1 Business and politics as Technology is shaping P04 P08 P12 the election approaches future manufacturing Exporting beyond Europe to China and America 24/02/15 #0300 THIS SPECIAL REPORT IS AN INDEPENDENT PUBLICATION BY RACONTEUR MEDIA UK MANUFACTURING
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3 UK MANUFACTURING ONLINE: P03 Distributed in Overview Publishing Manager Conie Rose Wechsler Managing Editor Peter Archer Head of Production Natalia Rosek Design, Infographics & Illustration The Design Surgery Contributors ALEX CARDNO Deputy editor of Credit Today, he worked at the Financial Times and has contributed to Insolvency Today magazine. CHRIS JOHNSTON Former business news editor at The Times, he is now a freelance journalist writing on a wide range of business subjects BRIGHT OUTLOOK DESPITE A CLOUD OVER EUROPE The forecast for UK industry is good, but dark clouds, including a skills gap and uncertainty over EU membership, hang over what could be a much brighter scene, writes Will Stirling Image: Getty 45% of funding for the manufacturing technology sector now comes from the private sector Source: HVM Catapult th successive month of growth in UK manufacturing employment, December 2014 Source: Markit/CIPS Purchasing Managers Index 15bn boost in UK economy by 2025 if British manufacturing is brought back to the UK through reshoring Source: EY CHARLES ORTON-JONES Former Professional Publishers Association Business Journalist of the Year, he was editor-at-large of LondonlovesBusiness. com and editor of EuroBusiness magazine. EDWIN SMITH Writer and editor, he has contributed to The Guardian, The Independent, The Independent on Sunday, The Sunday Telegraph, London Evening Standard, City AM and Private Eye WILL STIRLING Managing editor of The Manufacturer and Lean Management Journal, he has also worked for Euromoney and IPC Media. ELLIOT WILSON Freelance business journalist, he divides his time covering Russia, China, India and Africa for publications including The Economist, The Spectator, Euromoney and Barrons. Although this publication is funded through advertising and sponsorship, all editorial is without bias and sponsored features are clearly labelled. For an upcoming schedule, partnership inquiries or feedback, please call +44 (0) or Raconteur is a leading publisher of special-interest content and research. Its publications and articles cover a wide range of topics, including business, finance, sustainability, healthcare, lifestyle and the arts. Raconteur special reports are published exclusively in The Times and The Sunday Times as well as online at The information contained in this publication has been obtained from sources the Proprietors believe to be correct. However, no legal liability can be accepted for any errors. No part of this publication may be reproduced without the prior consent of the Publisher. Raconteur Media Like the curate s egg, the UK manufacturing sector is part good and part bad. Unlike the proverbial egg, however, the state of manufacturing has little that is truly so terrible to cover up these days. The Purchasing Managers Index, which measures indices such as company output, employment and new orders, jumped to 53.0 in January, up from 52.7, the 23rd consecutive month of growth. The food and drink industry turnover grew 2.7 billion and gross value added increased by 1.4 billion between 2012 and 2013, the latest figures available. Food and Drink Federation members have also decreased their CO2 emissions by 35 per cent, ahead of the 2020 target date. The textiles industry has experienced ten successive years of export growth and annual growth reached 11.8 per cent in According to the UK Fashion & Textiles Association, sales across the clothing and garment-making industry have surged 20 per cent in the past four years to 11.5 billion. But some vertical sectors shone less brightly last year. The chemical industry, including pharmaceuticals, contracted by 1.4 per cent from January to November However, chemical production, ex- pharmaceuticals, increased by almost 4 per cent in 2014 compared with a contraction of 1 per cent in 2013, Stephen le Roux, head of economics at the Chemicals Industry Association, points out. Output of steel in the UK in 2014 was virtually unchanged at 11.9 million tonnes, just 0.2 per cent higher than According to UK Steel, the main cause of the flat line has been the dumping of cheap steel into EU markets. Imports rose to take around 60 per cent of the market compared with 56 per cent in LOW-CARBON PREMIUM UK Steel says the government s decarbonisation policies, through heavy subsidies on renewable energy, have a much more harmful effect on electricity prices than falls in the price of oil. These [subsidies] currently add 26 per cent to the typical electricity price paid by an energy-intensive consumer, according to the Department of Energy & Climate Change, says head of UK Steel Ian Rodgers. Car factories in the UK produced more than 1.5 million vehicles last year, the highest number since However, for the second year Car factories in the UK produced more than 1.5 million vehicles last year, the highest number since 2007 running, the number of vehicles exported fell, reflecting a cooling off in European demand. Jaguar Land Rover in January said it would create 1,300 new jobs to build Jaguar s first sports utility vehicle. Where the UK fails is its dependence on foreign-sourced car parts. The Society of Motor Manufacturers and Traders and others are predicting that the UK could make two million cars by But the full value of this growth will not be felt in this country unless the locally sourced content in these vehicles rises from its current level of around 30 per cent towards Germany s 60 per cent, says Dermot Sterne, managing director at Applied Component Technology. More UK firms now have the capacity to supply big auto OEMs (original equipment manufacturers), he says. It is just as likely to involve SMEs [small and medium-sized enterprises] moving up the supply chain to become tier ones or tier twos, or to become partners for larger international organisations. But to make something you must first invent it. Government now gets innovation, experts say, and some of the so-called catapults, managed by Innovate UK, a division of the Department for Business, Innovation & Skills, have actually overdelivered. The Nuclear Advanced Manufacturing Research Centre worked with more than 450 companies in 2014, helping to create or sustain over 200 jobs and 400-million worth of new business, according to its February review. It s a similar story at the Manufacturing Technology Centre (MTC) near Coventry. Its original targets were 100 employees, ten industrial members and 10-million turnover by We currently have over 350 employees and 80 members, and operate as an open-access centre, fully supporting smaller companies and collaborative research between both members and non-members, says the MTC s Nick Hickman. Government has really engaged with this agenda since the recession and has led the way with its industrial strategy, its vision of which sectors the UK should focus on over the next 20 years, says Philip Greenish, chief executive of the Royal Academy of Engineering. This framework is already creating the pull that defines future educational and skills needs, he says, but warns there is a huge amount still to do to encourage youngsters to take technical careers. MIND THE SKILLS GAP As ever, lurking in the background is the perennial skills gap. In its 2015 report, the organisation Engineering UK says: The UK, at all levels of education, does not have either the current capacity or the rate of growth needed to meet the forecast demand for skilled engineers by ,000 new vacancies in engineering enterprises. The shortfall is a serious, fundamental threat to economic growth. Come May 8, Britain will know whether there will be a referendum on membership of the European Union. Terry Scuoler, chief executive of manufacturers organisation EEF, says the EU has been elevated to sit just beneath skills, access to finance and exports as the top priorities for UK manufacturing. Members support for staying in Europe has moved up from about 75 to 85 per cent. Our message on Europe is absolutely clear, says Mr Scuoler.
