Bigwigs speak out ahead of the Autumn Statement
Manufacturing added more than £148bn to the UK economy in 2012, and it’s the largest production industry we have, by a vast amount. But it’s on the wane. The value added to the economy by manufacturing was down 3.1% in 2012 from the year before, which works out as a not insignificant £4.7bn.
For all the government’s talk of supporting manufacturing, many in the sector feel that more could be done to support their industry, by various parties and on various fronts. There is perhaps even less support for London manufacturers, particularly from the public – quite simply because most people do not think of London as a manufacturing hub. Although, as we have written before,it certainly is.
There is a thriving manufacturing community in the capital that employs around 115,000 people, and features both decades-old, traditional manufacturers alongside cutting-edge innovators. It is these London businesses that need to grow if we are to increase job provision, grow our economy and rebalance our trade deficit by increasing our exports.
So we decided it was time to talk to London manufacturers and find out what needs to be done to help them grow. More than 16 senior executives from leading mid-market manufacturing companies in London and the South East joined us for our Dynamic Roundtable: The Future Growth of Manufacturing (see all attendees in the list below) on 27 November, along with Lloyds Bank, which has a key focus on supporting manufacturing businesses.
They told us about the challenges they face, and, crucially ahead of Thursday’s Autumn Statement, what government and others can do now to support their growth.
Our thanks to Richard Holden, head of manufacturing at Lloyds Banking Group and George Kessler CBE, joint deputy chairman of Kesslers International, for their opening remarks, and particularly to Lloyds Bank for supporting the Dynamic Roundtable.
This video introduces some of our guests and their insights into the key issues faced in these areas:
Skills shortages & lack of talent
- Manufacturing urgently needs more support for training
- More government support should be given for taking on apprentices – tax breaks would help
- Employment taxes such as NI should be relieved
- Wages are a looming issue – enforced increases could prevent job creation
- Manufacturers should be open to older recruits who have former relevant training
A lot of manufacturing is based on classic knowledge (that which must be taught and passed down) rather than patents, said George Kessler CBE, joint deputy chairman of Kesslers International, because “patents are easier [for rivals]to get round”.
That means there has to be substantial training in place to pass on that knowledge – and training to use machinery correctly is key. “A product depends not only on design, but how you use the machinery,” Kessler said.
Many panellists were in favour of taking on apprentices, providing they had the resource to do so, as they could be taught the necessary skills. The trouble is finding young people who have the passion for the sector (see the section below for more on this).
There was a general consensus that the older machines are the best, yet there is a dire shortage of people who can understand “the old equipment”, said Dennis Roycroft, Director, DBR & Associates Ltd, which all who used older equipment heartily agreed with.
Annette Nicholson, managing director, Society of London Manufacturers, countered that by saying she knew of many people in their late 50s and 60s who are trained in it but working in other jobs. Manufacturers could be at fault for not considering these people simply because they have been in other industries for the past few years, despite them wanting to re-enter manufacturing.
Lance Forman, managing director, H Forman & Sons, said that the London Living Wage is damaging to manufacturers here – he wants to take on more people but high wages are a barrier to that. Nick Warne, managing director, NE Plastics, said wages haven’t been an issue for the last five or six years, but he expected wage competition to start being an issue in the near future.
Manufacturing’s image problem & getting young people into the sector
- Young people should be given the opportunity to experiment with manufacturing tools and 3D printers to spark interest
- The media should portray manufacturing more positively
- There should be more effort to make manufacturing inspiring and exciting
There was a general frustration among the group that the public seem to think of manufacturing as respectable but boring and old-fashioned – “people think of the ‘dark satanic mills’,” as Bernard Nelligan, managing director of SLE, put it.
But that is despite people generally loving the idea of “making things”. “The big sexiness is on design now,” said David Hathiramani, co-founder and director, A Suit That Fits. “A lot of people use the products or technologies but don’t actually know how to make them.”
But there is hope for attracting more young people to the industry. Soner Ozenc, CEO, RazorLAB, is setting up a “makers café”, where the public can sit in a café and play around with 3D printers to forge an interest in manufacturing processes. 3D printing was seen as full of potential to spark interest in manufacturing.
