It’s an often-heard lament that Britain has forgotten how to make things – our history of manufacturing and engineering prowess has instead been replaced with expertise in banking and retail.
However, recent years have seen a surge in small, agile companies looking to build ground-breaking products on British shores. Not only are these ‘start-up’ businesses improving the image of UK manufacturing, but they are also shaking up established markets in all areas, from automotive to textiles and from food & drink to steelwork.
“Manufacturing is the backbone of Britain,” says Kate Mills, founder of Make It British. “Unfortunately, we have come very close to losing a lot of it, and that’s something that our grandchildren will look back on with so much regret were it to happen.
“We’re at the tipping point of either losing our heritage forever or protecting it and looking to build it back to what it used to be.
“People recognise the important part industry plays in our history, and are starting to feel a sense of duty to manufacture things here again.”
So, what’s behind this rise in start-ups, and should the establishment be looking over its shoulder as these innovative and fast-moving newbies come up on the inside rail?
“A glut of entrepreneurs”
Start-ups have long been associated with the tech industry – look how companies like Airbnb and Uber have taken their respective markets by storm with innovative approaches and a ‘funky’ image that has tapped into the needs and wants of today’s young consumers.
One manufacturing start-up that has risen to this level is Brompton Bikes. Their range of folding bikes is seen as a must-have for discerning commuters. The company, famously, was started in the West London bedroom of Andrew Richie in 1975. The manufacturing landscape facing the company back then was a lot different to what an up-and-coming company faces now, explains Brompton’s managing director, Will Butler-Adams. “When Andrew set up the company, the barriers to entry for start-ups were much higher than they are today,” he says. “In those days, there was no way you could challenge the giants of manufacturing. They all had computers that cost half a million pounds, which gave these companies information that nobody else could ever hope of getting hold of.”
Investment, as well, was a lot harder to come by. “Nobody wanted to invest in small companies in those days, because stockbrokers ruled the roost,” continues Butler-Adams. “A stockbroker was never going to put money into a bloke in his bedroom making a funny little folding bike.”
Today, though, things are a little different. Technology and changing funding models have made setting up a company more accessible than ever. “Everyone has a computer today,” says Butler-Adams. “You can design your bright idea on that, get a company to 3D print it, put a video on YouTube to market it and gain traction and backing through crowdfunding websites.”
This has led to a more open manufacturing market, unlike anything seen in recent history. “For the first time since the Victorian era, when we saw a glut of entrepreneurial manufacturers during the Industrial Revolution, we’re getting to a stage where those with the best ideas, and not just the most money, can succeed – and that’s so exciting for manufacturing,” says Butler-Adams. “The general public like someone with a good idea and a plucky attitude and are happy to back them on their journey.”
Mills agrees. “Everyone is looking to make things in the UK nowadays, largely because prices overseas are going up,” she says. “Trouble is, there aren’t enough manufacturers over here to keep up with the demand. I’m advising a lot of people to manufacture their own goods, as it can be hard to find an established manufacturer who can meet their demands because they are all just so busy nowadays. By making your own products, you are the master of your own destiny. You also benefit from shorter lead times, and having no middle-man leads to better profit margins.”
Risks & funding models
Of course, starting your own company isn’t without its risks. There is no guarantee that your ‘bright idea’ will be seen as such by the discerning public. Quite often, start-ups require a certain amount of faith and luck to get off the ground. “Many start-ups just come about from people taking a punt and hoping for the best,” says Mills. “I’ve heard of people re-mortgaging their houses to set up a manufacturing firm, which is obviously a huge risk.”
However, she adds, any business involves a certain amount of risk. “Does setting up a company here bring any more uncertainty than outsourcing to China,” she asks. “If the vast majority of your business is coming out of the Far East, and they suffer an economic, political or natural crisis, it will have knock-on effects all the way back to your company. If you keep your manufacturing close to home, it omits – or at
least reduces – a lot of that risk.”
For a start-up looking for its big break, the first hurdle comes in getting funding for the venture. There are several models for this. The traditional one involves sourcing funding from the bank. This, explains Malcolm Evans, founder and director of the UK Manufacturing Accelerator, can be tricky. “Investors today are looking for short-term wins,” he says. “They ideally want to make their money back within 24 months, and manufacturing doesn’t often allow that. Compare it to markets like software. There’s a reason tech start-ups are a lot more successful – you can start making money in software with just a laptop.”
This has seen a rise in interest in schemes like crowdfunding, which involves getting buy-in from fans and supporters. This has its benefits. “Instead of going cap-in-hand to one person at the bank, you can get 500 people to invest a small amount and you’re well on your way,” says Butler-Adams.