4 P04 UK MANUFACTURING 24/02/15 EDITION #0300 Politics CONSERVATIVE OR LABOUR? The run-up to the general election is an uncertain time for business leaders who nevertheless believe the next government will back UK manufacturing, as Chris Johnston reports Image: Getty Funding for many of these programmes expires in April 2016 and he worries that a Labour prime minister might face more ideological challenges in winning funding for these types of initiatives. Ed Miliband does need to reassure British business that he is an ally and show that he appreciates the sector, the EEF chief adds. Yet Mr Scuoler might be pleasantly surprised that, in many respects, he and Labour appear to be singing from quite a similar hymn sheet. Iain Wright, the shadow industry minister, says that his party aims for stability in industrial policy. We want to provide as much certainty as possible to ensure we attract as much inward investment and as many good manufacturing jobs as possible, Mr Wright says. The MP for Hartlepool adds: We re very short term in our outlook good manufacturing businesses are much more long term in their thinking. We ve got to align with that as much as possible to ensure manufacturing is a success in Britain. success of the industry, he says. Mr Scuoler says the EEF is not happy with all aspects of government policy, most notably the Tory stance on Britain s ongoing membership of the European Union. The possibility that we could leave the EU is not something that we are comfortable with and it is causing uncertainty, he says. Yet overall it is a balanced scorecard for the coalition, which delivered economic growth of 3.5 per cent in We have, to a large degree, rediscovered manufacturing and engineering, but there s a long way to go. Until I see business investment above pre-2008 levels, until I see exports rising strongly, the net trade gap decreasing and more being spent on research and development, and applied research, we ll not be able to tick all those boxes, Mr Scuoler says. Whoever comes into government on May 8 just needs to have the courage to continue to put the foot on the austerity pedal, but still drive the levers of growth. There s always a fear that, if there is a change of government, babies could be thrown out with bath water Change can be a scary thing. Many of us prefer to stick with what we know for fear that the unknown might be even worse. Better the devil you know indeed. It s even more the case for investors and companies, and elections are about the most potentially disruptive event that can befall a country, other than truly unknown unknowns such as financial crash. The corporate world wants to eliminate as many variables as possible, but elections can often herald a change of government that upsets, if not upends, the apple cart. Companies in the manufacturing sector are preparing for such an eventuality on the morning of May 8, when Britain should know whether David Cameron will get to stay in Downing Street or make way for Ed Miliband. While the composition of the next parliament is impossible to predict, one thing is certain: either the Conservatives or Labour will lead Britain s government for the next five years. For Terry Scuoler, chief executive of EEF, the manufacturers organisation, his primary concern is ensuring continuity in industrial strategy in the months and years after the election. Investment cycles are not linked to five-year parliamentary terms, he explains. I think we ve got a number of positive initiatives un- derway to support the growth agenda, and there s always a fear that, if there is a change of government, babies could be thrown out with bath water. I hope that s not going to be the case. To ensure a seamless transition for EEF members with the new government, its executive team has been talking a lot to the Labour front bench. Mr Scuoler s main fear is that a Miliband government could dismantle some of the initiatives implemented by the coalition over the past five years, such as more funding for apprenticeships, ringfencing the science budget at 2010 levels and doubling funding for UK Trade & Investment (UKTI) to promote exports. In Mr Wright s mind, the coalition is on the right track with its industrial policy, but has not done enough to foster innovation, which he says ought to be at the heart of British manufacturing. There has also been a failure to pay enough attention to sectors such as food and drink manufacturing where Britain is strong and has a global reputation. Neither is the UK selling as much to the rest of the world as it should. Exports are key and we don t achieve our potential we re underplaying our strength, he says. GLOBAL OUTLOOK However, Mark Stephenson, UK manufacturing lead partner at Deloitte, argues that UKTI has done a good job of encouraging small and medium-sized manufacturers to adopt a global outlook, and develop products with exports in mind. He says politicians from all sides have become cheerleaders for manufacturers and helped the public to recognise the sector s importance to the economy. But Mr Stephenson also notes: It s crucial that politicians continue to champion the increasingly highly technical, modernised and inventive industry that is UK manufacturing. No matter who forms the next government, he believes a more coherent industrial strategy that identifies key manufacturing hubs to help bolster the whole ecosystem is important. Support from the government is crucial to the long-term BALANCING ACT That could prove to be a tricky balancing act, particularly if some of the storm clouds on the horizon become more ominous. Those clouds include the slowdown of many economies in the eurozone, which accounts for half of Britain s exports. The most recent Deloitte CFO Survey found that economic weakness in the eurozone and deflation were two prime concerns for chief financial officers and corporate Britain this year. They are all reasons why the EEF boss says that headwinds for manufacturers are more severe than they were 12 months ago. Yet it should not be forgotten that the UK economy is set to perform better than any other European country this year, giving the next government the prospect of healthy tax receipts which can be spent on assisting sectors such as manufacturing. And following the dramatic slide in the oil price, lower energy costs are in effect a tax cut for both businesses and consumers that could add a further 0.8 percentage points or more to GDP growth this year. Despite the potential disruption the general election could cause for manufacturers, job creation, investment and expansion does not appear set to stop. As Mr Scuoler concludes: There is some caution out there, but it s still a positive message for 2015.
5 UK MANUFACTURING ONLINE: Opinion INNOVATION IS DRIVING GROWTH What s your relationship with ERP? Working alongside government to identify opportunities and challenges, and supporting businesses to address and solve them, is a key driver of the UK economy, says Mark Glover, director of strategy and planning at Innovate UK As the UK s innovation agency, we thrive on the problems that spark innovation. How to maximise crop yields, how to reduce road deaths, how to develop building techniques fit for an era of climate change, for example. Our focus in setting these challenges is always the same to encourage innovation in areas where the UK has particular strengths and UK companies could make a commercial success of the innovations that result from striving to meet those challenges. We understand that business-led innovation has the potential to create not just new supply chains, but entirely new market sectors, driving economic growth. We aim to help shape and join up the UK s innovation ecosystem, tilting that landscape towards those areas where the UK is well placed to be commercially successful in the global marketplace. This approach sees us encouraging innovation in sectors where the UK already has established supply chains, strong expertise or is otherwise well placed to innovate. This isn t always about providing funding. More often, this sees us using vehicles such as our Knowledge Transfer Network to connect innovative businesses in and across sectors and regions to collaborate and address potentially lucrative challenges. Often the final piece in a business success jigsaw is just a connection. Our grant-funding is also strongly tilted towards encouraging collaboration between companies, often from wholly different sectors, again to help spark innovative approaches with commercial potential. That approach is working. Innovate UK s collaborative R&D programmes, drawing together the ideas, agility and passion of small and medium-sized enterprises (SMEs) and the scale, process and customer base of large companies (and often academic institutions), deliver a return to UK PLC of 6.71 for every 1 we spend. This kind of investment is one of the best and most proven ways the government can support the economy. The UK now ranks second in the global innovation index, well above both the United States and Germany. In short, investing in innovation creates new industries, improves productivity, creates jobs and drives exports. But our work to shape the landscape for business-led innovation sits within a wider framework of carefully considered government measures that provide a coherent system of support for innovation. This stretches from the UK s world-class academic research base, through to early and later-stage commercialisation. LEAD CUSTOMER Such support for innovation involves government directly, through the Small Business Research Initiative (SBRI), a scheme which provides opportunities for SMEs to gain a foothold in the public-sector supply chain, by proposing solutions to societal challenges around issues as diverse as reducing road deaths, NHS efficiency and reinvigorating UK high streets, all with government as the lead customer. Intelligent Textiles, a two-person company operating out of a small building in suburban Surrey, secured an SBRI contract to develop a revolutionary fabric that conducts data and power, revolutionising military combat clothing. The funding helped them to secure, in partnership with BAE Systems, a multi-million-pound contract to supply new high-tech military uniforms. In 2010, Prime Minister David Cameron announced the government s intention to set up a network of Catapult centres, bridging the gap between business, academia, research and government, to help turn great ideas into commercial realities by providing easy access to the kinds of world-class research and development facilities, and expert staff that would otherwise be out of reach for many businesses in the UK. Since then, Innovate UK has established seven such centres of excellence, supporting different industry sectors, with two more due to open in The High Value Manufacturing Catapult alone has an innovation order book of more than 218 million and has engaged with over 1,700 SMEs during the past 12 months. ERP should inspire your business, not complicate it. Update your status. Epicor ERP is built to bring out the best in you and your business. Questions? Contact us at: Phone Copyright 2015 Epicor Software Corporation. Epicor, Business Inspired, and the Epicor logo are registered trademarks or trademarks of Epicor Software Corporation, registered in the United States and other countries.
