manufacturingmedia.ft.com/cms/9a129e6a-24d1-11df-8be0-00144feab49a.pdf · 2017. 10. 24. ·...

4
in North-West England MANUFACTURING FINANCIAL TIMES SPECIAL REPORT | Tuesday March 2 2010 Inside William Hall savours the wide range of food and drink producers in the region, including the makers of the Vimto brand Page 4 www.ft.com/north-west-manufacturing-2010 Weft and warp of history leave dwindling band of survivors Inside an old weaving fac- tory adjacent to the Leeds & Liverpool canal in Burnley, the 20 employees of Lanca- shire Textiles are doing their best to maintain some of the traditions of the region’s clothing and fabric industries. Joe McBride, the com- pany’s 42-year-old owner and managing director, says that competing in the tex- tiles business is a struggle, given the much lower costs of countries in Asia which in the past 30 years have become the leaders in this sector. “We have to do things dif- ferently and work out how we can make products in the way our competitors in China can’t,” says Mr McBride. His 10-year-old company produces a range of duvets, pillows and mattress cov- ers, sold mainly by a mix- ture of mail-order groups and retailers in the UK. Cameron Mill, the cavern- ous building where Lanca- shire Textiles is based, was built in the 1890s. Back then, Burnley was one of the world’s most important textiles towns, with a speci- ality in cotton weaving. But, as in much of the rest of the Lancashire tex- tiles business, decline set in soon after the start of the 20th century. Local companies were found wanting in their ability to adapt to new pro- duction techniques, and were undercut hugely on wages by new rivals, partic- ularly in India and Japan. The Lancashire textile industry was one of the UK business sectors worst hit by the 1920s eco- nomic slump, with progress since then being mainly downhill – with the number of companies and employ- ees in the region dwindling year by year. The recession of the past two years has added to the difficulties. However, the numbers of companies going under in this period have been fewer than in other downturns, indicating the relative resilience of the survivors in the sector. Today, the industry com- prises a few dozen compa- nies, including a handful of relatively new businesses. Among the latter are Mr McBride’s and others that have found ways to move into areas, where competi- tion from low-cost nations is noticeably less than in commodity textiles. Looking ahead to the rest of 2010, Mr McBride says he is fairly hopeful. “I am turning orders away, because I don’t want to overreach myself by tak- ing on more working capi- tal than the business can afford,” he says. As a consequence, he thinks the company’s sales will dip from £2m last year to £1.8m this year, but climb to £2.5m in 2011. But Mr McBride does not underestimate the problems Textiles New names are finding ways to compete against low-cost rivals, writes Peter Marsh Fewer companies have failed in the latest recession than in previous downturns Engine of growth set to fire on all cylinders M anufacturing has become fashionable in the UK again, but in the north- west of England it never fell out of favour. It is part of the DNA of a region that invented the spinning jenny, produced the first computer and where Mr Rolls met Mr Royce. In spite of years of decline as Brit- ain embraced a retail and bank-driven boom from the 1980s onwards, the sec- tor still comprises 20 per cent of the region’s gross domestic product, well above the national average of 13 per cent. Since the financial crisis, the gov- ernment has pledged to rebalance the UK economy away from services even designing an industrial strategy. The idea had been buried for 30 years after its policy of picking winners proved disastrous. The region’s factories help power – and safely land – aircraft, pump oil and gas, prevent hospital infection and build nuclear submarines. Its aerospace sector, which began with Avro triplanes and now includes parts of Airbuses and Eurofighters, is the biggest in the UK, as is its food and drink sector. Pilkington, the glass maker acquired by Japan’s NSG Group in 2006, still has a big presence in St Helens, Merseyside. Even after the worst recession since before the second world war, the region’s manufacturing sector employs some 400,000 people and con- tributes £19.6bn to the economy. Annually, each job creates about £45,000 in gross added value. Steve Broomhead, chief executive of the Northwest Regional Development Agency (NWDA), the state-funded body fostering economic development, says: “Manufacturing is critical to the north-west. The sector is the biggest of any English region and remains a major driver for economic growth.” However, for the past 18 months it has been a drag on growth. The reces- sion in the region has been deeper than the national average and is expected to persist until the third quarter of 2010, according to a recent report from the Commission for the New Economy, a branch of local government. The jolt has been huge, as wit- nessed by Leyland Trucks in Lanca- shire. A chronic sufferer from the “British disease” of strikes in the 1970s, it fell into receivership in 1993. A management buy-out revived the brand and then Paccar of the US bought it in 1998. It invested heavily and exports grew by 123 per cent between 2006 and 2009, as trucks were sold to 44 countries as far afield as Mexico and Australia. Production hit record levels, sharply increasing output to about 24,700 units in 2008, from 13,000 units in 2002, while the workforce grew by a fifth to 1,300. As late as March 2008, the company was taking on 80 staff, introducing a night shift and expect- ing annual production of 25,000 trucks. By December that year, it was announcing 250 job cuts. Now, however, aided by the fall in sterling, manufacturing is recovering. It will be a long, hard road. Mike Damms, chief executive of the cham- ber of commerce in East Lancashire, says: “The challenge is that in manu- facturing, we have become so produc- tive and efficient that we have had jobless growth.” Take the car industry. The north- west accounts for 12 per cent of UK car output, with big brands such as Land Rover and Vauxhall leading the way. While turnover of its companies increased by more than a third between 2002 and 2007, employment levels remained about the same, at around 23,000. However, there are grounds for opti- mism, say business leaders. Jürgen Maier, the Manchester-based head of the industrial division for the UK at Siemens, says: “The trend towards off- shoring is slowing. Labour costs are rising, shipping costs are rising. There is the quality issue also.” An EEF/BDO Stoy Hayward report last year found that one in seven UK manufacturers had repatriated pro- duction lines over past two years. Mr Maier also argues that foreign ownership of British companies about 70 per cent of manufacturers nationwide – is positive. British management, often answera- ble to the City of London, frequently chased short-term profit over innova- tion and sustainability. “There is a different attitude towards invest- ment,” says Mr Maier. “[Foreign own- ers] are prepared to put the money in and ensure the rewards are achieved over time.” Chris Rowlands, head of manufac- turing at the NWDA, says: “We have been very good at attracting inward investment.” Only London and the south-east have been more successful. As bank finance remains tough, it is foreign or privately-owned conserva- tive companies, of which there are many in the north-west, that can seize markets from rivals. Michael Oliver, owner of Oliver Valves, in Knutsford, Cheshire, says: “We have little debt and plenty of cash. We concentrate on gross mar- gin.” He commands a market niche – high quality valves for subsea opera- tions – which makes it hard for rivals to compete and he can sell worldwide to blue chip clients such as BP and Petrobras. “We go to our customers and ask them what they will need in two to four years’ time and then try to design it for them. A lot of British manufacturers suffered because they came up with a great product then found no one wanted it,” says Mr Oliver. This trend for customer service is mirrored by Ener-g. Originally a spin- out from what was then the Univer- sity of Manchester Institute of Science and Technology (Umist), it was bought by entrepreneur Tim Scott in 1997. It builds combined heat and power plants and also makes waste-to- energy plants and anaerobic digestion facilities that replace landfill for waste. It employs 230 in the north- west. Derek Duffill, managing director, says: “Private ownership allows us to plan long-term.” For example, the company pays the capital cost of new plants and then allows customers to pay for them through the energy savings they make over its lifetime. About 10 per cent of revenues come from long-term service contracts, another trend among manufacturing companies looking to add a stable income stream to smooth out demand. Tony Wilson, of Klarius, a car com- ponents maker, has built a big empire quickly. When buying companies he disposes of any parts that do not have market-leading capability. “Our aim is to outdistance the com- petition. We don’t want to be top of our league – we want to be in a league of our own,” he says, arguing that too many companies settle for less. One threat to all these companies’ growth is a skills shortage. Many engineering graduates are to be found in the City working for investment banks designing financial products rather than solid ones. While manufacturers hope such people can be now be wooed, it is hard to com- pete with salaries elsewhere. There is a big push to improve the industry’s image. The Manufacturing Institute, a Manchester-based charity, has produced a myth-busting bro- chure and is setting up the UK’s first Fab Lab, where people can design their own products. Whereas in many countries, Engi- neer is a formal title as respected as Doctor, in the UK it conjures up images of greasy rags, gloomy mill chimneys and shuttered factories. “There is no instantly identifiable role model for manufacturing, which is part of the problem, but when asked what their image of an engineer is, many people say: ‘Kevin Webster from Coronation Street’,” says Mr Rowlands. The TV soap opera charac- ter is a car mechanic best known for moaning about the world as he downs several pints of beer in the local pub, and lists his dislike as “ambition”. Mr Wilson says some company bosses bring the doom-laden image upon themselves. “Too many of them whinge. They are looking for help or handouts when they should be updat- ing or changing their products to give customers what they want.” That is what Verna Group in Bolton has done for 50 years. It began by using waste paper from the Bolton News to develop single-use pulp prod- ucts, such as bedpans and urinals, that would save nurses time. It makes macerators, which shred the waste and neutralise its chemi- cals. That creates new business in maintenance and new demand – as it cuts hospital infection. The machines are used in 90 per cent of UK hospital and 43 countries worldwide. Lesley Webster, an ex-nurse and Verna’s UK director, says: “We have to innovate constantly and improve our products. There are plenty of other companies out there that would like to copy them and they have a lower cost base. We are winning on innovation and quality.” Recession in the region has been deeper than the national average but the sector is recovering, writes Andrew Bounds Flight plan: final assembly of the Eurofighter Typhoon at BAE’s Warton plant, near Preston. The region’s aerospace sector is the biggest in the UK Inside this issue Biomedical Pharmaceuticals, born from the chemicals industry and including biological medicine, has an important presence, writes Andrew Jack Page 2 Chemicals The region’s biggest export industry retains a world-class reputation, says William Hall Page 2 Automotive After a tough year, the future looks brighter for carmakers but suppliers remain under pressure, writes Andrew Bounds Page 3 Aerospace Workforces have been trimmed, but the sector is defying financial gravity, writes Andrew Bounds Page 3 Guest column Terry Scuoler (pictured), the new chief executive of EEF, the UK manufacturers’ organisation, says the north-west’s manufacturers must take advantage of the recovery Page 4 Continued on Page 2

