The 10 year turnaround

On the tenth anniversary of The Manufacturer, Colin Chinery looks at a turbulent decade – the fall and rise of British industry

Ten years ago next month, high on the shoulder of an old pithead by the A1 at Gateshead, a 65 ft structure was raised: symbolism constructed of weathering steel with the wingspan of a jumbo jet, and named the Angel of the North.

It aspired, said sculptor Antony Gormley, “to grasp hold of the future, expressing our transition from the industrial to the information age, and to be a focus for our hopes and fears – a sculpture is an evolving thing.”

Five years later and Mr Gormley’s modishly facile assumption appeared to have its figurative validation when the company that built the Angel went into administration with the loss of 38 jobs. The reaction of Amicus general secretary Derek Simpson verged on the apocalyptic: the Angel, he said, would now become a monument to the wilful destruction of manufacturing in the region and across the UK.
But unlike the sculpture, industry is an evolving entity. In 2001 UK manufacturing saw its biggest annual decline for 10 years. Output, investment, jobs and percentage of GDP were shrinking, and a media debate pondered gloomily on its long-term prospects for survival.

Fast-forward to January 2008 and it is hard to recall a more buoyant self-confidence among our manufacturers. Britain is the world’s sixth largest manufacturer, output and order books are the best for 12 years, companies of almost every size are achieving global reputations for excellence, productivity growth is outstripping – the US apart – all our major competitors. An EEF survey of 600 companies suggests Britain will continue to be the primary location for high value manufacturing for the next five years.

All this and more is being achieved in a whirlpool of change and turbulence unparalleled since the Industrial Revolution. Who, for instance, in the late 1980s would have predicted the rise and extent of China’s economic power, or the challenges of globalisation, the vertiginous hike in energy and commodity prices (and in the case of the former, issues of supply and security)
and the potential millstone of a decade-long strong pound?

Jobs and supply chains have migrated east in vast numbers. Foreign owners and investment have been seduced to the UK, and skilled immigrant workers from an enlarged EU are recruited and welcomed. UK PLC has become – to the gratification of our competitors – the paragon of unconditional world free trade, a role to which none of them aspire.

Manufacturing has benefited from the longest period of domestic economic stability in modern times, and a generally focused – the MAS pre-eminent – if bewildering multiplicity of support agencies. Meanwhile, climate change implications are increasingly viewed for their opportunities.

At the same time the dead hand of Government dispensation has maintained a tax regime heavy and complex, and – again in contrast with competitor nations – zealously enforced regulations, and a generally unhelpful policy on state and public sector procurement.

Unsung and sometimes misrepresented by the mass media, marginalised by financial commentators – asked in 2003 to define manufacturing, economist Professor Tim Congdon sniffed: “It is usually done in a repetitive way on a production line in factories,” – British manufacturing is turning challenges into achievements. Ring out the bells!

It has been 10 years of two halves, says EEF chief economist Steve Radley, “the first five extremely difficult but with a very strong performance in the last five.” The re-structuring put in place to cut costs, improve productivity and focus on higher value-added activity has born fruit, and significant progress has been made in winning orders across the world.

“Lean manufacturing has been around for some time but companies are now using it more extensively, not just in production but in all operational aspects. And they are using it much more effectively,” he says.

“I think foreign ownership has been helpful, both in transforming companies that have been taken over but also in getting companies in the supply chain to adopt lean practices. People make the very easy mistake in thinking output has contracted, when the fact is we are making more with fewer people.”

Drive, flexibility, innovation and resourcefulness are now almost a given in a sector once hag-ridden by a Red Robbo image. “More than any other EU country, Britain over these 10 years has bought into the lean revolution,” says leading auto industry authority, Garel Rhys, emeritus professor at Cardiff University Business School. “We grasped that the only way to survive was to improve internal efficiencies, get rid of over-manning and poor management, improve systems, and invest in product renewal. All this wasn’t done in the last half but it is in the last five years that we have seen its manifestation. And it continues.”

Rhys argues that the issue of a declining percentage of GDP should be seen in context. “Services inevitably increase because this is where the new array of goods are. It’s much more difficult for manufacturing to retain its percentage of the growth in GDP, but the value added of the sector is most impressive, and the output per person excellent.”

Running through these years like an unexpectedly bright thread has been a shift towards a ‘can do’ attitude. Trevor Cross, chief technology officer of specialised electronic components and sub-systems leader e2v of Chelmsford, recalls an earlier climate, “a feeling that it was all too difficult and manufacturing is on the slide and will continue to get worse. Well just don’t believe it; forget that old hat.”

e2v’s emergence from the GEC/Marconi un-stitching in a 2002 management buy-out is an example of the emergent dynamism. “In effect it was the first stage of taking the lid off the potential that was locked up in the company. In our case we are in very very high technology high performance niches in most markets, and this means that a huge proportion of the value of what we do is in the design part of the product life cycle.”

When the post-grad Cross joined the former Marconi in the mid-eighties, “we were not long past the ‘winter of discontent’ and all that. And in a way some of the elements of that situation
have come back with the threat from another direction to the energy supply. But this time round, British industry is in a position to say ‘right, where’s the opportunity?’”

Garel Rhys agrees. “It was a rationalisation for failure. We didn’t even try.” Now he sees a ‘heartening’ difference in attitude towards manufacturing. “There is a big buzz for working for top class manufacturing, the breakthrough with brand new products, helping people to enjoy a better standard of life and well-being because this is what manufacturing does; it is a ‘good thing.’ People are beginning to see in the UK the sort of attitude towards manufacturing that we see in Germany where it’s the central plank, it’s iconic, a job that people aspire to.”

And despite the uncertain global and financial outlook, British manufacturing enters a new year largely resilient, its innovative and entrepreneurial spirit unchecked, though with potential road blocks; skill shortage and the pull of an illusory comfort zone among them.

“There has to be an acceptance that markets are global, a willingness to go out and spend face-to-face time with your customers. Even a relatively small company cannot exist just in the UK now,” says Cross.
For Garel Rhys there is serious concern about a lateral issue – infrastructure, communications, roads and to an extent the railways. “Now this is absolutely crucial. The continuing efficiency of manufacturing internally and externally doesn’t now depend just on its own efforts but also these other sectors of the economy being fit for purpose, and at the moment you can’t say that.”

Skills is an area where performance is still disappointing, says Steve Radley. “For the vast majority of companies it doesn’t feel we are anywhere near a demand-led system, where providers respond to their needs and where it’s easy to get information. There are a multitude of bodies in the skills area and for most manufacturers it is extremely cluttered and confusing.”

But Radley is impressed with the improvement of industry-academia relationships – an area to which e2v gives high priority. “Companies and universities are much better at working together now, and it’s becoming easier to access good information on innovation. And if you look at an organisation like UK Trade and Investment, although insufficiently resourced, it has pushed itself in the right direction, providing much more advice and assistance in fast growing emerging markets.”

Garel Rhys sees a continuation of the developments of the last 10 years and accelerated in the past five. “There aren’t any signs of particularly stormy waters. Clearly one can’t guarantee that the world financial crisis will not come into the real economy and reduce growth rates or even push the world into recession. That’s something industry has to live with and work out the risks.

“But in terms of the specifics, quality of management, lessons learnt and abided by, the way management and labour works together, I can only see that these next 10 years for manufacturing could well be the most successful 10 years the industry has experienced in the last 100.”

These 10 years, says Trevor Cross, “have been extremely interesting and a bumpy ride on occasions. But I have never looked forward to the decade in front of me with such optimism.”