6 P06 UK MANUFACTURING 24/02/15 EDITION #0300 Best of British SOME OF OUR BEST MANUFACTURING BUSINESSES It might be a long time since anyone described the UK as the workshop of the world, but the country is still the eleventh largest manufacturing nation and the sector accounts for 54 per cent of exports, directly employing 2.6 million people. Edwin Smith showcases some of the businesses that have shown the innovation, growth and brand value to be recognised as the best of British AUTOMOTIVE HI-TECH BAE Systems London What it does: Global defence and aerospace giant Why it's the best: Although defence funding at home and in the United States is under threat, BAE Systems remains the UK s largest manufacturing employer and biggest employer of professional engineers. Its work with 3D printing has seen it produce some of the first printed metal parts for fighter jets, including a protective cover for the Tornado cockpit radio, which is made in a day for less than 100 and is forecast to save the RAF 1.2 million in four years. Concrete Canvas Pontypridd What it does: Buildings in a bag Why it's the best: The two founders developed an innovation in construction technology while studying at Imperial College London and the Royal College of Art. Their concrete material can be transported in a roll, then unfurled on-site before it hardens when water is added. The method can mean that building work takes as little as a tenth of the time and whole buildings can be carried in a bag. Some 85 per cent of the company s 5.1-million sales come from exports. SSTL (Surrey Satellite Technology Limited) Guildford What it does: Design, manufacture, launch and operation of small satellites Why it's the best: The independent British company is part of the Airbus Defence and Space division, and has garnered international recognition for its work on projects such as satellite navigation, flood monitoring, and search and rescue operations. SSTL was spun off from the University of Surrey in 1981 and has since launched 43 satellites. It has 600 employees. Haydale Ammanford, Carmarthenshire What it does: Nanomaterials development and production Why it's the best: Haydale is one of the UK companies attempting to exploit the benefits of graphene. The space-age material was first isolated by scientists at Manchester University in 2004 and consists of a single layer of carbon atoms, is stronger than diamond, is the most efficient known conductor of heat and electricity, and is also almost completely transparent and impermeable. The company sources the raw material and processes it to realise its full potential. Wrightbus Ballymena, County Antrim What it does: Coachbuilder Why it's the best: The Ulster company is best known for its flagship vehicle, the completely reworked London Routemaster bus that is the product of collaboration with Thomas Heatherwick, the designer behind the London 2012 Olympic cauldron. A new order for 200 more of the hybrid vehicles, to be delivered by June 2016, should help boost revenue further. Last year Wrightbus announced that it grew turnover by 7 per cent to 168 million and increased staff numbers by 14 per cent to 1,185. Jaguar Land Rover Gaydon, Warwickshire What it does: High-end car maker Why it's the best: The British brands are owned by Tata Group after the Indian conglomerate bought JLR from Ford for 1.2 billion in early-2008, when the company made a 376-million loss on sales of 4.45 billion. But now revenues stand at 19.4 billion, with pre-tax profit at 2.5 billion. JLR employs 30,000 people in the UK and will add a further 1,300 in Solihull to manufacture the new Jaguar SUV. Xtrac Thatcham, Berkshire What it does: Transmission systems for motorsport, transport, defence and marine vehicles Why it's the best: Xtrac transmission systems are used in Formula 1, Moto GP, Le Mans 24, the Dakar Rally and by every car on the Indy 500 grid. In addition to an 88,000sqft factory in the UK s Motorsport Valley, the company has outposts in Indianapolis and North Carolina. Staff own a big slice of the business, accounting for 49 per cent of shares. Rolls-Royce Motor Cars Goodwood, Sussex What it does: Luxury car maker Why it's the best: Although owned by the BMW Group and under the control of a German chief executive, the company has remained tied to the UK and employs 1,500 people at its home in Sussex. Last year, Rolls- Royce achieved a fifth consecutive record year for sales, with 4,063 cars sold. North America is the company s largest market, ahead of the Middle East in second place. Bentley Crewe What it does: Luxury car maker Why it's the best: Another German-owned British legend, Bentley is part of the VW Group, but the company s 3,800-strong workforce in Crewe celebrated it best-ever year for global sales last year, up 9 per cent on Some 87 per cent of vehicles produced by Bentley are exported a figure that may rise in 2016 with the launch of the marque s new SUV (sport utility vehicle).