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Page 1: MANUFACTURINGmedia.ft.com/cms/9a129e6a-24d1-11df-8be0-00144feab49a.pdf · 2017. 10. 24. · software and biotechnology revolutions but the north-west of England has an even longer

in North-West EnglandMANUFACTURINGFINANCIAL TIMES SPECIAL REPORT | Tuesday March 2 2010

InsideWilliam Hallsavours thewide range offood and drinkproducers inthe region,including themakers of theVimto brandPage 4

www.ft.com/north­west­manufacturing­2010

Weft and warp of history leavedwindling band of survivors

Inside an old weaving fac-tory adjacent to the Leeds &Liverpool canal in Burnley,the 20 employees of Lanca-shire Textiles are doingtheir best to maintain someof the traditions of theregion’s clothing and fabricindustries.

Joe McBride, the com-pany’s 42-year-old ownerand managing director, saysthat competing in the tex-tiles business is a struggle,given the much lower costsof countries in Asia whichin the past 30 years havebecome the leaders in thissector.

“We have to do things dif-ferently and work out howwe can make products inthe way our competitors inChina can’t,” says MrMcBride.

His 10-year-old companyproduces a range of duvets,pillows and mattress cov-ers, sold mainly by a mix-ture of mail-order groupsand retailers in the UK.

Cameron Mill, the cavern-ous building where Lanca-shire Textiles is based, wasbuilt in the 1890s. Backthen, Burnley was one ofthe world’s most importanttextiles towns, with a speci-ality in cotton weaving.

But, as in much of therest of the Lancashire tex-tiles business, decline set insoon after the start of the20th century.

Local companies werefound wanting in theirability to adapt to new pro-duction techniques, andwere undercut hugely onwages by new rivals, partic-

ularly in India and Japan.The Lancashire textile

industry was one ofthe UK business sectorsworst hit by the 1920s eco-nomic slump, with progresssince then being mainlydownhill – with the numberof companies and employ-

ees in the region dwindlingyear by year.

The recession of the pasttwo years has added to thedifficulties.

However, the numbers ofcompanies going under inthis period have been fewerthan in other downturns,indicating the relative

resilience of the survivorsin the sector.

Today, the industry com-prises a few dozen compa-nies, including a handful ofrelatively new businesses.Among the latter are MrMcBride’s and others thathave found ways to moveinto areas, where competi-tion from low-cost nationsis noticeably less than incommodity textiles.

Looking ahead to the restof 2010, Mr McBride says heis fairly hopeful.

“I am turning ordersaway, because I don’t wantto overreach myself by tak-ing on more working capi-tal than the business canafford,” he says.

As a consequence, hethinks the company’s saleswill dip from £2m last yearto £1.8m this year, butclimb to £2.5m in 2011.

But Mr McBride does notunderestimate the problems

TextilesNew names arefinding ways tocompete againstlow­cost rivals,writes Peter Marsh

Fewer companieshave failed in thelatest recessionthan in previousdownturns

Engine ofgrowth setto fire onall cylinders

Manufacturing has becomefashionable in the UKagain, but in the north-west of England it never

fell out of favour. It is part of theDNA of a region that invented thespinning jenny, produced the firstcomputer and where Mr Rolls met MrRoyce.

In spite of years of decline as Brit-ain embraced a retail and bank-drivenboom from the 1980s onwards, the sec-tor still comprises 20 per cent of theregion’s gross domestic product, wellabove the national average of 13 percent.

Since the financial crisis, the gov-ernment has pledged to rebalance theUK economy away from services –even designing an industrial strategy.The idea had been buried for 30 yearsafter its policy of picking winnersproved disastrous.

The region’s factories help power –and safely land – aircraft, pump oiland gas, prevent hospital infectionand build nuclear submarines. Itsaerospace sector, which began withAvro triplanes and now includes partsof Airbuses and Eurofighters, is thebiggest in the UK, as is its food anddrink sector. Pilkington, the glassmaker acquired by Japan’s NSGGroup in 2006, still has a big presencein St Helens, Merseyside.

Even after the worst recession sincebefore the second world war, theregion’s manufacturing sectoremploys some 400,000 people and con-tributes £19.6bn to the economy.Annually, each job creates about£45,000 in gross added value.

Steve Broomhead, chief executive ofthe Northwest Regional DevelopmentAgency (NWDA), the state-fundedbody fostering economic development,says: “Manufacturing is critical to thenorth-west. The sector is the biggestof any English region and remains amajor driver for economic growth.”

However, for the past 18 months ithas been a drag on growth. The reces-sion in the region has been deeperthan the national average and isexpected to persist until the thirdquarter of 2010, according to a recentreport from the Commission for theNew Economy, a branch of localgovernment.

The jolt has been huge, as wit-nessed by Leyland Trucks in Lanca-shire. A chronic sufferer from the“British disease” of strikes in the1970s, it fell into receivership in 1993.A management buy-out revived thebrand and then Paccar of the USbought it in 1998. It invested heavilyand exports grew by 123 per cent

between 2006 and 2009, as trucks weresold to 44 countries as far afield asMexico and Australia.

