Manufacturers optimistic despite support in short supply
Midlands manufacturers remain optimistic about the opportunities that exist despite identifying a range of problems, from poor business engagement to understanding from funders.
In a wide-ranging round table discussion held at KPMG, as part of a wider project with TheBusinessDesk.com, the leaders of manufacturing businesses from across the West Midlands shared their knowledge, experiences and challenges.
“Strategically we all get it because we are in manufacturing and engineering,” said Mark Franckel, group chief executive of Arlington Industries.
“It’s the stakeholders who don’t get it – the banks don’t get it still and PE [private equity] houses don’t get it.
“Everyone I talk to gets old-school aerospace, automotive, payback periods of X, normal growth. But I’m not seeing normal growth.
“I need to raise money because we’ve just got too much going on. I want to buy more companies to fix our supply chain solution, because the automotive companies just want a fix.
“My frustration is that we have the fix in the Midlands but some of the stakeholders still don’t get it. I meet a lot business owners that are in growth mode that 100% get it.”
“You talk to the bank about we need more tooling, more capex, and they look at you like you’re a space cadet. Getting tooling funding in the UK is still so hard. We’re hopefully going to be £300m turnover by September and it’s still hard for us.”
Steve Morley, president of the Confederation of British Metalforming, believes there is a different approach on the continent
“I’m just spent a year in Hungary working to supply JLR in Graz, Austria and the mindset in Europe is totally different,” he said.
“Slovakia has gone head over heels to win new business, they have welcomed JLR with open arms.
“JLR have several sites in Europe but Slovakia gave them not only the best site but the best opportunity to build that site there and the supplier base are building around there. Now they’ve got a hub of JLR suppliers.”
Automotive and aerospace supplier Arlington Industries has nine sites in the UK as well as operations in France, Germany, Turkey, India and China, but Franckel has had few productive outcomes from his dealings with Government.
“Government doesn’t want to know,” said Franckel. “Well, they do, they make the right noises on the phone and you have a little chat, and you have a round table meeting, but nothing ever happens.
“We’re setting up in Slovakia and I’ve had more constructive meetings with the Slovakian Government. Getting the right contact in the UK at a government level to sit down and say ‘look, we’re raising £80m to grow the business’. They just look at it and say we need to get some guys together and have a meeting in Parliament, and I think ‘what, another train journey to Parliament to have another chat? No thanks.'”
This disconnect between Government and manufacturing has continued, said In-Comm managing director Gareth Jones, despite Theresa May’s initial enthusiasm for an industrial strategy.
“If you asked every SME about the industrial strategy, 90%-plus wouldn’t have either engaged, know about it or understand it,” said Jones.
“Who is educating everybody as to what’s actually available or pushing it through? They want to make the right nosies at the right time but who is actually supporting industry or taking the message to industry to grow?”
BSA Technologies’ Steve Brittan, who has represented the manufacturing sector through organisations including the Greater Birmingham Chambers of Commerce and the Institute of Engineering and Technology, said: “Locally we don’t have an issue with export, but we do nationally. The question I get asked is ‘how do we reach the SME?’
“Government doesn’t know how to get at them because, generally speaking, they’ve got their sleeves rolled up, getting on with the day job. It’s a difficult area to reach.”
KPMG’s Midlands manufacturing lead Nick Harrison believes there is not enough coherent, joined-up thinking.
“There’s something around the strategy of businesses that we need to be thinking about now, and that’s a collective – that’s government, universities, the LEPs, the catapults,” he said.
“I just don’t see that coordination and I assumed that the industrial strategy would do that but it doesn’t seem to be cascaded down to the SME sector or pretty much any manufacturers.”
While Government is focused on Brexit – “I don’t think Government has capacity for anything other than Brexit at the moment”, said one company boss – and Jaguar Land Rover, Airbus and BMW have all recently issued stark warnings about the impact of getting it wrong, there is still some positivity among manufacturers.
Walsall manufacturer PP Control and Automation last week announced it had been bought by Canadian private equity firm Ardenton Capital to support its plans to double turnover to £40m within five years.
Chief executive Tony Hague said: “All of our customers are global OEM, some are UK-based, some American, some Europe. Irrespective of what news we sometime read in the papers, they are doing really well, with full order books and strong exports.
“I don’t believe it’s just down to weaker Sterling. Every customer I talk to, whether it’s in security, printing, packaging, medical, life sciences et cetera, everyone’s busy and everyone’s optimistic.”
Steve Quinlan, chief executive of Mirius, believes Brexit is a “terrific opportunity” for businesses like his.
Mirius, which recently rebranded from Coventry Chemicals, supplies retailers with branded and private label products, and his customers are seeking to procure more products from within the UK as Brexit takes effect.
But he lamented the UK’s approach when he compared it with what he sees at trade shows across Europe.
He said: “We tried to use people like UKTI 3-4 years ago when we decided we’d have a real good push into export, they withdrew all the funding for UKTI here in the Midlands and chopped half the staff.
“If we go to an exhibition – I’ve been to one in Thailand and one in Ukraine very recently – and it’s embarrassing to be a UK producer within that environment,” said Quinlan.
“I’ve just been to a private label manufacturer exhibition in Amsterdam at the RAI where half of one exhibition hall was taken by the Turks – the Turkish government bought the whole stand and gave it to their manufacturing people for free.
“We were two people in a corner with the Union Jack over the top of our stand that was about the size of your toilet block and we pay for it ourselves. There’s no support from government for exporting.
“They talk it, but they don’t support it.”
Despite the lack of support from external agencies, the mood among manufacturers remains positive.
Karl Edge, Midlands regional chairman of KPMG, said: “I think there is an optimism because we have got people in the room who let their businesses and have taken the challenge and have got the scars.
“How do you share those stories of the scars to give others the confidence to follow?
Another challenge manufacturers face is finding the time to gain the knowledge and then find the time to develop a strategy that encompasses all of the disruption and opportunity.
KPMG’s Harrison said: “There’s an awful lot of hype around industry 4.0 I think it is critical, but where do you place your bets? There isn’t a week that goes by that you aren’t invited to a conference around industry 4.0, AI and some of its really great groundbreaking stuff. But you’ve also got a day job to run your business.”
Pete Jarvis, managing director of Contechs, which provides specialist design and engineering services to automotive OEMs and suppliers, believes his company is at the forefront of industry 4.0 in terms of new design concepts.
“Where that manifests itself is everything becoming more modular, more lightweight,” he said. “Skateboard platforms are the future, so you can put different configurations of vehicle designs on to that carrier. But, more importantly, then it is how you integrate the manufacturing arm in with the new design technologies and techniques.”
“What we’re really good at in the UK is reinventing, reinventing and reinventing. We are natural innovators, which is a great thing. But at the same time we need to be a little more Germanic in the way we think, a bit more process driven and think about quality and refinement back into the design.
“To me it’s all about simplicity, understanding the risks and driving that through.”