7 UK MANUFACTURING ONLINE: P07 Applied Graphene Materials Teesside What it does: Produces and develops applications for grapheme Why it's the best: Whereas the majority of graphene producers mine the material, this AIM-listed (alternative investment market) UK business synthesises it from an ethanol solution. It only accounts for one of the one hundred and fifty tonnes of graphene produced globally in a year, but that could grow quickly with demand for graphene s potential applications, such as superfast computer chips, bendy touchscreens, paints, coatings and lubricants. CONSUMER GOODS Brompton Bikes West London What it does: Manufacturer of folding bikes for commuters Why it's the best: All the 40,000 bikes the company produces each year are made in its 22,000sqft west-london factory, but three quarters of these are exported, with Japan being the largest market. And international sales are on the up, with growth averaging 30 per cent over the last two years. The company s first UK shop was opened in Covent Garden in 2013, adding to outposts in Kobe, Shanghai, Hamburg and Amsterdam. Cambridge Satchel Company Cambridge What it does: Manufacturer of traditional leather satchels Why it's the best: Julie Deane started the business in 2008 with just 600 after realising that no one in the UK was making a traditional-style satchel. The business has since grown rapidly and now has around 100 employees who manufacture 900 bags a day. Turnover has risen to almost 20 million, with a significant chunk accounted for by exports to 110 countries around the world. Lily s Kitchen North-west London What it does: Healthy, organic pet food Why it's the best: After consulting a vet and curing her dog s illnesses with a diet of superfoods, founder Henrietta Morrison decided to start a business offering high-end pet food products with natural ingredients. Novelty items such as a Christmas advent calendars with baked organic cheese and apple biscuits have seen it stocked by Ocado and Tesco, while sales have skyrocketed from 800,000 in 2011 to 6.1 million last year. Hotter Comfort Shoes Skelmersdale, Lancashire What it does: Footwear manufacturer and retailer Why it's the best: The family company was founded in 1959, but has expanded rapidly in recent years, chalking up an average 110 per cent growth in international sales over the last two years. Total sales now stand at 75 million and the company claims to be the UK s largest shoe manufacturer, having produced 1.6 million pairs last year. Brewdog Fraserburgh, Aberdeenshire What it does: Craft beer brewer Why it's the best: The company s unconventional approach to branding, finance and just about everything else has yielded fruit since it was set up in Thanks, in part, to a 7-million crowdfunding scheme that offered equity to customers, it now has revenues of 32 million, 357 staff, owns 25 bars across eight countries and exports to 45 more. We are leading the field in creating advanced materials for next generation disruptive technologies. Our team create solutions that are tailored and engineered to your specific requirements. Our unique patent pending plasma process HDPlas functionalises graphenes and other nanomaterials. Functionalisation is at the heart of enabling Graphenes and other nanomaterials to properly disperse into the host material. This provides a rapid and highly cost effective method of supplying bespoke solutions to both raw material manufacturers and application teams wanting to get improved performance from a product. Quality and production repeatability is at the core of the company and in 2014, we were awarded with ISO9001 and ISO14001 accreditations. Independently our HDPlas functionalisation process has been verified by the National Physical Laboratory. Our composites division; Haydale Composite Solutions, has achieved over a 200% improvement in ultimate tensile strength (a measure of maximum stress that a material can withstand while being stretched or pulled before failing or breaking) using a standard polyester resin mixed with our functionalised HDPlas GNPs. These excellent results can now be demonstrated to the composite industry. Our process is scalable, repeatable and clean, making it the obvious solution for your project. So whatever your objective or vision, we can help you make that future a reality. Haydale making the future possible...
8 P08 UK MANUFACTURING 24/02/15 EDITION #0300 Factory of the Future SHAPING THINGS TO COME... New technologies that will shape manufacturing for the next two decades are already here, writes Charles Orton-Jones UK MANUFACTURING F KEY FACTS ON UK MANUFACTURING 10% of 2013 national economic output, worth billion, came from manufacturing 12.2bn spent by manufacturers on R&D, which amounts to 72% of business expenditure 2.6 people are in this s The future is here, it is just unevenly distributed the line from sci-fi author William Gibson s 1984 novel Neuromancer is spot on for manufacturing right now. 3D printing is an outstanding case. Sceptics say it won t catch on because printing metal is tricky and it can t scale. In fact, the new generation of 3D printers have blown those doubters away. Nasa s Marshall Flight Centre in Alabama is producing engine parts using 3D printing. The printed nickel alloy parts are built layer by layer, using a fabrication technique called selective laser melting. The process means Nasa can iterate designs without having to recast the tooling each time. The parts were designed for the J-2X engine, part of the futuristic new Space Launch System. In addition, Nasa is testing 3D metal printing on the International Space Station. The 3D Printing In Zero-G programme is testing both plastic and metal 3D printing in zero gravity. The goal is to give astronauts the ability to create solid metal replacement parts in an environment unsuited to normal manufacturing hardware. The long-term goal is to equip deepspace missions with versatile inspace manufacturing. And back here on Earth? 3D printing is already reshaping fac- manufacturing or AM). Their new hardware allows them to produce filters in an entirely new way. Following the initial investment, additive manufacturing offers a long list of positives, including quicker prototype development and the ability to create never-before-possible products which can, in turn, offer time, energy and cost-saving, says Neil Burns. These gains outweigh the downsides. The main con is undoubtedly the price of the machine, which can be a drawback for some, he says. The Realizer SLM-250 machine used by his startup costs 400,000 including set-up and staff training. BEYOND OLD TECHNIQUES By using 3D printing it is possible for Croft to produce a new design of filter, beyond the reach of old-fashioned techniques. The layer-by-layer approach means flow dynamics can be improved, offering a 10 per cent performance uplift. The lack of joins means the product is stronger too. Scale is achievable. While there are machine-imposed limitations on the size of products that can be created, says Mr Burns, there is no limit of the number of products the AM machine can create overall. Often, additive manufacturing is a more viable option, especially for larger quantities as, depending on the size of the products, it can create hundreds in one build. The long-term goal is to equip deep-space missions with versatile in-space manufacturing TOP MANUFACTURING NATIONS IN THE WORLD 22.4% 17.4% 9.7% 6.0% 2.8% 2.4% 2.3% 2.2% 2.1% 2.0% 1.9% 1.8% 1.8% 1.6% 1.4% UK IMPORTS AND EXPORTS UK MANUFACTURING 15 imports of manufac 1.8 value of UK outward foreign dire 97 value of UK inwar 618, cars export 2.7 R&D spend tories. In Warrington, Croft Filters has been in operation for almost three decades, making metal filters for industries from water treatment to oil and gas. Founders Mark and Neil Burns with a fellow entrepreneur Darren Travis founded a sister company, Croft Additive Manufacturing, to explore the possibilities of 3D printing (also known as additive 3D modelling will grow because of the switch to computer-aided design (CAD) modelling. The old method of creating physical prototypes is gone. Even supposedly straight-forward products, such as washing-up liquid bottles, are designed exclusively in CAD environments. Bottle thickness, weak spots, drop-heights, squeezability China United States Japan Germany South Korea Italy Russia Brazil France India United Kingdom Mexico Indonesia Canada Spain Source: UN/Mapi 2013 imports exports 10 exports of manufac