Production hit record levels, sharplyincreasing output to about 24,700units in 2008, from 13,000 units in2002, while the workforce grew by afifth to 1,300. As late as March 2008,the company was taking on 80 staff,introducing a night shift and expect-ing annual production of 25,000trucks. By December that year, it wasannouncing 250 job cuts.

Now, however, aided by the fall insterling, manufacturing is recovering.It will be a long, hard road. MikeDamms, chief executive of the cham-ber of commerce in East Lancashire,says: “The challenge is that in manu-facturing, we have become so produc-tive and efficient that we have hadjobless growth.”

Take the car industry. The north-west accounts for 12 per cent of UKcar output, with big brands such asLand Rover and Vauxhall leading theway. While turnover of its companiesincreased by more than a thirdbetween 2002 and 2007, employmentlevels remained about the same, ataround 23,000.

However, there are grounds for opti-mism, say business leaders. JürgenMaier, the Manchester-based head ofthe industrial division for the UK atSiemens, says: “The trend towards off-shoring is slowing. Labour costs arerising, shipping costs are rising. Thereis the quality issue also.”

An EEF/BDO Stoy Hayward reportlast year found that one in seven UK

manufacturers had repatriated pro-duction lines over past two years.

Mr Maier also argues that foreignownership of British companies –about 70 per cent of manufacturersnationwide – is positive.

British management, often answera-ble to the City of London, frequentlychased short-term profit over innova-tion and sustainability. “There is adifferent attitude towards invest-ment,” says Mr Maier. “[Foreign own-ers] are prepared to put the money inand ensure the rewards are achievedover time.”

Chris Rowlands, head of manufac-turing at the NWDA, says: “We havebeen very good at attracting inwardinvestment.” Only London and thesouth-east have been more successful.

As bank finance remains tough, it isforeign or privately-owned conserva-tive companies, of which there aremany in the north-west, that can seizemarkets from rivals.

Michael Oliver, owner of OliverValves, in Knutsford, Cheshire, says:“We have little debt and plenty ofcash. We concentrate on gross mar-gin.” He commands a market niche –high quality valves for subsea opera-tions – which makes it hard for rivalsto compete and he can sell worldwideto blue chip clients such as BP andPetrobras.

“We go to our customers and askthem what they will need in two tofour years’ time and then try todesign it for them. A lot of Britishmanufacturers suffered because theycame up with a great product thenfound no one wanted it,” says MrOliver.

This trend for customer service ismirrored by Ener-g. Originally a spin-out from what was then the Univer-sity of Manchester Institute of Scienceand Technology (Umist), it wasbought by entrepreneur Tim Scott in1997. It builds combined heat andpower plants and also makes waste-to-energy plants and anaerobic digestionfacilities that replace landfill forwaste. It employs 230 in the north-west.

Derek Duffill, managing director,says: “Private ownership allows us toplan long-term.”

For example, the company pays thecapital cost of new plants and thenallows customers to pay for themthrough the energy savings theymake over its lifetime. About 10 percent of revenues come from long-termservice contracts, another trendamong manufacturing companies

looking to add a stable income streamto smooth out demand.

Tony Wilson, of Klarius, a car com-ponents maker, has built a big empirequickly. When buying companies hedisposes of any parts that do not havemarket-leading capability.

“Our aim is to outdistance the com-petition. We don’t want to be top ofour league – we want to be in a leagueof our own,” he says, arguing that toomany companies settle for less.

One threat to all these companies’growth is a skills shortage.

Many engineering graduates are tobe found in the City working forinvestment banks designing financialproducts rather than solid ones. Whilemanufacturers hope such people canbe now be wooed, it is hard to com-pete with salaries elsewhere.

There is a big push to improve theindustry’s image. The ManufacturingInstitute, a Manchester-based charity,

has produced a myth-busting bro-chure and is setting up the UK’s firstFab Lab, where people can designtheir own products.

Whereas in many countries, Engi-neer is a formal title as respected asDoctor, in the UK it conjures upimages of greasy rags, gloomy millchimneys and shuttered factories.

“There is no instantly identifiablerole model for manufacturing, whichis part of the problem, but whenasked what their image of an engineeris, many people say: ‘Kevin Websterfrom Coronation Street’,” says MrRowlands. The TV soap opera charac-ter is a car mechanic best known formoaning about the world as he downsseveral pints of beer in the local pub,and lists his dislike as “ambition”.

Mr Wilson says some companybosses bring the doom-laden imageupon themselves. “Too many of themwhinge. They are looking for help or

handouts when they should be updat-ing or changing their products to givecustomers what they want.”

That is what Verna Group in Boltonhas done for 50 years. It began byusing waste paper from the BoltonNews to develop single-use pulp prod-ucts, such as bedpans and urinals,that would save nurses time.

It makes macerators, which shredthe waste and neutralise its chemi-cals. That creates new business inmaintenance and new demand – as itcuts hospital infection. The machinesare used in 90 per cent of UK hospitaland 43 countries worldwide.

Lesley Webster, an ex-nurse andVerna’s UK director, says: “We haveto innovate constantly and improveour products. There are plenty ofother companies out there that wouldlike to copy them and they have alower cost base. We are winning oninnovation and quality.”

Recession in the regionhas been deeper thanthe national average butthe sector is recovering,writes Andrew Bounds

Flight plan: final assembly of the Eurofighter Typhoon at BAE’s Warton plant, near Preston. The region’s aerospace sector is the biggest in the UK

Inside this issueBiomedical Pharmaceuticals, bornfrom the chemicals industry andincluding biological medicine, hasan important presence, writesAndrew Jack Page 2

Chemicals The region’s biggestexport industry retains a world­classreputation, says William Hall Page 2

Automotive After a tough year, thefuture looks brighter for carmakersbut suppliers remain under pressure,writes Andrew Bounds Page 3

Aerospace Workforces havebeen trimmed, but the sector isdefying financial gravity, writesAndrew Bounds Page 3

Guest column Terry Scuoler(pictured), the new chief executiveof EEF, the UKmanufacturers’organisation,says thenorth­west’smanufacturersmust takeadvantage ofthe recoveryPage 4

Continued on Page 2

Page 2: MANUFACTURINGmedia.ft.com/cms/9a129e6a-24d1-11df-8be0-00144feab49a.pdf · 2017. 10. 24. · software and biotechnology revolutions but the north-west of England has an even longer

2 ★ FINANCIAL TIMES TUESDAY MARCH 2 2010

Manufacturing in North­West England

Centre of excellence ref lectshistory of scientific innovation

In a factory in Runcorn,near Liverpool, sit rows ofmachines that untilrecently were whirringaway in California. Aresearch director from theUS will soon be joiningthem.

Those moves illustratethe commitment ofAmerica’s Thermo FisherScientific, a leader insupplying laboratoriesworldwide, to Runcorn –and the lure of the townfor it.

The west coast of the USmay have spawned

software and biotechnologyrevolutions but thenorth-west of England hasan even longer history ofscientific innovation.

Thermo Fisher, whichalready had amanufacturing plant atRuncorn, has now createda centre of excellence indisease research and inchromatography, a processused to analyse everythingfrom contaminated food tocrime scenes.

Some 60 extra staff havebeen hired and the 200employees could increaseto 500 within five years,says Yuh-Geng Tsay,senior vice-president andhead of specialitydiagnostics, who openedthe facility last month.

“A centre of excellence isa site we have made astrong commitment to andwe own the property,” hesays.

“The north-west ofEngland has advantages interms of academic and

medical capability. There isa lot of high-tech researchand we can take advantageof the great universities inLiverpool and Manchester,”Mr Tsay adds.

“Our cancer diagnosticbusiness is headquarteredin Kalamazoo, Michiganand we will relocate theresearch director here.”

