 1970s. The company nearly trebled its turnover in the last decade from £71m in 2000 to year-end figures of £186m in 2010. Forecasts for 2011 predict turnover of £210m from the company’s four production sites in the South West that collectively employ 1,400 staff.
Amid this prosperity, however, the privatelyowned company has not lost sight of its local roots or its founding ethics, reflected in several accolades and awards including three Queen’s Awards in 2001, 2006 and in April this year.
The awards, all for Enterprise in Sustainable Development, acknowledge the company’s commitment to supporting best practices for, and demonstrating outstanding performance in, sustainability across its operations. The latest award recognised Yeo Valley’s further sourcing of renewable energy, via an anaerobic digestion system, beyond its production sites to its offices. Managing director Tim Mead says: “The sustainable farming and manufacturing philosophy runs through everything at Yeo Valley and our renewable energy project is the latest development to help reduce our impact on the environment.”
Aerospace – Key names:
AgustaWestland, Airbus, BAE Systems, Beagle Aerospace, Boeing, GKN, Goodrich, Meggitt, Messier Dowty, Moog Controls, Rolls-Royce, Stirling Dynamics, Thales UK, Tods Aerospace
The South West is home to one of the biggest clusters of aerospace and defence companies in the world – producing about 35% of all aerospace R&D investment in the UK.
Uniquely within the UK, the South West of England is a world leader in manufacturing airframes (particularly wings), aero engines, rotorcraft and unmanned aerial vehicles. The South West aerospace cluster is big across both civil and defence sectors and includes 10 of the 12 world’s largest aerospace companies as well as over 800 SMEs supplying to the aerospace sector.
Food and Drink – Key names:
2 Sisters Food Group, Badger Breweries, Constellation Europe, Dairy Crest, Gerber Juice, Ginsters, Yeo Valley, Tamar Foods, Wiseman Dairies, Wyke Farms
Food and drink manufacturing in the South West employs around 37,000 people in over 3,000 workplaces. These businesses turn over about £5bn annually and punch above their weight nationally, contributing 6% of the UK’s food and drink exports and 8% of its productivity.
Other important sectors:
Bio-manufacturing and nanotechnology, ceramics, construction industry manufacturing, furniture manufacturing, glass manufacturing, paper production and printing, yacht building.
Big hitter: Airbus
Aircraft manufacturer Airbus is undoubtedly one of the biggest manufacturing names in the South West region. Its Filton base employs around 4,500 people in design and support functions, while more than 2,000 engineers work on a wide range of activities including wing integration, flight physics, structures and systems. The Filton site is also responsible for wing assembly and fitting out for the much delayed A400M military multi-role airlifter.
Commendable though all of this frontline manufacturing activity is, none of it would be possible without the core research work which goes into devising engineering solutions, new manufacturing methods and investigating alternative materials.
The aerospace sector in the South West accounts for about 35% of all aerospace R&D investment in the UK and Airbus is one company at the forefront of this, spending around £300m on R&D annually. In addition to Airbus’s specific research, the company is lucky to have its parent company EADS’s Innovation Works co-located at Filton. This site recently won a bid with the Regional Growth Fund to support its additive layer manufacturing research.
“We were very pleased that the West of England was successful in its bid to become an LEP and the aerospace and defence community in the region played a huge part in supporting the bid,” says Katherine Bennett, VP political affairs at Airbus.
“We also have a place on the board of the LEP.
They have placed a big focus on supporting the sector and are keen to engage with business in a strategic way.”
Somewhere, beyond the sea
Such indications of confidence make a stark contrast with national employment trends. Nor is the optimism here a mere flash in the pan. Steady growth has been recorded since the beginning of 2010 across most sectors in the region and many contributors to the MAS South West barometer report that they expect stable sales to continue at least into the next two financial quarters, with exports dominating slower domestic sales. This export strength is extremely positive and as Terry Slater, director of EEF in the South West, says: “It fits with the Government’s growth plan,” for long term economic wellbeing. Mr Slater says EEF is encouraging manufacturers in the region to innovate and diversify for export markets, with a particular focus on economies like Brazil and India. But such aspirations will mean overcoming, in part, the concerns which press-in on everyday operations, such as rising input costs.
One of the South West’s sectors caught out by the swing in favour of exports over domestic markets is construction manufacturing. The recession hobbled the UK construction industry and, says Tom Bowtell, deputy CEO of Proskills, the sector skills council for process industries, orders are yet to return to anything similar to prerecession levels. Hope for this sector is, however, at hand in the South West as the planned new build nuclear power station at Hinkley Point in Somerset is expected to re-energise order books.