9 UK MANUFACTURING ONLINE: P09 ACTFILE m employed ector 8bn tured goods, trn ct investment (FDI) stock, bn d FDI stock, ed in 2012 bn ing in bn tured goods, 2012 Source: EEF 2014 UK MANUFACTURING PRODUCTION % CHANGE YEAR-OVER-YEAR JAN 14 FEB 14 MAR 14 APR 14 EUROPEAN UNION MAY 14 Source: EEF 2014/UNCTAD 2013 JUN 14 JUL 14 UK BUSINESS EXPENDITURE ON R&D 28% 9% 28% 9% 6% 12% 8% Aerospace AUG 14 Pharmaceuticals Electrical and optical Transport equipment SEP 14 UK manufacturing production UK industrial production OCT 14 NOV 14 Mechanical equipment Other manufacturing Rest of economy DEC 14 Source: ONS Source: ONS 2014 and feel can all be refined. In fact, entire product lines are now modelled with CAD. JJ Churchill is a Midlands-based maker of blades and vanes for compressors and turbines. Founded in 1937, it supplies the likes of Rolls- Royce and BAE Systems. The directors wanted to establish a new facility in Mexico. The plant was modelled and refined entirely in CAD. Consultants at The Manufacturing Centre used simulation modelling to create a prototype factory. The engineers at JJ Churchill were able to see the site layout and run through what if scenarios. The design could then be tweaked and iterated. The company reported a plant utilisation increase of 20 per cent using the technique, leading to a 20 per cent saving in annual costs. Capital costs fell 82 per cent. As a bonus, the experience was subsidised by the CASiM2 project, part funded by the European Regional Development Fund, which brings the expertise of Rolls-Royce, The Manufacturing Centre and the University of Birmingham, to ambitious small and medium-sized enterprises in the Midlands. The verdict? Kevin McCormick of JJ Churchill says: Through the project we were able to visualise the proposed site in Mexico, and take away any potential risks in a cost-effective and reliable environment. Aside from the technical expertise we received, the CASiM2 project made it possible for us to utilise the site in the best possible way to make JJ Churchill more productive, reliable and profitable. ELITE TESTING This sort of collaborative approach is a growing part of cutting-edge manufacturing. The National Physical Laboratory (NPL) is the UK s official measurements body. It employs 500 scientists and hosts 388 of the world s most sophisticated measuring laboratories. Its new mission is to help British manufacturers improve their efficiency. The NPL s Product Verification Programme (PVP) offers tests to the private sector to improve product SMART SPECS design, reduce waste and promote productivity. In one case, the NPL saved a UK company 500,000 by spotting using a thermal imaging method, called pulsed thermography, to reveal hidden flaws in turbine blade coatings. In another instance the NPL recalibrated the machines of an Oxford engineering firm, saving 18,000 a year. Brafe Engineering, of Woodbridge in Suffolk, signed up for the full NPL review. Brafe creates castings predominantly for the oil and gas industry, in stainless and carbon steels, and nickel, titanium and copper alloys. Quality manager Ken Dean says: Following the discovery of non-conformances in some of our products, we recognised that our inspection processes contained some inherent weaknesses. We therefore looked into the possibility of having external experts come in and give us advice on how we could improve our systems. Going Global Page 12 The team from NPL came in for one day to conduct a PVP exercise and help highlight areas that we knew we were weak in. This allowed us to take appropriate action right away and over the following months we established four independent programmes to overcome the inefficiencies in our system. Manufacturers often believe they have everything under control and may even feel they know their own areas of weakness, but bringing in experts from NPL really gives them a chance to examine their operations in detail. The scheme comes with a fee. Mr Dean says: Given the costs associated with the inspection, I would say that NPL s PVP programme pays for itself. It s a wise strategy. The technologies of the future are here. You just have to head out and find them. Aircraft-maker Airbus is implementing its Factory of the Future strategy. One key new technology will be intelligent eyeglasses for aircraft assembly. On the A350 sub-assembly there are approximately 400,000 locations to be drilled, inspected and tightened during production, requiring more than 1,100 tightening tools. National Instruments created Head-Up Display glasses for Airbus. These use edge detection of the holes to provide the engineer with relevant information as work is conducted. The display brings up detailed graphics indicating bolts to be tightened and which tool to use. The tools automatically adjust torque and report to the Airbus quality-assurance database in real time.
10 P10 UK MANUFACTURING 24/02/15 EDITION # RACONTEUR.NET i /COMPANY/RACONTEUR-MEDIA f /RACONTEURMEDIA /RACONTEUR.NET Commercial Feature Helping more businesses in awareness of asset and invoice financing Forward-thinking businesses are now looking to two well-established, flexible and cost-effective alternative forms of financing As economic confidence continues to return, companies around the UK are looking to replace equipment and to invest in new technology, having put the process on hold over the last six to seven years. The correct financing solution can have a significant impact on an organisation s success, providing the liquidity needed to grow, adapt, make acquisitions or simply help to manage day-to-day business requirements. More businesses are now aware that there is a range of financing solutions available to them and as a result many forward-thinking companies are looking at alternative forms of funding. Two particular examples that are attracting growing interest are asset financing and invoice financing, both of which are flexible, cost-effective opportunities for businesses to realise working capital and which enable borrowing for investment. QUICK GUIDE Asset financing In its simplest form, asset finance is a loan that is used to purchase tangible assets. These assets can be anything from vehicles, agricultural equipment, plant and machinery, IT to boats and planes. Asset finance provides a resource over and above your normal banking facility, and as such is a useful additional source of funding that provides significant cash flow and tax benefits for businesses looking to purchase a new piece of equipment, a vehicle or other fixed assets. Invoice financing This is an umbrella term covering a number of products, such as factoring, invoice discounting and asset based lending. The latter, not to be confused with asset finance, enables businesses to borrow against the value of their trade receivables and inventory, such as raw materials, finished goods or both, as well as other balance sheet assets to finance the working capital they need. GROWING AWARENESS It might be a well-established form of financing, but in recent years asset finance has grown significantly as more and more companies have become aware of the benefits offered by this flexible, cost-effective, risk-managed form of financing. Figures released by the Finance & Leasing Association show that in 2014 new asset finance business grew by 13 per cent to 25.4 million, the strongest rate of growth in at least seven years, while plant and machinery finance grew by 48 per cent in December 2014 compared with the same period the previous year. Asset finance, along with other forms of finance, such as peer-to-peer and invoice finance, have all grown in popularity as businesses have looked to find alternative methods of funding to the traditional bank loan, and also to provide solutions to specific funding requirements. Asset finance in particular has grown because of its simplicity and flexibility as a funding method for equipment as diverse as office furniture to biomass boilers, says Neil Lloyd, head of sales development at leading asset finance provider Lombard. The simplicity and flexibility of asset finance mean that it s suitable for all types of business from startups buying their first