John Griffiths, who isleading research intoleukaemia at theUniversity of Manchester,says he cannot work toisolate potential problemproteins and genes withoutThermo Fisher products,including reagent liquids.

Chromatography allows

researchers to break downsamples quickly in thesearch for clues as towhich proteins areresponsible for differentcancers, and these could betargeted by new drugs.

Runcorn will also remaina centre for anatomicalpathology, supplyingproducts for hospitals thatneed to analyse tissuesamples.

Mr Tsay says it is agrowth area and he isconfident of findingqualified staff in theregion. “We are pleasedwith our ability tocontinue to attract talentin this area,” he says.

Thermo Fisher arrived inRuncorn after buyingShandon, a laboratoryequipment maker.

It had to leave thosepremises to make way fora new bridge across theriver Mersey, but Mr Tsaysays it has neverconsidered leaving thetown.

Rather, it found a biggerbuilding with help fromthe Northwest RegionalDevelopment Agency andHalton council. “We havebeen made very welcomehere,” he says.

The company spent£4.5m refurbishing the85,000 sq ft offices. Withfive acres of land, it couldalmost double in size ifnecessary.

It is a big vote ofconfidence from a Fortune500 company with revenuesof $10bn and 36,000

employees, 380 of them inthe north-west in fourlocations.

North America accountsfor 61 per cent of sales andEurope 24 per cent, so thepotential for growth inemerging markets is large.

Roger Platt, chairman ofthe Northwest ScienceCouncil, which representsuniversities andbusinesses, says: “It is justthis kind of investmentthat is critical to thesuccess of our region andthe UK as a whole.”

Searchfor workneverstops

Les Nuttall thinks thestory of the demise of theUK’s engineering industryhas been overdone.

“There is plenty of workaround – but you have tomake a lot of effort to findit,” says 54-year-old MrNuttall. He is managingdirector and owner of MercEngineering, based in acramped former textile millin Barrowford, a smalltown in easternLancashire.

Mr Nuttall started thecompany in 2001, when hebought an engineeringbusiness that had been runby Geoff Nuttall, hisfather, but had gone intoreceivership after gettinginto financial difficulties.

After taking over a staffthat had been slimmeddown to just 16, he hasexpanded the employees to53 – roughly the samenumber as the companyemployed in its previousincarnation.

Merc’s sales in the yearended March 2009 were£3.9m. In 2008 Mr Nuttallfelt sufficiently confidentto buy Bright Spark,another local engineeringcompany, which employs16 and – like Merc –concentrates on makingparts for other UK-basedbusinesses on asubcontracting basis.

Mr Nuttall runs the twocompanies separately,although sometimes theymay work jointly on thesame production run tomake the overall processmore efficient.

In the past year, demandfor Merc’s components, infields such as railwayrolling stock, defence,energy equipment, FormulaOne racing and generalengineering, has beenlower because of therecession.

Mr Nuttall estimatesthat sales in the currentfinancial year will be downby about 25 per cent. Even

so, the number ofemployees has been kept atroughly the same numberas 12 months ago.

“It’s been difficult, but Ifeel we are now on anupward curve,” he says.The key for Merc has beento look continuously fornew orders.

“We do a lot moreplanning and marketingthan most smallcompanies,” Mr Nuttallsays. “We have a databaseof 1,500 potential customersand are continuallyplugging away at them inan effort to pick up work.”

Of the 80 customers thatMerc is working for, 40 arefairly new, having beensigned up only in the pastfew months.

“Our key competence isthat we can take on workin small production runsand do it quickly,” MrNuttall says. “Customersare becoming moredemanding. Nowadays,they are asking fordeliveries [of a new set ofparts] in between one weekand five weeks while a fewyears ago, the deliverytime might have been aslong as three months.”

Being a UK-basedmanufacturers isparticularly helpful whenworking for other Britishcompanies on smallproduction runs with shortlead times.

The focus on searchingfor work has meant thatfrequently in the past yearMerc has kept its priceslow to win new orders.Partly as a consequence,the company is likely torecord a small loss in2009-10.

But Mr Nuttall says he isconfident it will return toprofit in the comingfinancial year. “I feel thehard work we’ve put intobuilding up relationshipswith new customers isgoing to pay off,” he says.

‘We do a lot moreplanning andmarketing thanmost smallcompanies’

Pharmaceuticals industry has deep local roots

The modern glass andmetal building with itsstacks of sophisticated labo-ratory equipment looks likethe headquarters of a Cali-fornian biotechnology com-pany, but it is in fact thenew extension of the Liver-pool School of TropicalMedicine.

In the past few years,Janet Hemingway, its head,has turned the world’s firstsuch dedicated academiccentre – founded at the endof the 19th century by mer-chants concerned about thediseases afflicting theircrews – into a hub of global

research for innovativedrugs and pesticides.

Yet while the school hasforged impressive partner-ships with industry, philan-thropists, universities andgovernments in some of theworld’s poorest countries,Liverpool’s own historicallyrich commercial drugs sec-tor is feeling the pinch ofglobal pressures.

Across the region, phar-maceuticals – born from thechemicals industry andspanning the more recentexpansion of biologicalmedicines – remains animportant presence.

The Northwest RegionalDevelopment Agency esti-mates that the biomedicalsector accounts for 20,000jobs, £1.6bn in gross valueadded, and generates moreexports for the sector thanany other part of the UK at£3.4bn a year.

Alongside the School ofTropical Medicine, Liver-pool boasts two universi-ties. Manchester has a largelife sciences academic huband a strong record ofresearch through theNational Health Service.

Last year, the North WestExemplar began operatingas a way to reverse theUK’s falling internationalshare of commercial clinicaltrials by easing red-tapeand “match-making” com-pany projects with sympa-thetic and skilled NHSresearchers with capacity.

The region’s workforce,with skills in a wide rangeof manufacturing sectors,has allowed cross-fertilisa-tion. AstraZeneca has evenborrowed several car indus-try managers to help intro-duce Japanese-style leanproduction techniques.

Pharmaceuticals has a

long history in the region.Speke, near Liverpool,boasts a European biotech-nology manufacturing hub,although it is dominated bywell established, long-stand-ing names: Eli Lilly, whichproduces insulin andhuman growth hormone;

and Novartis and Astra-Zeneca, which took overexisting flu vaccine sites.

ICI’s chemical factorieshave morphed throughdemerger, merger andrestructuring over the yearsinto AstraZeneca’s Maccles-

field drug production opera-tions and its Alderley Parkresearch and developmentfacilities, where staff areawaiting news of job lossesfollowing fresh cost-cuttingplans.

“The axe is hanging inthe air at AstraZeneca,”says Derek Ellison, chiefoperating officer of EdenBiodesign in Speke. Hiscompany ran the NationalBiomanufacturing Centre,designed partly to helplocal biotech companiesscale up production withexperimental batches ofvaccines and biologicalproducts for clinical trials.

Yet he has had to goabroad to find business.“We have more Portugueseclients than British ones,”he says, citing others fromSweden and Japan. Hiscompany is now set to betransformed following its

recent purchase by Watson,the US generics group.

2Bio, a consultancy thatmanages Mersey Bio, anincubator attached to Liver-pool University’s life sci-ences department, has alsochanged strategy. It hasnurtured 38 small busi-nesses, only a handful ofwhich have failed.

But many are service pro-viders rather than fledglingdrug development compa-nies, and 2Bio itself nowmakes much of its moneyfrom clients elsewhere inEurope, helping identify themost promising innovationsto commercialise.

