Will Stirling talks to EEF’s CEO Terry Scuoler about determination, the Government’s conviction in industry, promising horizons and, above all, the need to invest.
EEF’s new chief executive, Terry Scuoler (pron. ‘Skool-er’), seems to be made of the right stuff to lead the UK’s main manufacturers’ organisation. Five and a half years in the British Army and 26 years in manufacturing, much of it at the “front end” of engineering and product development, should be a solid grounding to lead the trade body in challenging times. And his 10 years in charge of Ferranti Technologies, manufacturer of avionics systems, will be a valuable experience. The Oldham-based company was suffering from financial problems when he joined 1999. Orchestrating a management buy-in with his own money and private equity backing, he and his team led Ferranti from a loss-making position to that of sustainable profit and increased the order book by a factor of 10.
Scuoler, a soft-spoken but direct Scotsman, has had a colourful career. The Army, he says, was a very solid foundation. He was a combat solider in the infantry and airborne infantry with the Argyll & Southern Highlanders and saw active duty in Northern Ireland. “For a young man in junior leadership role as an officer, it was on occasions demanding and frightening, but it is very character building. Without a doubt I benefited strongly from the Army and don’t regret it for a moment.” After a brief spell in advertising sales, he joined Royal Ordnance in 1982 and remained there after it became a public corporation in 1985 and was sold to BAE Systems in April 1987.
His first appointment for divisional board at Royal Ordnance, in the electronics division, was in charge of 1,100-1,200 people at the Blackburn site.
Following BAE Systems’ purchase of Royal Ordnance in 1987, the Scuoler took the commercial management path, progressing through junior to senior management. “At some fairly early point you move into general management, when you’re running a business or part of a large business, and every business is about engineering and manufacturing. I’m in no shape or form an expert in engineering, but I’ve had a lot of exposure to it over the years,” he says.
In 1999 he took a risk and engineered the buyin of Ferranti Technologies, an essentially good company with serious financial problems. “What makes someone decide to give up a good corporate ‘day job’ and to invest in a troubled mid-sized business, put in an equity stake, risk your own money, and try to develop an underperforming business strategically?” Determination and selfmotivation, says ex-colleague and now managing director of Ferranti, Steve Warren. “Terry has high levels of motivation and determination – it was this motivation, along with the key team, that got Ferranti through some very difficult years from 1999 to 2001.
He’s a good guy to have on your side.” Ferranti was sold in 2007 to Israeli-owned Elbit Systems, but Scuoler stayed on as an employee for a further three years. Warren is keen to add that Elbit was chosen partly because it provided the best platform to protect and create jobs in the UK, which Scuoler backed, and has since invested heavily in people.
On Ferranti’s turnaround, Scuoler says: “It takes some form of vision, and the attitude that I can do this – for myself, for the business I’m embarking on, for others. I’ve got a passion for what I’m doing, which then was an aerospace and defence-oriented manufacturing company.”
Why did he want to take this make-it-work approach beyond the defence sector and work for EEF across all sectors? “Even in the difficult times at Ferranti, I made decisions that we must invest,” Scuoler says.
“Unless you’re investing in the asset – in technology, plant and equipment, people and training – then you’re not developing the business. I used to think that quite strongly when I looked at companies in other sectors, where some perhaps didn’t have the courage of their convictions. I’ve nothing against foreign ownership, I support the free market, but when I saw other businesses being bought up often rather cheaply, without a strategic plan for growth, I got frustrated. I regarded manufacturing generally as the great organ for growth; once you’ve put some form of product or technology module in whatever capacity into the marketplace, you get spin-offs from it – ongoing spare parts, logistical services, training and support, the next derivative of it and so on. I saw that as something that I could influence and do something about.”