vehicle, to PLCs investing in new IT architecture. The reason for this, other than possible tax benefits and the ability to budget more easily, is that on most occasions the asset is our security, which makes asset finance very accessible as a form of funding. Commonly funded assets include vehicles, plant and machinery, and IT. The benefits afforded to manufacturing companies in particular by asset financing have been enhanced by an increase in the annual investment allowance (AIA). Many companies are still unaware of this form of capital tax relief that offers a 100 per cent allowance on qualifying capital expenditure in the year of purchase. The AIA limit increased temporarily Asset finance has grown because of its simplicity and flexibility as a funding method for equipment as diverse as office furniture to biomass boilers from 250,000 to 500,000 a year with effect from April 1, 2014 for companies and from April 6, 2014 for sole traders and partnerships, having already been increased from its original level of 25,000. However, the time-limited increase is due to end on December 31, 2015 and at present there is no indication whether this will continue or revert to a lower allowance. This date might seem some time off, but given that the amount of tax that can be offset is calculated for each accounting year and that acquiring new equipment is rarely a speedy process, companies need to plan ahead and consult their accountants or financial advisers to get guidance on how they can best benefit from the increased allowance. As awareness of the benefits of asset finance grows in all sectors, it s important for a provider to have a proper understanding of the company that it s working with, whatever its business might be. As well as its 150-year heritage, Lombard finds that clients, especially those who are new to asset finance, appreciate the detailed knowledge of its team of more than 300 relationship managers based across the UK. Lombard has dedicated teams working in technology, agriculture, commercial transport and green energy, and also has manufacturing specialists, who understand the particular requirements of funding in these areas. For example, the green energy team are able help customers looking for an effective way of funding renewable energy and are knowledgeable about the government initiatives available and how to apply for programmes such as the Renewable Heat Incentive scheme. Our relationship teams are well educated across a range of business skills and are accredited each year by Chartered Banker, the only professional banking institute in the UK, meaning our customers can have confidence in what our relationship managers say. It is also very much in line with our ethos of taking time to understand our customers needs, both current and future, in order to better serve these needs, says Mr Lloyd. With asset finance firmly on the radar of more and more companies, what advice would Lombard give to a business thinking of joining this trend? First, make your accountants your first port of call, Mr Lloyd says. They should be able to advise you on which asset finance product is best suited for your needs and put you in touch with an asset finance provider. Then get your funder involved at an early stage of the buying cycle. Doing this will ensure they work with you and the supplier of your asset to put in place a funding solution that is right for you. ASSET FINANCING PROVIDES A FLEXIBLE SOLUTION Devon-based Hymid Multi-Shot Limited, one of a handful of specialist manufacturers of two-shot plastic injection moulding in the UK, was looking to fund increased capacity. It turned to Lombard for asset finance that offered the financial flexibility which enabled the business to acquire the new equipment it need straightaway and to make the investment without impacting on its cash flow. We have worked with Lombard for many years and asset finance is an established and proven product for us, says Tom McMurtrie, managing director of Hymid Multi-Shot. It provides a flexible solution that enables us not only to invest in the latest technology, but also to free up cash so that we can raise the technical capabilities of our staff. The combination of efficient systems and well-trained staff means we can pursue our overall growth strategy, and ultimately plan for the long term to ensure Hymid continues to achieve and perform in a competitive market. INVOICE FINANCING SUPPORTS ASSET FINANCE Once a company has secured the capital expenditure spend on new assets with asset finance, how can it finance the growth in revenues these assets will bring? Particularly when the increased sales made on the back of these assets take some time to turn into cash and this gap needs to be bridged by some kind of finance. Growing businesses quite often won t have the internal capital to do this nor to purchase raw material and finance the conversion cycle of these assets into cash. The answer could be asset based lending which allows companies to accelerate payments against outstanding invoices and also to finance the inventories they need to hold. Advocates of alternative forms of financing include former trade and investment minister and former director-general of the CBI Lord Digby Jones. I m very, very keen on getting more companies to stop looking to their bank for an overdraft, he says. Look to your bank for using your invoices and using your debtors. Go to a company that will lend you money on your invoices and manage your invoices then you can look at a different way of financing. Manufacturing companies in particular can experience extreme seasonal fluctuation in orders and payment, but they still have to run plant, upgrade technology and invest in new materials and inventory all year round, says Mirka Skrzypczak, head of product and client proposition at RBS Invoice Finance, one of the largest invoice finance and asset based lending companies in the UK. This form of finance helps bring stability to this cycle through access to working capital.
11 UK MANUFACTURINGONLINE: 24/02/15 EDITION # RACONTEUR.NET i /COMPANY/RACONTEUR-MEDIA f /RACONTEURMEDIA /RACONTEUR.NET P11 ANNUAL INVESTMENT ALLOWANCE HOW IT CAN HELP YOUR BUSINESS GROW How much your business can recoup on your investment through tax savings If your qualifying spend is at the rate of 550,000 per annum in qualifying period April December ,000 per annum gets 100% tax relief your remaining 50,000 per annum of qualifying assets gets 8 or 18% tax relief WHO CAN CLAIM? WHAT DOES THIS MEAN FOR YOU? Any business except for mixed partnerships and trustes 500,000 on corporation tax/income tax per annum = maximum Annual Investment Allowance deduction from taxable profits from April 2014 Pro rata for short periods, long periods or periods which span the operative dates SAVE 1 in taxable profits FOR EVERY 1 in taxable profits UP TO A MAXIMUM OF 500,000 ELIGIBLE ASSETS Qualifying expenditure covers most assets purchased for use by business INELIGIBLE ASSETS Plant and machinery Office furniture and qualifying equipment Vans, trucks, cranes and diggers Business machines Lathes and tooling machines Tractors, combine harvesters and other agricultural machinery HOW ANNUAL INVESTMENT ALLOWANCE HAS CHANGED OVER TIME Computer hardware and qualifying software, computerised/computeraided machinery Building fixtures and fittings Wind turbines and optic cabling Garning machines and amusement rides Driving-school cars Land Buildings (excluding integral features) Cars Existing or gifted assets April 2008 April 2010 April 2012 January , ,000 25, , ,000 March 2010 March 2012 December 2012 March 2014 April December 2015 Invoice finance improves the cash conversion cycle of a business and provides access to cash quicker than debtors pay which in turn allows having bargaining powers with suppliers, she says. Christopher Hawes, RBS director of UK Corporate Asset Based Lending, adds: The availability of working capital is an issue faced by most, if not all, businesses. Asset based lending is a cost-effective alternative for companies to increase working capital without having to slow business growth or raise equity. BOOSTING INTERNATIONAL EXPANSION James Briggs, a producer of manufacturing products including paints, lubricants, cleaning fluids and polishes for the automotive, industrial and hygiene sectors, recently secured a 9-million working capital facility with RBS Invoice Finance. The business, which has a turnover of 50 million and 200 staff, was backed by private equity investor Endless LLP in a management buy-out in 2013 and has been focussed on further expansion. The funding from RBS Invoice Finance will allow the business to pursue opportunities in new territories and new sectors which provide a hugely exciting future for the business, says Ian Plumb of Endless. To find out more about how Lombard can help you finance eligible assets call Text Relay Security may be required. Product fees may apply