Geoff Wainwright, 2Bio’sjoint director, points to theabsence of capital in thenorth-west to help earlystage companies in the sec-tor, with a regional invest-ment fund ill adjusted tothe long-term and uncertain

returns of biotechnology.He also argues that there

is a skills gap, with academ-ics pushed in too manydirections, while those whohave left large pharmaceuti-cal companies find them-selves abandoned in smallbiotechnology companieswithout supportive infra-structure, where “you haveto be chief cook and bottle-washer”.

That view is shared by MsHemingway. “People in thespace [between researchand commercialisation]have often not made it inacademia or industry,” shesays. “It’s the blind leadingthe blind.”

The more the drug indus-try globalises its operations,the harder it will prove forany single location to com-bine all the skills neededacross the developmentvalue chain.

BiomedicalAndrew Jack on asuccess story thatfaces challenges

Formula forgrowth builton the saltof the earth

The chemicals industry isone of the north-west ofEngland’s overlooked suc-cess stories. During a

25-year period when many of theregion’s traditional heavy indus-tries have shrunk beyond recogni-tion, it has retained a world-classchemicals sector, which has alsoemerged as its biggest exporter.

The region is home to the big-gest concentration of chemicalsmanufacturing in the UK, prima-rily around Runcorn and a clusterof sites along the M62/M56 motor-way corridor.

It embraces some 650 businessesemploying 50,000 people directly,and accounting for 27 per cent oftotal UK chemical exports. It gen-erates more than £10bn of sales ayear and contributes £3bn to theregional economy.

Until the onset of the recent glo-bal recession, the north-west’schemical sector had been growingfaster than the rest of the UKchemical industry. Productivity,measured by gross value addedper head, increased 27 per centbetween 2005 and 2008, andregional chemical exports grew8 per cent a year between 2001and 2008, well ahead of growth inthe global chemicals industry.

There are a number of histori-cal reasons for the sector’s contin-ued success. Abundant supplies ofsalt under the Cheshire plain pro-vide the raw material for chlorineand caustic soda, which in turnare essential for the production ofchemical products for industriesranging from water treatment and

paints to pharmaceuticals andelectronics.

Runcorn’s Ineos Chlor is thesole UK producer of chlorine andEurope’s largest PVC manufac-turer. It estimates that its outputof chemical raw materials sup-ports 133,000 jobs directly andindirectly in the UK chemicalindustry supply chain.

Another of the region’s strate-gic assets is Shell’s 86-year-oldStanlow oil refinery, the UK’s sec-ond biggest. It provides a sixth ofthe UK’s petrol and the integratedShell Chemicals plants manufac-ture a variety of petrochemicals.

The region’s chemical industryboasts a long history of innova-tion, and continues to benefitfrom a strong chemistry researchbase at universities in Manchesterand Liverpool, as well as sizeableresearch facilities at multination-als such as Unilever and Shell.

Unilever employs more than 700scientists at Port Sunlight, themain research centre for its homeand personal care brands, whileShell’s main UK research centreis near Chester. Its work rangesfrom providing technical supportfor some of the top Formula Onemotorsport teams to biofuelsresearch.

However, the biggest influenceon the north-west’s chemicalindustry was the creation of Impe-rial Chemical Industries (ICI) in1926, from the four-way merger ofBrunner Mond, which producedsoda ash at Northwich, UnitedAlkali, another local competitor,Nobel Explosives and British Dye-stuffs.

As ICI developed into the UK’slargest and most successful manu-facturing company, the north-west’s chemical industry pros-pered on the back of two core ICIbusinesses which remained firmlyanchored in the region – heavychemicals, based in Runcorn, anddyestuffs in Blackley, Manchester.

When the ICI growth enginebegan to splutter in the 1990s,there were understandable fearsthat the region’s chemicals indus-try would not be able to survivethe loss of such a dominant playeras ICI, which finally left theindustry in 2008.

However, the north-west’schemicals industry is a greatsurvivor.

The old ICI pharmaceuticalsbusiness is now part of Astra-Zeneca and retains a largeresearch and manufacturing facil-ity in the region.

Most of ICI’s heavy chemicalsoperations at Runcorn were takenover by Ineos, a highly leveraged,

private equity-backed vehiclewhich has grown into one of theworld’s biggest chemicals compa-nies. It is investing more than£400m in a new combined heatand power plant at Runcorn toreduce its reliance on gas.

Indeed, the region is litteredwith ex-ICI companies that con-tinue to prosper under othernames.

Blackpool-based Victrex, a pro-ducer of high performance poly-mers, and its neighbour, AGCChemicals, have both beenexpanding their plants in thenorth-west, as has Brunner Mond,the UK’s sole producer of sodaash.

But the north-west’s chemicalssector is made up of far morethan ex-ICI companies.

McBride, founded more than 80years ago to supply chemicalproducts to Lancashire’s cottonindustry, is now Europe’s leadingsupplier of private label house-hold and personal care products.

PZ Cussons, which began mak-ing soap in 1920, has recently

opened a £26m research and man-ufacturing facility in Manchesterto accelerate the growth of its per-sonal care product businesses (seestory on opposite page).

In the short term, there are anumber of clouds on the horizon.The future of Ineos, under pres-sure from its bankers to slimdown its heavily indebted opera-tions, and Shell’s Stanlow oilrefinery, which is up for sale, areconcerns.

In addition, the steady rundownof the UK’s manufacturing indus-try in recent decades has reducedlocal demand for the north-west’schemicals output, while risingenergy costs and environmentalcontrols threaten to dent exportcompetitiveness.

However, Jenny Clucas, chiefexecutive of Chemicals North-west, a promotional body, is keento dispel the myth that theregion’s chemicals sector is a sun-set industry. “For every companythat is struggling, there are com-panies that have had their bestyear ever”, she says.

ChemicalsThe region’s biggestexport industry retains aworld­class reputation,writes William Hall

White move: a digger pours salt into a waiting truck at the Runcorn factory of chemical company Ineos, whichreleased some of its supplies for use on the UK’s roads during January’s nationwide cold snap AFP/Getty Images

‘For every companythat is struggling,there are companiesthat have had theirbest year ever’

ProfileMercPeter Marsh visitsthe Lancashirecomponents maker

ProfileThermo FisherThe US laboratorysupplier is stronglycommitted to thenorth­west, saysAndrew Bounds

Some smallercompanies in thesector have had togo abroad tofind business

Weft andwarp oftextilesector

caused by the 2008-09 reces-sion. “We had to write off£250,000 last year, becausetwo of our customers col-lapsed, owing us money,”he says.

One other notable newenterprise in the region isSweet Dreams, set up inBurnley in 1988 by RiazAhmed, its managing direc-tor. It is now one of theUK’s biggest producers ofmattresses and divans.

Also representing thissame branch of the textilesindustry is Silent Night,based in nearby Barnolds-wick. As well as makingbedding products, it is alarge bed manufacturer.

Another textiles businessthat has relatively recentroots is Cavalier, based inBlackburn, and among Brit-ain’s leading carpet manu-facturers. Set up by itschairman Gerry Lowe in1974, the company special-ises in tufted wool-basedcarpets and has among itssenior managers Mr Lowe’sthree sons, Nathan, Hansand Julian.

Nathan Lowe, Cavalier’smanaging director, saysthat despite cutting backthe company’s employeesby about 20 per cent to 225over the past 18 months, hethinks an upturn is on theway. “We’re feeling moreconfident and are gettingready to launch a series ofnew ranges of carpets,” hesays.

One of the oldest compa-nies in the area still in theweaving business is JamesThornber, in Clitheroe. Itdates to 1906 and specialisesin furnishings and fabrics.Owned by the seventh gen-eration of the Thornberfamily, the companyemploys 50 people and hadsales last year of £5m.