Added to that, says Mills, crowdfunding also offers an ideal way of judging the potential success of the product. “One benefit of crowdfunding that is often overlooked or under-judged is that, not only do you get other people to pay for your idea, they also pre-validate it and give you an indication of how well it will work on the wider market. It’s
a great bit of market research.”
These new funding models don’t just apply to start-ups. They can also be useful for established businesses looking for a quick injection of capital.
One such company is Cumbria-based Border Steelwork Structures (BSS), which needed funds for a major fabrication project in Yorkshire.
“Our bank was unable to provide any other funding and, having only ever borrowed via an overdraft in the past, we were unaware of the alternative finance options that had appeared in the market,” explains Craig Docherty, BSS’ financial director.
The company were introduced to a system called ArchOver, which provides peer-to-peer financing to companies looking for loans.
“ArchOver’s borrowing model allowed us to use trade debtors as a means of securing the working capital we required,” explains Docherty, with the company achieving £1.3m of financing. “With the funding, we were able to run multiple large-scale projects at the same time to fuel our expansion. We’ve now been using peer-to-peer financing for over two years. It allows flexibility to both the lender and borrower, which means that deals can be tailored to suit both parties.”
There is, though, still a market for traditional funding models, argues Ian Barker, manging director of manufacturing at Close Brothers.
“So far we haven’t seen much evidence of any disruption from new funding models,” he says. “Start-ups in particular still like to deal with a lender who understands their business, asset types and the challenges they are likely to face, which mitigates the risks and puts less onus on the customer’s ‘personal’ worth.”
The risks, as well, of traditional funding are minimised, continues Barker – both for the lender and the start-up. “We stick to funding ‘asset-backed’ deals where we understand the risks,” he says. “We also want a clear exit strategy, which – from our perspective – makes it a
Blazing your own trail
As previously mentioned, the most successful start-ups are the ones that reinvent the way consumers view a particular market. Brompton Bikes are one such example, with their radically different product revolutionising the way customers – and commuters in particular –
viewed the humble bicycle.
This wasn’t an overnight process, says Butler-Adams. The company took 15 years to become established, he explains, and the fact it took so long had a major impact on the quality of the bike. “Andrew had so much time to make mistakes; and if you have time to make get things wrong, you have time to get things right,” he says. “After he had made his first 400 bikes, in 1980, there was
a six-year gap before he made another one.
“This was probably the most important period in the company’s history, despite how demoralising it was, because it allowed Andrew time to take stock and reflect on what he had done wrong.”
Building success takes time, continues Butler-Adams, and many start-ups expect overnight success that just won’t happen. “Success comes over time,” he explains. “Look at Apple: they spent years making weird computers for an ‘edgy’ crowd, and they bumbled along like that for ages, all the time getting their product spot-on.”
Another such company trying to muscle in on the established old-guard is Alcraft Motor Company. Founded in 2012 by David Alcraft, the company is trying to change the image of the electric vehicle industry by designing a radical new sports car, in the spirit of some of the great British car makers of the past. “When I sold my business five years ago, I wanted to try something different,” he says. “I’ve always had a passion for cars, and electric vehicles struck me as an interesting area with a lot of potential.”
For former pharmacist Alcraft, there was also an altruistic reason behind choosing the electric vehicle market. “I’ve spent a lot of time working with people suffering from asthma and lung disease, which, when added to my interest in cars and the blossoming electric vehicle industry, made setting up this company seem like the natural thing to do.”
Alcraft’s vision is to make electric cars fashionable. “Lots of people see electric vehicles as rather boring,” he admits. “And it’s fair to say that this is certainly the case for a lot of mainstream models. We’re hoping that this car acts as a bit of a ‘hero product’ for the industry and helps to change people’s views.”
This goal is easier for a start-up than for a more established brand, argues Alcraft. “When companies have a history of making petrol-driven cars, that can be hard to shake off. Start-ups like us can build their own image from scratch without any negative baggage from the past working against them. Image is so important in today’s market, especially if it’s a negative one.”
The entire image of a company is important, agrees Mills. “If you look at successful companies, especially digital giants like Google or Facebook, they have really fancy offices and are seen as a desirable place to work,” she says. “Some of the most successful manufacturers nowadays are those with a cool image and interesting working environment. The stuffy, ‘corporate’ image of some of the bigger companies is one thing that is putting off young workers. It even boils down to things like serving better coffee: sometimes making relatively small changes can make a huge difference to a company’s appearance and reputation.”