12 P12 UK MANUFACTURING 24/02/15 EDITION #0300 Exports GOING GLOBAL IS A WIDE-OPEN CHALLENGE With the eurozone an uncertain market, capitalising on global export opportunities, particularly in America and China, is more important than ever, as Elliot Wilson reports Exporting is a strange and challenging business. Vital to a nation s economic and cultural self-interest, not to mention its sense of self-worth, it can often be overlooked or misunderstood. Take a lazy pair of assumed narratives about Britain that we no longer make anything of great worth, still less anything that an informed foreigner would want to buy. Nothing could be further from the truth. Export volumes jumped 2.4 per cent year-on-year in December, according to the Office for National Statistics (ONS). Manufacturing output rose in January on higher export orders, offering yet more encouraging data for an economy in solid recovery mode, says Paul Hollingsworth, an economist at Capital Economics. Britain s export story is nuanced and compelling. It starts and ends with the City of London, perhaps the country s greatest single asset. Business and financial services account for around 55 per cent of all outbound sales, with fast-growing emerging markets from China to India to Nigeria desperate to import knowledge in industries stretching from legal affairs to fund management to public relations. Little wonder some see London, which generates more than a fifth of all national economic output, as a juggernaut, towing the UK in its wake. There is life beyond the capital. At one level, it s remarkable how little the export mix has changed in recent decades. Britain is still a major producer of completed automobiles, shipping 23-billion worth of cars overseas in 2014, according to the ONS, up 8.2 per cent year-on-year. After that comes a dizzying array of products as old as the hills, from oil If Germany stands for stolid manufacturing excellence and the French for flair and fashion, Britain is an amalgam of traits and valves to medical equipment and gas turbines, evidence of our maturity as a crafter of complex manufactured goods. The UK earns billions of pounds each year from the export of telephones and computers, and does a roaring trade in human and animal blood. Yet this is also a country in a fascinating state of flux. If Germany stands for stolid manufacturing excellence and the French for flair and fashion, Britain is an amalgam of traits. FASHIONABLE GENTILITY To customers in the United States and the Middle East, key markets for British manufacturers, the UK will always stand for a gentility that never quite goes out of fashion. Burgess, a global leader in the construction and charter of super-large yachts with sales of 1.2 billion in 2014, trades firmly on the reputation of its founder. Nigel Burgess was the quintessential British gentleman, says marketing director Alev Karagulle, cordial and polite, and immaculately attired in a pinstripe suit. Mr Burgess passed away in 1992, but his tradition of doing business with a handshake and a smile lives on, Mr Karagulle adds. What surprises many is the burgeoning strength and flexibility of the national brand. From Japanese executives, clad in Paul Smith, to Emirates billionaires, ensconced in Image: Getty Felixstowe in Suffolk is the UK's busiest container port dealing with 40 per cent of containerised trade their Range Rover Evoques, Made in Britain really means something. When Lee Newton, chief executive of Essex-based events specialist Media 10, took 50 British designers to China last year to showcase their wares, he didn t know what to expect. Nearly 50,000 mostly trade customers flocked to Design Shanghai, his inaugural two-day show, to goggle at everything from UK-made jewellery to furniture to timepieces. Contacts were made and sales soared. There is a genuine hunger for well-made British products in China, says Mr Newton. They love everything from their history to their design excellence. This year s event, he says, will be even bigger. Mr Newton s success shows that exporters of any size can be successful given a bit of ambition, gumption and support. Angloco earns 17 million a year exporting Yorkshire-made fire engines to the Middle East and Africa. It is now expanding into Oman and Trinidad and Tobago with help from UK Trade & Investment. Parker & Farr s range of bespoke armchairs, lovingly stitched and sprung in Nottinghamshire, come with lifetime guarantees. We re the Rolls-Royce of sofas, says the firm s managing director Tony Crinion, invoking another great British success story. With prices starting at 2,500, a Parker & Farr doesn t come cheap. But that hasn t crimped its expansion into China. They love the Britishness of our product and that we are a supplier to Buckingham Palace, he says. Indeed, while there are few short cuts in life, becoming a supplier to the Royal Family may be one. If you want to get on and get up in the United States as a British firm, the advice is simple: get a royal warrant, advises Allyson Stewart-Allen, founder and chief executive of International Marketing Partners, a business consultancy with offices in London and Los Angeles. DOWNTON ABBEY Another curio is how the UK is viewed depending on where you are in the world. Americans lap up British accents and entertainment, from pop music to Downton Abbey. Cinema, theatre, Broadway shows you d be staggered how much of it is British in origin, says Ms Stewart-Allen. Yet in areas like fragrance, accessories and cuisine, UK brands barely register in America, barring a few standout names. The story is different in the Middle East and Asia, as well as western and southern Africa, huge growth markets for everything from Black Orchid Interiors glitzy, blingy furniture to Anya Hindmarch handbags to waxed Barbour jackets. Even British cuisine has cachet, helped by superchefs, such as Jamie Oliver, and specialist foodmakers, including Rococo Chocolates, which generates 3 million in annual sales, mostly via exports to the Middle East, East Asia and Latin America. When I started Rococo, there were no cult luxury British chocolate brands, but now London alone has several dozen, says Chantal Coady, who founded the firm in It s a really creative, vibrant export market. Growth Capital Page 15 Not all nations and regions are sure-fire winners. Get the branding right, and British products sell like hotcakes in the Middle East, Asia and North America. India, with its swelling middle class, is another growth market. Leicestershire-based Triumph sold 4,000 British-made motorbikes in the country in 2014; that number is set to rise to 10,000 this year. Perhaps the only genuine cause for concern is Europe. Of the topfive sovereign destinations for British exports, four are European. Monthly sales to the 28-strong EU bloc of nations have remained flat since the start of 2011, at around 12 billion. Exports to Holland fell 5.4 per cent in the first 11 months of 2014, according to HM Revenue and Customs (HMRC), with French imports of British goods down 12 per cent. Parker & Farr notes that, while the eurozone remains important, customers are increasingly careful with their pennies. In the short term, Europe remains the biggest buyer of UKmade goods; over the longer term, it may make better sense to infiltrate growing, confident markets, from the Middle East to Africa to the two markets likely to define the future of many if not most UK exporters, America and China. The first of those buys more British-made goods than any other nation, while exports to the latter surged more than 40 per cent in 2014, according to HMRC, much of it involving high-end, high-margin goods made by some of the UK s most vibrant, creative companies.