Illustrating adaptability isJames Dewhurst, based inAltham, which was estab-lished in the 1930s as a pro-ducer of fabrics for con-sumer applications. But inrecent years the companyhas moved into high-valuetextiles for industrial appli-cations, for instance for thebuilding industry.

Another company thathas taken a similar route isMitchell Interflex, whichhas its headquarters nearColne. It makes specialisedfabrics for processes suchas filtration as well as fordeckchairs and the walk-through “strip curtains”used in factories.

Continued from Page 1

ContributorsAndrew BoundsNorth of EnglandCorrespondent

Peter MarshManufacturing Editor

Andrew JackPharmaceuticalsCorrespondent

William HallFT Contributor

Andrew BaxterCommissioning Editor

Steven BirdDesigner

Andy MearsPicture Editor

For advertising, contact:Jim Swarbrick on +44(0)161 834 0219; e­mail:[email protected]

Yuh­Geng Tsay: opened the new research facility last month‘It is just this kindof investmentthat is critical tothe successof the region’

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FINANCIAL TIMES TUESDAY MARCH 2 2010 ★ 3

Manufacturing in North­West England

Workforces trimmed but f lag is still f lying high

It was the woes of the car indus-try that dragged the aerospaceindustry down to earth in thisrecession.

When three US car companybosses were pilloried for flyingcompany aircraft to Washingtonin November 2008 to beg for abail-out, demand for businessjets plummeted. They did not fitwith corporate belt-tightening,as workers were laid off orreceived pay cuts.

Commercial travel then fell,too, and it was the workers ofthe north-west aerospace indus-try that suffered. Annually, theygenerate £74,000 of gross value

added each – more than fourtimes the regional average – andhad a record year in 2007. Butmaking top-quality products isno guarantee of a job if there isno demand.

David Bailey, operations direc-tor of the North West AerospaceAlliance, the sectoral body thathas 750 member companies,says they have endured well.“We have seen organisationshaving to cut back on the work-force but we have not seen anykey strategic companies go intoliquidation.”

He says some 50,000 peoplestill work in the industry. “Ithink from the projections wehave of the civilian and militarymarket at the moment, we havea wall of work in front of us.”

He cites the F35 Joint StrikeFighter, part of which BAE Sys-tems is building at Samlesburynear Preston, the Airbus A400,which will have its wings built

at the company plant atBroughton in Wales, and Rolls-Royce’s Barnoldswick operation,which has been designated acentre of excellence for the frontfan of its Trent engines, guaran-teeing significant investment.

These three prime contractorshave been working with theNWAA to improve local compa-nies that supply them in anambitious plan to create world-class companies, capable of win-ning work on their own.

“We focused on the 45 moststrategically important compa-nies in the north-west,” says MrBailey. “They have a joint turn-over of £658m and 7,000 employ-ees.” The aim is to take thecompanies through five stagesof improvement to becomeworld class. They work with thebig three to improve manage-ment and production.

The companies include APPH,which makes landing gear at

Runcorn, RLC and BrookhouseComposites near Blackburn.Four, including the latter two,have won work on the F35 thatcould have gone anywhere.

Nigel Blenkinsop, head of air-craft manufacturing at BAE,says: “The demand on us forbetter quality and cheaper

prices is relentless. We can onlysatisfy that if we have a worldclass supply chain.” He says thenext step is to share projectionsof orders with suppliers so theycould work on what capacityand skills are needed.

BAE is investing £800m in theF-35 with help from the Penta-gon. Production should risefrom one aircraft every 15 daysto one a day by 2016 as part ofan order for 3,000. That wouldcreate 600-800 jobs to add to the5,500 at Samlesbury.

Mr Blenkinsop concedes thatany government programme isvulnerable as public spendingcuts loom, though many jetsthat have flown long hours inIraq and Afghanistan will needreplacing. BAE’s historic Wood-ford aerodrome, which makesthe Nimrod surveillance air-craft, is closing with the loss of630 jobs in 2012, after the gov-ernment cut order numbers fol-lowing cost-overruns.

However, he says: “I am posi-tive about the future. We havesome of the most advanced man-ufacturing techniques in theworld. There is nowhere elsethat can do it.”

It was BAE’s experience withlightweight composites for theEurofighter Typhoon thathelped win it part of the USDepartment of Defense contract,with Lockheed Martin. It devel-oped a moulded titanium fuse-lage, which provides strengthand manoeuvrability.

One beneficiary is BrookhouseComposites. Employing 240 staffand with turnover of £18m, itwas founded in 1986 and wasbought by Kaman of the US in2008. Mike Haworth, managingdirector, says he is confident,although he had to make 10 peo-ple redundant last year.

“We are under pressure to bemore efficient. If we are not, ourcustomers won’t win contracts,”he says.

Aircelle, which make theengine flaps that help aircraftbrake on landing, is also hope-ful. Demand for the A330, thesmaller Airbus jet, has compen-

sated for the loss of work oncorporate jets.

Part of France’s Safran group,it occupies a site once owned byLucas, the component company,and has increased workers from550 in 2007 to 750 last year.Andrew White, managing direc-tor, says competition is fierce,but the UK’s skilled and flexiblelabour force gives an advan-tage.“We are a medium-costcountry, not a high-cost one.”

The expertise available in uni-versities such as Liverpool,Manchester, Lancaster and Bol-ton also helps. They have estab-lished the Northwest Compos-ites Centre, which will leadresearch into using the strong,lightweight materials in otherindustries.

The £5.3m virtual engineeringcentre led by the University ofLiverpool will aid design of vir-tual prototypes, cutting costsand lead times.

AerospaceThe sector is defyingfinancial gravity, saysAndrew Bounds

‘We are underpressure to be moreefficient. If we are not,our customerswon’t win contracts’

Profile Sweet smell of success at PZ CussonsPZ Cussons is a rare company thatstarted in services and then movedinto manufacturing, albeit more than60 years ago. It is also rare in beingone of only three UK­listed businessesthat have increased dividendsconsistently for 25 years.

It began life trading commoditiesfrom Africa in the 1880s, principallycotton, which was then spun into clothin Manchester. Still majority­owned bythe Zochonis family, it retains itscommitment to the north­west.

Sir John Zochonis still lives there,although his nephew, Anthony Green,will step down as company chairmanthis year, marking the end of familyinvolvement in running the business.

However, the decision to set up a£26m innovation and manufacturingcentre in Salford was hard­headed,says Brandon Leigh, finance director.

The company wanted to concentrateits UK operations from three sites toone, making soaps and shower gelssuch as Imperial Leather and Carex,dishwashing liquids and the CharlesWorthington range of haircareproducts, among others. “We movedmanufacture of soap bars to Thailandbecause [the UK] is a declining marketand it is a lot more cost­effective tomake them overseas,” he explains.

“Then we asked if we should do thesame for liquid soaps. From a costperspective it was pretty neutralbecause transporting lots of liquid isexpensive. From a commercialperspective, it fitted with our aim tomake things in the market [where theyare sold] to keep it in the UK.”

Unlike big rivals such as Unilever, PZCussons believes in retaining differentbrand names in different markets. Thishas worked, as it increased its share ofthe UK personal wash market from 17per cent to 23 per cent between 2006and last year.

It has £800m turnover and a marketcapitalisation of more than £1bn,making it one of the 200 biggest UKplcs, with 10,000 global employees.

Local manufacture also allows it toreact quickly to demand. “We havevery short lead times. If Tesco wantsto change the size of a bottle for anoffer, we can do it very quickly,” saysMr Leigh.

Bottles are delivered every fourhours, there is room to store only fourtruckloads of packed stock andingredient tanks are topped upautomatically by suppliers as they rundown. The plant can expand capacity

from 130m bottles annually to 250m.The Salford site employs 150 people,

including those who devise newproducts and the fragrance division –perfumiers who blend ingredients in alab on site to meet demand for originalgels and shampoos.