Government intent and a Budget for business
EEF has faced big challenges through the recession, with cash-strapped companies looking closely at their non-core spending. Its membership numbers remain close to, if not slightly higher than, pre-2008 levels, but revenues are down because fees are linked to members’ payroll. But Scuoler is upbeat about prospects for UK manufacturing and senses a tangible zeitgeist of positivism. “Possibly never before in my memory have we had such positive governmental and media statements of support for manufacturing,” he says. “In the run-up and immediately after the coalition Government formed, the Prime Minister and cabinet ministers made such positive statements about manufacturing and a rebalancing of the economy that I don’t think they’ve got much room for manoeuvre.” The first evidence of that intent was the Budget on June 22. On balance, Scuoler says, manufacturers were supported in that Budget. “We could have wished that capital allowances were not reduced to assist the deficit reduction. Yes this was a concession, and capital gains tax rises won’t be popular, but when you look at the whole picture – corporation tax reducing by 4 per cent over four years, and reducing the small firms tax rate from 22 per cent down to 20 per cent, I don’t think this was a bad Budget at all.” Despite this, Scuoler was disappointed that the Budget had very little for investment for growth in industry, on which there was plenty of talk from all parties leading up to the election. UK industrial competitiveness is all about investment today, he says. EEF surveys show that manufacturing investment has reduced considerably, but Scuoler says he is beginning to see signs that investment is returning.
Scuoler is sympathetic to the wretched market conditions companies have faced, but he is firm on the need to make tough decisions. “Some manufacturing companies will have taken steps to invest in the latter part of the recession,” he says.
“There’s a judgement call to make here, there is something called leadership. While I acknowledge there are serious issues with access to capital, at some point you’ve just got to be a bold enough to take decisions to invest. At certain points when I was taking these decisions, the businesses I ran struggled with cash flow in the early part of that investment, and I may have had issues with using new plant effectively. Further on, when the teething problems were out of the way and we were using the machines effectively, I never once regretted deciding to invest in plant or equipment.”
EEF is a membership organisation. “We wish to be unequivocally the single, lone voice for manufacturing in the UK,” Terry says. “We are also a business services organisation – 50 per cent of our revenue comes from business services. We need to build our membership and we need to broaden our membership to include all sectors of manufacturing.” Strongly linked to SMEs, EEF’s strategic review earlier this year recommended that it open its doors to all companies, from small firms to the multinationals.
Another proposal is to attract a broader range of businesses that are associated with manufacturing who share EEF’s policy agenda, such as transport and logistics and material handling companies. “This will strengthen our agenda and our ability to represent a wider base that will help in the corridors of power.” In lean times there is a case for consolidation, Scuoler says, and not just in business. “Successive governments have spent a lot of money spent on initiatives set-up to encourage manufacturing in the UK. To a large extent this has been scattergun and this needs to be pulled together.” So what about rationalisation of non-governmental organisations, such as trade bodies? “There are several [trade] organisations who would share my view that some form of rationalisation would be beneficial. Some of them have had a pretty torrid time over the last couple of years. It is a valid view that to a degree, larger is better and more focused, especially if that relates to sectoral coverage. We live in an open society, where people are free to push their agenda.
But from a macroeconomic and sectoral point of view, sector trade organisations could do better in terms of more cohesive, coordinated performance.”
Is big better?
Hard skills, as ever, is a big issue for this sector.
“Several members are reporting that a skills shortage is emerging. The need for STEM subjects especially, but apprentice-level skills, and not just for teenagers but more mature work-based skills.” In what way does EEF engage with the skills debate? “We have a voice, I sit on the board of Semta, we’re talking to the skills minister and his colleagues at BIS. We lobby but we don’t play politics – whenever we come to government we come with evidential-based quality survey work that we can piggyback on to get a high quality dialogue.” So what will EEF focus on to tackle the elephant in the room, sustainable manufacturing growth? “We’ve got to support entrepreneurial start-up opportunities, whether graduating students or small groups leaving larger organisations. More, and to be fair continued, support for them in driving start-ups is important.”
EEF is currently looking at what turns an SME into a large-medium sized business. “I slightly fear, and I hope I’m wrong, that once an SME always an SME in the UK. What obstacle dynamic hinders an SME of 200-250 people from moving into that 500-1,000 employee size? This is a personal concern of mine that we can look at.”
Terry Scuoler has the minerals, as they say in the Army, to take EEF forward through a bumpy recovery. A strong focus on lobbying government for a simpler tax system, widening the membership to pro-manufacturing service companies and a focus on support for investment should endear him to a growing membership.
*Never Forgotten, the motto of the Argyll and Sutherland Highlanders