13 UK MANUFACTURING ONLINE: P13 Case Studies LONDON LOOK MANUFACTURERS TAKING ACTION TO RAISE INVESTMENT % of companies citing UK investment spend on plant and machinery as share of turnover (past two years) ROLL OUT EXPORTS No spend Less than 1% 3% 1-3% 18% 30% 24% 10% 7% 2% 4% 1% Some retailers start out in the high street before migrating online. Others take the opposite route. Sally Chamley s Black Orchid Interiors began life using ebay to sell high-end furniture to affluent customers in London. Four years ago, keen to take her firm to the next level, she secured 1.4 million in capital from a London-based angel investor. Since then, the ten-year-old company, which makes exquisite home furniture ranging from quartz mirrored console tables to elegant ebony chairs, has found its groove. Fresh funding and advice allowed Ms Chamley, 34, who describes herself as a natural entrepreneur unafraid to think outside the box, to form a long-term business plan. A turning point came when House of Fraser began selling her designs at its flagship store in London. Black Orchid gained scale, keeping a large share of production fixed firmly in Britain. But the ticket to true export success came from a bold foray into franchising. This can stop some companies cold in their tracks or prove their making. Ms Chamley says she fell in love with a business model that allowed her to keep control of pricing and branding. A Qatari investor paid a six-figure sum to operate six Black Orchid outlets in the tiny Gulf state and from there the business snowballed. Next on the radar are similar deals in Saudi Arabia, Dubai and India. The firm is in fast-growth phase, Ms Chamley says, with turnover projected to rise from 1.2 million last year to 10 million-plus over the next decade. Business gets an extra boost in summer, when the monied denizens of Dubai and Doha decamp to London to escape the blazing heat. A Saudi buyer on a chance visit recently bought a 40-foot c ontainer of Black Orchid furniture, which he shipped back to Riyadh. So what ultimately made the business click, apart from hard work, design brilliance and a handful of well-timed decisions? In one word: London, Ms Chamley says. The Middle East is our largest export market and they love London there. Our furniture has an English style to it, but it s also a glitzy, blingy London look, from the black-andgold trim to the studs on the furniture and that goes down a treat. 4-6% 7-9% 10-15% Share of turnover 16-25% 26-50% More than 50% Have you ever stopped to ponder the escalators that propel us forward and upward at the world s busiest metro stations and airports? Chances are you re staring at the result of engineering excellence stemming from a factory located in Market Harborough rather than Munich or Mumbai. Texane s products are unwittingly used by millions of people every day: the Leicestershire-based firm literally makes the ground beneath our feet. Founded nearly 50 years ago, it was transformed in 1999 after being taken over by Arnab Dutt, a north-london-born entrepreneur. He saw that the firm needed to hone its product range to survive. It also needed to crack the export market no small feat for a small manufacturer in a country then obsessed with financial, not industrial, engineering. But he persevered, shifting production to a specialised, higher-margin product: the super-tough polyurethane wheels used in everything from agricultural machinery to gas pipelines to car plants. In just 15 years, he was a global market leader. The big break came when the London Underground put in a major order for Texane wheels and then adopted them as a primary supplier. They are such an iconic name, respected around the world, says Mr Dutt. We would go to other metros around the world and they d say, If you re good enough for London, you re good enough for us. Texane s British-made industrial wheels are now found embedded deep within escalators and luggage carousels at the Paris Métro, New York City Subway, Gatwick Airport and beneath the trains on Coney Island s heart-stopping roller coaster. Key export destinations include Germany, the United States, France and Australia. Mr Dutt intends to export more than half the firm s output in 2015, while expanding into Asia and the Middle East. His advice to smaller British firms is not to go it alone in key markets, but to lean on help and advice from trade associations, UK Trade & Investment, and the commercial divisions of British embassies and consulates. He s now looking to push into the consumer and healthcare sectors, parlaying the firm s expertise in polyurethane elastomer technology. Texane, Mr Dutt says, is busy creating an anti-bacterial polyurethane coating that kills dangerous pathogens, while launching a new division this year that makes hardy, high-end scooter and skateboard wheels. Source: EEF/Lombard Investment Monitor 2014
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15 UK MANUFACTURING ONLINE: P15 Growth Finance CHOOSING THE RIGHT FINANCE OPTION FOR GROWTH As the UK continues its tentative economic recovery, manufacturers have financing options available beyond traditional bank lending, as Alex Cardno discovers PUBLIC FINANCE How does it work? In response to the recession, the government created a plethora of schemes aimed at aiding business, particularly small and medium-sized enterprises to stay solvent and grow. Overall, the UK government currently has 631 approved funding schemes from grants and loans, through to financial advice and equity products. The main schemes currently of interest to manufacturers include the Annual Investment Allowance. This scheme has been extended to 2015 and allows businesses to invest in new plant and machinery, offering 100 per cent tax relief on qualifying expenditure in the year the purchase is made. Initially cut to 25,000 by the government, a manufacturing business can now qualify for tax relief on new purchases of up to 500,000 in one year. Manufacturers can also make use of the British Business Bank, which assists companies with a turnover of up to 25 million, as well as Local Enterprise Partnerships. The partnerships are between local authorities and businesses. They decide what the priorities should be for investment in roads, buildings and facilities in the area. These were given the chance to apply to government to set up an enterprise zone, and can take advantage of tax incentives and simplified local planning regulations. Since 2012, 39 local enterprise partnerships have been created. Entities such as Enterprise Ventures, which manage these funds, have access to both public and private money. This means shortfalls in public funding due to restrictions can be supplemented from the private sector. Best suited for: Small to medium-sized businesses. Considerations: Most government schemes have restrictions on things such as time and funding levels. For example, the JEREMIE (Joint European Resources for Micro to medium Enterprises) funds, which come from the European Union, state that unless the company is located in an assisted area, only those employing fewer than 50 staff members are eligible. This means businesses may need to seek other forms of finance to achieve growth targets. ALTERNATIVE FINANCE How does it work? Alternative finance encompasses products such as peer-to-peer lending, supply chain finance and bridging loans. Perhaps the fastest-growing form of alternative finance available to manufacturers is peer-topeer lending, whereby money is lent by pools of lenders via an online platform instead of through a financial institution such as a bank. Peer-to-peer lenders, otherwise known as crowdfunding platforms, can deliver funds within 14 days if the borrower s business information is provided in a timely fashion. Much of the application process is handled online and offers the potential for a business to reach thousands of investors. Typical loan rates run from 10 to up to 100,000 at fees of around 7 per cent. For UK manufacturers reliant on international suppliers or global supply chains, online platforms have begun to emerge offering cross-border pre-approved revolving credit facilities which allow purchasers to pay suppliers a bulk sum or full amount of a transaction s value at a pre-determined point in the supply chain, with buyers typically being offered 120-day terms to repay the lender. Short-term or bridging loans can also be considered as a way for manufacturers to grasp time-sensitive opportunities and deal with unexpected cash-flow issues. According to Chris Baguley, managing director of Bridging Finance, manufacturers can typically borrow anything from 20,000 to 5 million, which is often secured against commercial, semi-commercial or residential property. These funds can be used to raise capital, pay unexpected bills, update or repair equipment, or to finance acquisitions. Best suited for: Smaller firms or startups with solid financial forecasts, manufacturers trading across borders and/or in need of short-term funding, businesses deemed too risky by banks. Considerations: Depending on the type of funding, finance can often only be granted on a project-by-project basis. Businesses should also be wary of the type of security needed to secure finance. ASSET-BASED FINANCE How does it work? Often referred to as asset-based lending, this form of finance takes on two forms: factoring or invoice discounting. Both operate on the same concept, using the outstanding invoices of a firm as security against an upfront loan of typically up to 90 per cent of the value of the invoice. The product is designed both as an aid to growth and an alternative to overdrafts. With factoring, which is designed as a solution for smaller businesses, the lender then assumes control of recovering the outstanding debts owed on the invoice. With invoice discounting, the same loan principle applies, but the borrowing firm retains control of its credit management. Often the specific requirement of a manufacturer for cash can be extremely varied from acquiring the stock and raw material required to deliver an order, to hiring the right personnel to undertake it, or even perhaps buying newer and more efficient machinery to optimise the opportunity, says Louise Beaumont, head of public affairs at GLI Finance. As such these orders often place a high demand on cash and working capital for manufacturing companies, with speed of access to finance often cited as the crucial factor in securing the deal. Paula Laird, partner at Squire Sanders, says this form of finance is increasingly being used for complex transactions, including syndicated, cross-border and financial sponsor-backed acquisition finance, as well as being used as a working capital facility alongside other finance products such as a high-yield bond. Best suited for: Companies seeking an alternative to overdrafts and/or companies with cash-flow issues. Considerations: Using this product means handing over control of a firm s sales ledger, which is much riskier for the borrower than the lender. An asset-based lender often becomes a priority creditor in the event of insolvency.
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