Tastes vary widely. PZ Cussons haspersonal wash businesses in countriessuch as Poland, Greece, Nigeria andIndonesia, which all prefer differentsmells. It also makes and sells whitegoods and food in Africa and homecare products.

Sales continued to grow through therecession. Staff received a bonus andpay rise at about the level of inflationwhile many other manufacturers werelaying workers off.

The company is sometimesdismissed as a conglomerate, but MrLeigh says it will stick to its formula,as refined as the 30 ingredients thatgo into one of its fragrances. “We willlet the giants fight it out over China,Russia and India. We will focus onwhere we can deliver.”

This year, PZ Cussons will also moveits 200 headquarters staff to apurpose­built office near Manchesterairport. It will be modelled on theSalford plant, which has breakoutareas with sofas and bean bags, freetea and biscuits and an open, lightfeel.

“We want it to reflect our business.It is based on being innovative,entrepreneurial and taking risks – likeGoogle.”

Andrew Bounds

Head start for African deliveries

Carmakers turnthe corner whilesuppliers suffer

Vehicle makers hadto slam on thebrakes hard lastyear, but there are

signs that many havepulled out of their skidbefore running off the roadaltogether.

The region is heavilydependent on four big pro-ducers that employ about9,000 between them: theJaguar Land Rover plant atHalewood in Liverpool, thenearby Vauxhall plant atEllesmere Port, Bentley inCrewe and Leyland Trucksin Leyland.

Huge question markshung over the first two lastyear, as JLR sought a Brit-ish government subsidy andGM, Vauxhall’s parent,entered bankruptcy.

At Bentley, production –which hit record levels of10,000 in 2008 – may havesunk as low as 5,000 in 2009according to reports.Volkswagen, the luxury car-maker’s parent, does notgive out figures. Neverthe-less, it also launched theMulsanne, the first car for ageneration to be designedand built entirely in Crewe.

Over the past 18 months,all these plants have had tolay off contract staff, whileshutting for extended peri-ods or introducing shorterhours. Now, at least theirshort-term future is safe.

Neil Barlow, of the North-west Automotive Alliance,which represents the sector,says: “The recession has hitbadly. The bigger producershave survived OK, but the

second and third-tier com-panies in the supply chainrely on the banks, which-have not been supportive. Iknow one or two companiesthat are teetering.”

Niche producers, such assports car maker TVR inBlackpool, have gone under.

One problem is thatresearch, design facilitiesand procurement decisionsare taken in head officeselsewhere, with the partialexception of Bentley –which has inhouse design –and the smaller domesticparts makers.

The Vauxhall plantsources 90 per cent of itsparts from continentalEurope, while JLR buys 70per cent in the UK, but notnecessarily in the region.

However, a purpose-builtindustrial park nextdoordoes host pre-assemblerssuch as Johnson Controls,Decoma and Visteon.

Getrag Ford, a transmis-sions maker, remains atHalewood, although Fordhas sold JLR to the TataGroup of India.

Halewood and EllesmerePort have made hugestrides in productivity. Yetpolitical decisions couldhave seen them closed.

After months of distress-ing headlines and UK gov-ernment lobbying, GM saidit would close its less effi-cient plant in Antwerp.

JLR said it would shutone of its Midlands plantsand would award the newLRV smaller Land Rover to

Halewood, creating 1,000jobs, subject to productivityagreements. The Liverpoolplant’s ability to make twomodels on one productionline helped keep it open.

Michael Straughan, opera-tions director, says the LRVwill be just reward for aworkforce that last yearaccepted a four-day, 35-and-a-half hour week to cutpower and wage bills.

“The workforce has beenextremely supportive of themeasures we have had totake. We have hit them inthe pocket,” he says. Pro-duction is returning to nor-mal levels, as UK demandfor Halewood-built Free-landers rose by half year onyear in January, partlythanks to snowy weather.

Things look bleaker forsuppliers, Mr Barlow says:“Irrespective of the reces-sion, there is still over-capacity in the industry,especially in continentalEurope, and there has beenfor the last 10 years of so.”

The result is fierce com-petition on price. Over thelast few years Honeywell ofthe US, which made turbo-chargers, Dunlop Hiflex, ahosemaker, and FederalMogul all closed factoriesand sent the work overseas.

Tony Wilson, managingdirector of Klarius, a fast-growing car parts maker, istargeting the aftersalesmarket as margins on origi-nal equipment are so tight.

Turnover at the Cheshire-based business has grownfrom £10m to £350m in threeyears, partly through acqui-sitions. It now has 1,450employees in the UK andmainland Europe.

All the big carmakers areexploring low-carbonoptions. Bentley is testingbiofuels. Ellesmere Porthopes to win the Amperaelectric car. JLR is invest-

ing £800m over the nextfour years in hybrid or elec-tric vehicles.

But it is the humble busthat leads the pack. Optare,which employs 500 to makebuses in Blackburn as wellas Leeds, has reacted to thedownturn by creating a newline of business.

With backing from thegovernment’s £30m GreenBus Fund, it is developing asmall electric bus andhopes to win orders for 70fully electric and hybridbuses, worth more than£12m. Durham City Councilhas agreed to buy three forthe north-east city’s cathe-dral route.

Optare has also begun aservice to convert buses tooperate with alternativefuels, such as plant oil orbatteries, so that they cancontinue in service as emis-sions rules are tightened.

“In these challengingtimes, operators are consid-ering every way to extendthe service life of their vehi-cles, while maintaining thehighest standards for theirpassengers,” says GlennSaint, Optare‘s commercialdirector.

Automotive sectorAfter a tough year,the future looksbrighter, writesAndrew Bounds

Basking in reflected glory: a Bentley car receives a final polish at the Crewe factory Getty Images

Things look bleakerfor parts makers.Fierce competitionon price reflectsovercapacity

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4 ★ FINANCIAL TIMES TUESDAY MARCH 2 2010

Manufacturing in North­West England

Manufacturers must takeadvantage of the recovery

Does Britain make anything anymore? It is a question people oftenask, yet few realise the UK remainsthe sixth largest manufacturingnation in the world.

The north-west makes a largecontribution to this total, employingmore than 400,000 people andgenerating almost £20bn across fieldsas diverse as chemicals, aerospace,automotive, advanced materials andfood and drink production.

Manufacturing generates justunder a fifth of the region’s grossvalue added (GVA) and is the onlysector in the north-west to have anaverage GVA per head higher thanthe national figure.

The recession has, of course,created problems for all businessesin the region, but there are signsthat trading conditions arestabilising – and the focus must nowbe on how to move from survival togrowth mode.

Policy-makers nationally and inkey regions such as the north-westhave a vital role to play in creatingthe conditions in which the UK’smanufacturing base can thrive. Thiswill require politicians of all stripesadopting a very different mindset tocreate an investment-friendlyenvironment.

One of the results of the recessionhas been a new commitment by thecurrent government to “industrialactivism”, as it is realised that thevalue created by the UK’smanufacturing base has beenseriously neglected for too long.

The strategy is to move away froman over-reliance on financial marketsand to provide much greaterencouragement for the “real”economy, where companies makeand sell products and services tocreate tangible wealth.

As the next general electionapproaches, the UK is at acrossroads and for this change tobecome reality certain things need tohappen.

The starting point must be acredible plan for reducing the fiscaldeficit, centred on reductions inpublic spending – driven bysignificant improvements in theeffectiveness of the public sector –strict control over costs and afundamental rethink of whatgovernment does.

The alternative of significant taxrises would weaken competitiveness,undermine businesses’ ability toinvest in growth and jobs, and send

out the wrong signal to internationalcompanies looking to invest in theUK.