Best of British?
Companies like Alcraft play on the golden age of British manufacturing. Alcraft himself says that, in their market at least, ‘Brand Britain’ plays a big role. “UK manufacturing still has an element of kudos around it, especially when it comes to British sports cars,” he says. “Companies like MG, Austin-Healey and the like have given us a solid bedrock to build on with what we’re doing.”
For Mills, that heritage goes back even further. “If you can say something is ‘Made in Britain’, it implies quality, heritage and history,” she says. “Industry started in earnest in this country, and that still rings true today. It’s that provenance that UK manufacturing has that so many other are lacking in – so many British manufacturers have decades, or even centuries, of history behind them.”
However, warns Butler-Adams, companies – of all sizes – must beware of over-playing the Made in Britain tag at the expense of more important factors. “At Brompton, we don’t like to play up to the ‘Britishness’ of the product too much,” he says. “I’m very against sticking a Union Jack on something and using that as an excuse to sell it at a higher price. That’s not to say we’re not proud of the fact we’re made in the UK – we are. But we’re more interested in the quality of the bike, and how hard it is to make. We have to make it ourselves, as it’s such a complicated design and we’re the only ones we can trust to get it right.
“If you can’t compete in terms of offering the best product at the best value, you’re kidding yourself if you think it will succeed on its ‘Britishness’ alone. That was a problem in the 1980s: people decided that ‘of course our cars are better than the Japanese, we’re British’, but Japanese cars started first time, lasted longer and were better value-for-money.”
The risk of getting ‘Ubered’
You may be sat reading this in a manufacturing site that has the market for itself. However, in an industry becoming increasingly attractive for start-ups, long-established manufacturing stalwarts should be aware of the risks posed. Not every start-up will succeed – indeed, around 90% of all start-ups fall by the wayside (http://bit.ly/2m0c8oU) – but those that do, have the potential to seriously disrupt those who have enjoyed a relative lack of new competitors in recent years. “Look at Uber and how it is disrupting the taxi industry,” says Mills. “The same will happen in manufacturing, without a doubt. Those who can’t keep up will die off, and the faster-moving new ones will be able to take their place.”
Mills also has a warning against complacency, and warns that no market is safe from the rise of the start-up – even those that, traditionally, would be seen as struggling. “I recently saw a story that featured a Welsh mill owner complaining that his industry is dying and that nobody wants to get into manufacturing,” she says. “But we’ve had two dynamic new start-ups enter into the milling industry in recent years, both of whom are now selling into major international fashion houses.
“Companies like the mill in Wales haven’t been at the top of their industry for a number of years; they’ve got jaded and fallen down the pecking order, and, as a result, have got the impression that nobody wants to work in the industry any more.
For Brompton, success has brought with it threats to their status. “We’re at a size now where we could quite easily get knocked off our perch by a young upstart,” says Butler-Adams. “It’s not the devil we know that worries us, it’s the devil we don’t know. The bigger a company gets, the harder it is for them to be able to recognise threats against them. You have to be proactive: we’ve bought lots of bikes and have signed up to initiatives on Kickstarter to suss them out and see what potential competitors
This approach not only means Brompton can keep an eye on any potential competitors, but it also provides investment opportunities, adds Butler-Adams. “We want to see what these companies are doing, whether it’s any good and whether we’d want to invest in them going forward to help each other grow,” he explains. “And why not? If they have a great idea and are the next Andrew, then it helps everyone.”
Start-ups are a tricky business. They come and go, making glancing blows on their respective markets, often without making so much as a ripple. However, some hit the target and tap into a niche in the industry that more established brands may have missed. It’s those ones that manufacturers have to be aware of, or else a complacent attitude towards competition will soon see you falling down the pecking order.
What makes a start-up?
A successful start-up can be boiled down to six discrete stages:
1 Ideating – Initial ideas for product/company and target market, often dreamt up by one person or a small team, with no company structure
2 Concepting – Defined mission and vision with key goals for the coming years. Job roles are defined, and some outside financial backing may take place
3 Committing – Shared vision amongst the founding team, along with a signed shareholder agreement over time and financial commitments for next three years
4 Validating – Testing assumptions about the idea and its viability in the market. Some initial KPIs can be drawn up, and any additional resources found
5 Scaling – Focus on KPI-based, measureable growth in customers/profit/revenue share as the company looks to grow fast. Implementation of quality-control processes
6 Establishing – Growth achieved and expected to continue, which makes the company attractive to further investment. Initial founders often leave at this point