What support is available for urban manufacturing?

Posted on 16 Feb 2015 by Ruari McCallion

Like any revolution, the urban manufacturing renaissance needs money and support. Ruari McCallion’s cap is in his hand.

The macro dynamics in the economy are the best they have been for 20-30 years, in terms of facilitating smaller businesses especially.

Hit or Myth - Urban Manufacturing PQ3The Government has a focus on manufacturing, the costs of manufacturing abroad are not as advantageous as they were and intellectual property is fast becoming the essential lifeblood of small and niche manufacturers. Macro factors percolate down and small companies are able to benefit from the improved climate.

And the Government support is more than just soundbites, according to Mark Bryant, head of manufacturing at Business Growth Fund (BGF).

“R&D tax credits, capital allowances, Innovate UK, the Catapults and Enterprise Hubs all help,” he says. “The holistic approach, including STEM Ambassadors, is beginning to happen. It is a lot of little things, coming together.”

But there are still challenges – what he describes as the “Valley of Death”, in particular. It is the gap between the funding and support available for small companies up to proof of concept but it is the next jump, to expansion and commercialisation that is difficult to bridge.

BGF itself is probably the wrong side of the divide as its remit is to distribute its £2.5bn of capital funding generally in cheque sizes in the £2 – £10m range. Its target businesses have annual turnovers in the £5-£100m range. One source of that ‘gap’ funding is venture capital but that is not always entirely welcome.

“Entrepreneurs don’t really like the idea of selling or disposing of their companies in five years’ time,” Bryant observes. If a business is the right size then BGF can be just the job, as it is not allowed to take control of companies. But it can point to several success stories, including Hobs, PurePrint, Molecular Products in Harlow, which makes CO2-absorbing rebreathers, and Trunki, the injection-moulded sit-on luggage bags aimed at children, which are made in Plymouth. And ThamesCard, in Rayleigh, which makes secure credit cards.

RDM Production (P)
Asset finance is one way for businesses to buy essential equipment.

The banks have made clear that they are interested in lending to businesses. They are offering a range of options, including asset finance. It is a pretty good way for a business that doesn’t have much in the way of traditional collateral – i.e., property – to buy essential equipment. Novel and innovative methods are getting closer to the mainstream as well.

Crowdfunding tends to raise smaller amounts, with £10,000 being a good total, but peer-to-peer lending is another option and RBS has announced that it will direct customers towards such sources, in the right circumstances.

The list of incentives and tax credits available from government is real and should not be ignored. R&D tax credits are very attractive for businesses that are leveraging clever ideas and the enhanced Annual Investment Allowance (AIA) should be taken advantage of before it runs out.

RDM Group – case study

RDM Production (P2)
RDM Group is targeting sales of £25m by 2018.

RDM Group of Coventry has invested over £400,000 on acquiring an additional 20,000 sq ft facility on the Bilton Industrial Estate. It has been fitted out with two CNC machines, three injection moulding machines, a three axis router, laser engraver, the latest CAD/CAM software and a dedicated area for vehicle conversions and builds.

The new machinery and software means RDM Group can now offer precision machining, injection moulding, surface engraving, routing and prototyping services. The project received support from Coventry and Warwickshire Local Enterprise Partnership (CWLEP) and will enable RDM to develop new business, repatriate sub-contracted production from China and promote its capability to produce special vehicles and low volume builds.

Sales are targeted to reach £25m by 2018. RDM employs 38 people and also has Telematics and Meditec divisions.

Durable Technologies – case study

The managing director of Durable Technologies has invested more than £200,000 into setting up his own manufacturing facility in Hartlepool and developing a supply chain involving a number of local businesses.

Working with the MAS and the North East Business and Innovation Centre (NE BIC), the company has completed its first installation at UK Steel, with plans in place to sell over 7000 units this year. This will lead to the creation of four new positions, doubling the workforce within 12 months.

L-R Chris Hylton from MAS and Alex Carter from Durable Technologies with the light harness
Image from L to R: Chris Hylton (MAS), and Durable Technologies’ Alex Carter.

The company’s latest product, the ‘Light Harvester’, contains the light detector and controller in a single, easy-to-mount casing and uses Bluetooth technology and a special app to view data and make adjustments including to light levels and timeouts.

The trials of the first installation show that lighting costs in monitored areas can be reduced by nearly 80%. Durable Technologies, won the North East Business Award for Innovation in 2013 and is currently working on another major project to produce light controllers for a household electrical manufacturer.

Combined with the ‘Light Harvester’, this will see the company increase turnover by 100% to £600,000.