But government needs to gofurther than this. A strategy todiversify the UK’s economy must beembedded across government, withall levels of it focused on the futureand pulling in the same direction.

Greater co-ordination is neededacross government to ensureconsistency of strategy and delivery.Cabinet committees, for example,should be given a greater role inthe delivery of specific,

cross-departmental priorities. Agreater focus is also needed onrebalancing the UK’s economy awayfrom the south-east and boostingregions such as the north-west.

A start must be made, too, onrebuilding the economy byaddressing long-term competitivenessissues, such as skills, infrastructure,access to new markets and theregulatory environment.

Government must provideinvestment and support in marketswhere manufacturers have, or couldhave, a comparative advantage.

For example, the government’s£175bn annual procurement spendmust be used to foster innovation

and support the creation of newmarkets. R&D needs to be givengreater encouragement andtechnology policy better co-ordinatedso that the UK leads in low carbonmanufactured goods. By 2015 theglobal market for these goods andservices will be worth £4,500bn,according to a report last year byInnovas, the consultancy, for theUK’s Department of Business,Innovation and Skills.

Manufacturers and governmentalike will need to work ever harderto take advantage of growing worldmarkets in areas such as the lowcarbon economy. The governmentcan make a major contribution bycreating a single source of finance tosupport ambitious, growingcompanies that are making long-terminvestments.

It also needs to ensure that UKTrade and Investment is equipped tosupport these companies indeveloping markets abroad for theirnew products. In the low carbonarea, it must also take care not tosign up to targets to reduce carbonemissions that are out of step withthe rest of the world and wouldplace British industry at acompetitive disadvantage.

Manufacturers in the north-westalso have a major part to play. It iscritical that they take advantage ofthe recovery, the current sterlingexchange rate and low interest ratesby investing in their businesses toimprove competitiveness, buildmarket share and not concentrate onshort-term increases in profit margin.

With countries coming out ofrecession in 2010-11, foreigncompetitors will be aggressivelytargeting their markets and the UKmust show courage and commitmentin beating them to the punch.

The country’s economic futurenationally, and in the north-west, isinextricably linked to thedevelopment of a strongmanufacturing base that has accessto global markets, is focused onknowledge and high value, andcapable of exploiting fast growingmarkets.

For the economy to thrive, it isvital that manufacturers continue toevolve, adapt and grow. It isencouraging to note that after thefailure of the financial markets, thepundits and politicians finally agreethat Britain needs a balancedeconomy. It is the nation’smanufacturers, and those in thenorth-west, that can make it happen.

Terry Scuoler is the incomingchief executive of EEF, the UKmanufacturers’ organisation.

Guest ColumnTERRY SCUOLER

Focus is needed onrebalancing the economyaway from the south­eastand boosting regionssuch as the north­west

Scuoler: UK needs balanced economy

Beer, bread and baked beans on the menu

Food and drink is bigbusiness in the north-west. According to FoodNorth West, the promo-

tional body, the region is theUK’s largest for food and drinkproduction, with some 103,000people employed in more than2,000 companies.

A number of well-knowninternational brands have theirUK headquarters in the region,including Kelloggs cereals atManchester’s Trafford Park, andTyphoo tea on the Wirral. TheWigan baked bean canningplant of US multinational Heinzis said to be the largest foodprocessing plant in Europe,turning out 1.5m cans of beans aday.

Warburtons, the UK’s secondbiggest bakery, is probably thebest-known local success story.But there are several others,ranging from Frank Roberts &Sons, the Northwich bakers, andNichols, owner of the Vimto softdrinks brand, to DanielThwaites, the North of Eng-land’s biggest regional brewer,and Lofthouse, whose Fisher-man’s Friend lozenges are soldin more than 100 countries.

Although operating in verydifferent parts of the market, allthese companies share a coupleof things in common. Theyremain largely family-con-trolled and have been operat-ing for more than 100 years.In the case of Blackburn’sDaniel Thwaites, it hasrecently celebrated its200th anniversary, and isstill going strong.

There are a number ofreasons why the north-west has such a strongfood and drink pedigree.With a population of6.8m, it is the third big-gest region in the UK,after London and thesouth-east, so for a startthere is substantial localdemand.

A quarter of the UK’s

dairy farming activity takesplace in the region, whichaccounts for 16 per cent of theUK’s milk deliveries and sup-ports substantial dairy-relatedactivities at companies such asRobert Wiseman, Dairy Crestand Fayrefield Foods.

The region’s central posi-tion in the UK, and excel-lent motorway and air-port links, are big drawsfor food manufacturers,

as is the Port of Liv-erpool. More grainand animal feed isimported throughLiverpool thanat any otherUK port –more than 2m

tonnes a year.The port plays a

vital role in the sup-ply chains of some ofthe UK’s best-knownfood manufac-turers. Multi-n a t i o n a l

agribusinesses, such as ArchersDaniel Midland (ADM) andCargill, have sizeable raw mate-rial processing operations con-nected to the port, which inturn supply the nearby plants ofcompanies such as Cereal Part-ners, the UK’s second biggest

breakfast cereal producer,jointly owned by Switzer-land’s Nestlé and GeneralMills of the US.

The north-west’s foodand drink operationshave not been immuneto cutbacks and clo-sures, particularly on

the bakery side.But the sectorcontinues toattract newinvestment.Greggs opened

a £16m bakery inManchester last Sep-tember which employs

220 people,and FineL a d y

Bakeries has named Manchesteras its preferred location for a£20m northern base, which willcreate up to 250 jobs.

Tulip, a Danish meat productscompany which closed its slicedmeats factory on the Wirral lastyear, is investing £12m in a

new sausage-making factoryon the same site, which willcreate 270 jobs.

New Britain Palm Oil,which produces in Austral-asia, has commissioned a£18m palm oil processingfacility at the port. Its firstcustomer is United Bis-

cuits, one of a growingband of north-westfood manufacturersthat are keen todemonstrate their

ethical policies, bysecuring a supply of

palm oil that can be provento have come from sustain-

able plantations.Overall, the food

and drink industry

in the north-west – encompass-ing all parts of the food supplychain: food retail and food serv-ice, food processing and agricul-ture – contributes 10 per cent tothe region’s gross value added

and accounts for almost15 per cent of totalregional employment.

While the sector stillhas considerable long-term growth potential,there are signs ofincreasing consolida-tion.

Economies of scalein commodity-typefood manufacturing,and the need forincreased bargaining

clout to counter a highlyconcentrated UK supermarketsector, are putting pressure onmid-sized operators.

The collapse of Blackburn’sInter Link Foods, a fast-growingcake manufacturer with 11bakeries, highlighted the vulner-ability of some smaller food

Food and drinkWilliam Hall savoursthe wide range ofproducers with apresence in the region

The Port ofLiverpool plays a vitalrole in the supplychains of some of theUK’s leading foodmanufacturers

Slice of life: Warburtons, the UK’s second biggest bakery, is probably the best­known local success story

companies. In a attempt toachieve the critical mass tocompete with bigger rivals, suchas Northern Foods and Associ-ated British Foods, Inter Linkoverstretched itself, and had tobe rescued by McCambridge, anIrish bakery group, in 2007.

Size is not the sole criterion ofsuccess. Bells of Lazonby, aCumbrian company producingallergy-friendly bakery prod-ucts, and Cheshire’s DelamereDairy, the UK’s leading supplierof goats’ milk products, are twosmall north-west companies thathave managed to carve out lead-ing positions in national nichemarkets.

However, they tend to be theexceptions. “The north-west hassome very big companies at thetop end and small ‘cottage’industries at the bottom,” saysJulian Wild, food group directorat Rollits, a Yorkshire law firm.“Life is most difficult for thefood companies caught in themiddle.”