SWIM for it: South West Innovative Manufacturing

Posted on 3 Apr 2012

SWIM: a new business forum in the South West, organised by BDO LLP, Barclays and insurers Marsh, to share ideas and best practice, provide tax and business advice and develop personal and professional networks. Will Stirling attended its first meeting.

It was apt that the first South West Innovative Manufacturing event, or SWIM, was hosted at the National Composites Centre. Just up the road in Filton, Airbus has an order backlog of 4,437 aircraft (at March 24) and the aircraft industry needs to find improved manufacturing techniques to satiate the demand – and fast. In March, separately to SWIM, head of R&T business development and partnerships for Airbus UK Colin Sirrett said, “With this backlog and projected growth of air travel demand of 45% over the next 10-years, research into high volume and low cost manufacturing is essential for Airbus to meet future market needs.”

SWIM is a forum for manufacturers in the South West to debate hot topics affecting the sector. Investment and innovation, and the barriers to developing both, will be recurring themes. The first event on March 15 covered:

  • The status of UK manufacturing by The Manufacturer, leaning on issues debated at the recent EEF National Manufacturing Conference
  • The National Composites Centre (NCC), its capabilities and mandate, delivered by the centre’s CEO Peter Chivers
  • Supporting Innovation – tax breaks and government funding, presented by Robert Hayward of BDO
  • A short wrap of the UK’s position in global manufacturing, with an insight into China, by BDO’s head of manufacturing Tom Lawton, and
  • A Q&A of the discussion points chaired by Mark Lee, head of manufacturing, transport and logistics at Barclays Bank.

Status of UK manufacturing

EEF’s latest Fact Card, released in March, confirmed that the UK has slipped to 9th place in the global league table for manufacturing gross value added. Up until April 2011 the UK was still seventh.

The two new kids in the top 10, Brazil and South Korea, have crept up fast. Brazil’s rapid economic progress is well documented and its leader Dilma Rousseff has made no secret of her feelings about state protectionism to boost industry. South Korea’s vast electronics industry has been greatly helped by the Electronics and Communications Research Institute (ETRI), one of the Technology and Innovation Centres (TIC) Dr Herman Hauser identified as a model for better ‘business incubation’ from university research in his seminal 2010 report. His review gave rise to the UK’s own TICs, the Catapults, and the National Composites Centre is one of seven nationwide centres that comprise the High Value Manufacturing Catapult.

EEF’s recent national conference had debated three heavyweight issues central to growing the manufacturing sector: innovating products and processes, growth through export and alternative finance for investment. Help with exports, it was suggested at SWIM, needs better articulation and the company experiences with UK Trade & Investment are not always glowing. The Alternative Access to Finance workshop identified equity finance through the Business for Growth Fund and the government-sponsored Capital for Enterprise as two alternatives to plain bank lending. Tim Breedon’s recent report highlights these other routes.

Innovation, as part of the SWIM acronym, was addressed in more detail. The Technology Strategy Board’s Catapult concept was explained, briefly reviewing the High Value Manufacturing Catapult centres. Each one has a specialisation, with some crossover, and are designed to collaborate with each other to help the acceleration of proven ideas and products to market. For example, the Nuclear AMRC in Rotherham, which opened in 2011, is working to help subcontract engineering firms acquire the knowledge needed to become accredited as a nuclear industry supplier.

National Composites Centre

Composite manufacturing applications are set to grow by up to 18% in some sectors, said the NCC’s chief executive Peter Chivers. He explained the size, capability and purpose of the Centre. Like the other Catapult centres, the NCC is funded broadly by a three-way split, between the Technology Strategy Board (funding via BIS), industrial partners and the European Regional Development Fund. Partners are rated from tier one to tier three, depending on their contribution. He reiterated that the NCC is not merely for research, a core purpose is to develop manufacturing processes in situ that will help industry save time and money in ramped-up production of composite-based components.

The 8,500m2 centre is a large facility with equipment to match. When the kit list was specced by the original consortium, tier one partner Airbus wanted the capability to make and test parts up to 20 metres diameter. The new Automatic Fibre Placement machine, installed in March, uses twin robots to automatically layup sheets of composite material at twice the rate of the previous equivalent process.

Asked if the NCC has any funding concerns, Mr Chivers said no. “Our main issue is ramp-up; how we are going to manage when the current pipeline of projects are all on-stream. More equipment is being delivered shortly, and we’re increasing headcount from 33 to 100 by June. It’s still a big task to actually do the work, but it’s exciting.”

NIC and R&D – good news for business

Robert Brown, a tax director at BDO, talked about apprenticeships, National Insurance contribution (NIC) holidays and R&D tax credits.

Between March 2011 and March 2015, the government will utilise £180m to fund up to 50,000 additional apprenticeship places. SMEs will get specific help with 10,000 higher apprenticeship places. Companies that have been established since June 2010 can claim a saving of 10% of the cost of NIC for the first 10 employees, up to a potential deduction of £50,000 per year. But you must qualify to claim – and only about 500 firms in the South West had done so to date.

Responding to recommendations in James Dyson’s 2010 report, Ingenious Britain, the rate of enhanced deduction for expenditure on R&D by SMEs will increase to 225% from April 1, 2012 (following EU approval). This means for every £100 spent on R&D, companies will get £225 tax deduction. Further changes were introduced from April 1 that include an abolition of the cap on the R&D tax credit to the amount of PAYE and NIC paid, and abolishing the minimum required spend of £10,000 a year.

Mr Brown agreed that the big issue with R&D claims is often to understand precisely what qualifies for R&D. Head of manufacturing at BDO Tom Lawton, who visits China regularly, felt that UK manufacturing had strengths but its top 10 place was at threat. He sees much better integration between government policy and industry in China and South Korea than in the UK. While the Catapult was a good step forward, and MPs had made promising noises recently, there was little sign of the 20-year industrial strategy required to secure large tracts of manufacturing here.

Mark Lee, head of manufacturing transport and logistics at Barclays, chaired a Q&A to close the forum. One guest, a local engineering firm, said the banks’ current finance model was simply not aligned to promote growth. He said his firm needed land to expand, but the terms offered by their bank – a 5-year revolving credit which required up to 60% of the principal – were more akin to a sub-prime loan than a competitive commercial mortgage.

Mr Lee said banks’ lending to SMEs was being held to account via mechanisms like the Breedon report, and that it was proving challenging to free up more lending “within the constraints of the banks’ current business model”. He challenged the delegate to test his borrowing criteria with Barclays.