And Viviane Jaeger and Emma-Jayne Parkes, co-founders of Squid London, give talks to young people about the industry and are “passionate” about promoting it. But they believe that the lack of access to equipment for young people is harming potential interest. “Young people are interested in making things, it’s just having the opportunity,” said Parkes.
Many also felt the media had a part to play in showing manufacturing in a more positive light and showing exciting case studies from the sector. “We need to see more of the theatre of manufacturing,” said Ozenc.
Lance Forman, managing director, H Forman & Sons, suggested a campaign titled “Love Making” to promote manufacturing’s image, as the word “manufacturing” conjured images of “robotic car plants or sweat shops in Bangladesh”.
Taxes & allowances
- The government should give 100% capital allowances to enable manufacturers to buy the machinery they need to grow
- The government should increase the provision of R&D tax credits
- Taper capital gains tax over many years to encourage long-term share-holdings
Manufacturing R&D in this country is under-invested in, and tax credits for it lightweight compared with other countries, said Bernard Nelligan, managing director, SLE. He and others on the panel felt furthering the provision of R&D tax credits would enable them to take on “more projects and more people”.
Tapering capital gains tax over many years to encourage long-term share-holdings would encourage greater long-term thinking and so help the sustainability and future growth of the sector, Lance Forman, managing director, H Forman & Sons, suggested.
- Cut fuel duty and road taxes to make transport cheaper and encourage exports
Talk of exporting opportunities in Russia, China, Japan, Germany, Europe in general, South A
merica and Australia, among other markets, gave hope that growing through exports held great potential for the group. But transportation costs and duties were prohibitive, and the government could provide tax reliefs to ease this problem.
Access to finance
- Banks should strive to have deeper understanding of manufacturing
- Manufacturers should remember to keep their bank manager updated on business
- Easier access to loans is needed
- Finding a way to “take pressure off the individual” for asset purchases would encourage more investment
“More than any other industry, manufacturing needs cash and investment,” said George Kessler CBE, joint deputy chairman of Kesslers International.
Yet many bank managers don’t have the technical knowledge to be able to make quick decisions about funding application from manufacturers, nor do they understand that strategies and investments in manufacturing are very different from other businesses.
“Banks don’t understand manufacturers,” said Richard Holden, head of manufacturing, Lloyds Banking Group, which has trained up 150 managers with a manufacturing qualification to try to counter the problem.
David Peddy, managing director, SIGH, said he thought of his relationship with his bank manager as “like a marriage”, saying it helps to keep in touch fortnightly and that “you have to put something in” if you want understanding when you ask to borrow at a later date.
Would government grants help? Lance Forman, managing director, H Forman & Sons, was against them, as they prop up the market in ways that ultimately distort it, so do more harm than good.
Competition in the industry
To support mid-market and SME manufacturers, large manufacturers are crucial, said George Kessler CBE, joint deputy chairman of Kesslers International. “The food chain in manufacturing is much more tightly integrated than in most industries.”
Kessler said companies like his are competing “penny for penny” not with China, but from Italy, Germany, Switzerland and the North of England. This is generally because the London manufacturers present created high-spec items.
Our thanks to all the panellists:
Andrew Naylor, area director, South London, Lloyds Banking Group
Annette Nicholson, managing director, Society of London Manufacturers
Bernard Nelligan, managing director, SLE
David Hathiramani, Co-Founder and Director – A Suit That Fits
David Peddy, Managing Director – SIGH Ltd
Dennis Roycroft, Director – DBR & Associates Ltd
Emma-Jayne Parkes, co-founder, Squid London
Geoffrey Davies, chairman – Polybags
George Kessler CBE, joint deputy chairman, Kesslers International Ltd
Lance Forman, managing director, H Forman & Sons
Lisa Parsons, head of programme, SME Banking Network, Lloyds Banking Group
Lucinda Reilly, sales director, Ecotile
Nick Warne, managing director, NE Plastics
Paul Evans, area director, Essex & East London, Lloyds Banking Group
Richard Holden, head of manufacturing, Lloyds Banking Group
Soner Ozenc, CEO, RazorLAB
Steve Last, senior manager, Lloyds Banking Group
Steve Wallis, general manager, Laa UK
Tony Lane, owner, MCS Consulting
Viviane Jaeger, co-founder, Squid London
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