Finally it appears that the manufacturing sector is a key priority for government. It is almost impossible to pick up a newspaper without a government spokesperson stating that “a strong manufacturing base is essential for the future prosperity of the UK.” UK companies that make and export products are starting to get the attention they need, but are we doing everything possible to support this with investment, incentives and best practice?
There is a view that UK manufacturing is in terminal decline and that only low cost economies like China have real prospects for building substantial manufacturing industries. Western economies may hang on in some high value, complex manufacturing areas such as aerospace, defence and automotive manufacturing but sooner or later they will lose even that to lower cost economies. Of course the reality is rather more complex but the basic premise could well come to pass over the next 10 years.
If UK manufacturing is to thrive then what will be the building blocks for success and how will it compete against low cost economies such as China and India? Early indications in sectors like the automotive industry are that China and India will buy up what is left in the UK and absorb our expertise and knowhow.
For example, Tata, the Indian conglomerate bought Land Rover and Jaguar from Ford in 2008 and Shanghai Automotive Industry Corporation bought MG.
From a UK manufacturing point of view does the fact that increasingly our manufacturing base is foreign owned really matter? So far foreign ownership appears to have been a good thing, bringing investment into the country.
For example, Jaguar’s model line up has vastly improved under Tata ownership and the same is true of Land Rover where sales in March were up 60pc on last year breaking its previous sales record of 10,600 cars set in March 2006.
British engineering companies like Lotus are launching exciting and ground breaking cars such as the Evora Coupe and a hybrid version, see opposite, with a range of 300 miles and a 0-60 time of less than four seconds, which was unveiled in March at the Geneva Motorshow. In spite of the recession foreign investment in our automotive industry appears to have provided both confidence and inspiration to an industry that not long ago looked to be on its last legs. It will be interesting to see if Swedish based Volvo enjoys a similar resurgence under Chinese owners Geely. The ever present danger for the UK, of course, is that production will eventually be moved to the investor’s home country.
Whether this is the eventual outcome will largely depend on what we do now.
Creating the right conditions for manufacturing growth
The key thing the Government can do is to create the right conditions for manufacturing growth. These are the conditions that most businesses need – a competitive tax regime and a skilled and innovative workforce.
A competitive tax regime requires government to wise up and gain a genuine understanding about what makes modern manufacturing competitive. The EEF March report “tax reform for a balanced economy” covered this comprehensively. For the most part these were simple actionable recommendations that could be implemented quickly without costing large sums of money when you consider the likely benefits to manufacturing as a whole. Some of the key recommendations were:
● Modernise the capital allowances regime
● Make R&D tax credit easier to claim and reflect a wider range of costs
● Create a more sustainable capital gains regime
● Reduce the headline rate of corporation tax over time
● Prioritise areas for simplification that will genuinely reduce burdens on business
The second area is skills. This again requires an attitudinal shift and some financial investment and incentives.
The UK manufacturing sector has inherent strengths in innovation and there is a real demand for skilled engineers.
The success of Formula 1 in the UK is a prime example of UK engineering strength and the household appliance manufacturer, Dyson is looking to double the number of engineers at its Malmesbury headquarters to 700 (The Manufacturer May 2010) yet young people in the UK still have a sense of apathy towards a career in manufacturing. This forces companies to either recruit from abroad, which is costly, or persuade an aging workforce to stay on which may prove damaging in the long term.
The relentless pursuit of excellence for the customer
However, it is not just down to education and government policy.
Manufacturing companies need to play their part by investing in their engineering talent while supporting and encouraging wide spread adoption of proven methodologies for product and process excellence such as lean, six sigma, and design for six sigma (DFSS). If the bedrock of UK manufacturing is going to be around innovation and the ability to manufacture sophisticated high value products, then we are going to have to lead the world in the ability to make complex products more simply and cost effectively than anyone else.
DFSS for example allows engineers to build in reliability at the design phase rather than ‘test out’ failure at the prototype stage. The savings in time and cost through using this approach are proven and yet engineers in many companies, persist with an over reliance on a ‘test out’ approach. Lean sigma approaches are similarly underutilised in UK manufacturing.
Furthermore many companies take a piecemeal approach. This causes adoption and application to be patchy and skilled lean sigma practitioners thin on the ground. If we are to lead the world in making complex high value products then eliminating waste and process complexity in our design and manufacturing facilities should be central to our manufacturing philosophy.
Looking to the Future
Now is not the time for business as usual we need to sow the seeds of the UK’s next industrial revolution by focusing and building on what we do best. We remain a strong manufacturing nation but no longer a great one. If we are to regain that status then government, the education establishment and manufacturing businesses all need to play their part. Foreign companies like Tata see the value of what we have to offer and have invested accordingly but perhaps it is time we decided our own future before others decide it for us.
About the author
Stuart Smith is Managing Director of Bourton Group and its subsidiary company The Six Sigma Group www.bourton.co.uk Tel: 01926 633333.