In preparation for this upswing, manufacturing companies like Aggregate Industries have been investing heavily in skills and training.
One to watch: Stirling Dynamics
Stirling Dynamics is the UK’s leading independent landing gear specialist.
The 90-employee company is a key player in the South West aerospace cluster and contributes to both domestic and international aerospace projects. Stirling Dynamics recently celebrated a new contract with Bombardier Aerospace to provide ground loads, flight loads and component loads analysis for the C-Series aircraft programme being manufactured in Montreal, Canada.
Technical director Andrew Pfeil, says: “We are delighted to have the opportunity to work with Bombardier on their industry leading aircraft development programme. The C-Series contract is the realisation of a long-running dialogue with Bombardier and provides an exceptional opportunity for us to demonstrate our key strengths.”
To pastures green
Alongside the generally buoyant outlook for the South West there are still many day-to-day challenges to face in business and operations. Just as with the rest of the nation, the well received 2011 Budget has been tarnished by the pressure to comply with a range of new environmental legislation. The carbon floor price, introduced at £16 per tonne in 2012 and rising to £30 per tonne by 2020, is the biggest elephant in the low carbon room.
However, despite complaints about how environmental legislation is putting cost pressures on manufacturers and is being poorly managed in terms of timing and consultation, there is no denying that there are big benefits to be gained through exploiting low carbon technologies, reducing energy consumption and breaking into new, fertile green product markets. According to EEF’s Slater, opportunities are strong in the South West for the low carbon supply chain with an already strong renewable energy presence and obvious potential for further wind and wave development along the region’s ample coastline. But much more work needs to be done for local companies to realise their potential in the emerging low carbon economy, either in product and process innovation or through new markets, according to statistics from MAS South West.
A massive 84% of respondents to the MAS barometer survey said that they felt the low carbon economy would have no impact on their business; a figure which has only dropped by 5% since Q1 and the intervening announcement of the carbon floor price, another green tax. Simon Howes, managing director of MAS-SW says: “The fact that most [manufacturing] businesses do not expect to see any impact from the low carbon economy suggests that many are yet to realise the benefits of low carbon, which could be as simple as improving product design or processes. Perhaps businesses do not fully understand what it means, and how embracing the opportunity can help a business grow.” This lack of confidence in understanding opportunities is unsurprising, given the increasingly complex landscape of environmental legislation which is being rushed in to try and push UK industry into a low carbon economy: “No one would argue that the move to a low carbon economy is not a good thing,” says Slater. “We need an economically sustainable approach. The trick, however, will be to move towards that in a way that doesn’t damage growth. We need an approach that looks deeply at impact analysis and helps sectors manage their specific implications.” Slater suggests that this is not yet being done; the whole green compliance landscape needs rationalising and that directives like REACH (Registration, Evaluation, Authorisation and restriction of Chemicals) and WEE (Waste Electrical and Electronic Equipment) need to make industry understanding, in both directions, a priority. He recently reassured regional members that EEF will be on hand to give advice about how to act on these directives.
Adapting manufacturing methods to shifting markets and regulatory requirements on a large scale would be difficult if not impossible without a strong network of industry support. While there has been a consistent presence from the South West arm of MAS to highlight national and international trends in competitive manufacturing, the abolition of the Regional Development Agencies and their staggered replacement with Local Enterprise Partnerships has left many manufacturers across the UK feeling that sources for advice and support have been very much in flux over the last year.
According to EEF, however, this is now changing in the South West and, after some initial skepticism the new regional LEPs are bedding down with their industry partners to good effect. One South West LEP making the quickest impression on the business community is that in Devon and Somerset. Officially sanctioned in April, the LEP is now identifying and supporting important enterprise zones and transport projects. Paul Goodhand, managing director of Knorr-Bremse Rail Systems UK, has a vested interested in seeing the South West’s participation in such transport projects increase. Speaking of existing projects with high value to his company, the region and the country, Mr Goodhand says: “Knorr-Bremse is ready to be involved in the UK’s exciting high speed rail replacement project and we are well placed to do this. We are confident that through investment in our UK facilities we can not only supply the world class products and systems required for any [rail] application, but importantly we have what I believe is an unrivalled ability to locally support the in-service operation of the new trains over their entire life.”