Two bogeymen stalk the otherwise sweet dreams of UK manufacturing in 2015 according to site managers at WM's Outlook roundtable on business confidence for the year ahead.
The first appears to be an affable pint-drinking chap. But, come May's general election, he could transform into a ghoulish apparition that will have manufacturers cowering under the duvet. "Nigel Farage" business leaders cried out in unison when asked to name their biggest fear for the year ahead.
It's nothing personal, the UKIP leader might be reassured to hear. Farage is simply the manifestation of political upheaval that manufacturers say they could do without. "The election could be a seismic change in direction when the new folk come in," pondered Clive Beardmore, director of Top-Tec, an SME-sized furniture manufacturer. "It will be critical to see whether the incoming government commits to the capital projects that are going on at the moment. Consistency is sacrosanct."
The Cameron years would hardly go down as halcyon days according to assembled industrialists. But, amid the usual grumbles over fair weather friends and an engineering light education system, there was a sense of 'better the devil you know'.
"For me, the golden piece of advice is just don't change," said Peter Bennet, MD at Groveley Precision Engineering. "If Labour come in, they will do exactly the same as the Conservatives, but call it something different."
The fragmented state of British politics threatened to pull the rug out from under a manufacturing recovery. Ross McCombe, senior operations manager at Newsprinters Eurocentral site in Motherwell, said: "There could be more Scottish Nationalist and UKIP MPs, a diminished Labour party and non-existent Liberal Democrats. You could have a three-way coalition. From anyone's perspective that's not good because it creates inertia and weakness."
With the election bogeyman now out of the bag, the group turned its attentions to discussing a second unwelcome spectre: rising energy prices. Average industrial electricity prices leapt 6% from Q2 2013 to 2014 according to official figures. Further hikes risked stifling international competitiveness, warned site leaders.
Meanwhile, capricious pricing on the national grid was triggering a giant game of cat and mouse, delegates revealed. Martin McKervey, partner at legal firm Nabarro, said: "I know of five businesses that get an email on Monday telling them the triad periods when their energy prices will go up 500%... In one company, to boil a kettle in that triad period costs £47.50."
The government plans a wave of new nuclear power stations to bring future bills down. However, with reactors unlikely to come online until the late 2020s, there was anger among delegates over pricing pressure in the interim. Delegates called for Westminster to ease the strain by boosting capital investment incentives on energy saving equipment.
Manufacturing craves continuity on key policies like energy, the Outlook roundtable heard. And yet the government was more prone to moving goal posts than a sport and recreation ground officer at the local council. "This comes back to long term planning," said Gary Livingstone, MD at LG Motion. "The fact is there isn't any on any of the critical amenities: roads, manufacturing, electricity – it's all up in the air."
Exports cool as the home market hots up
Yet, in the midst of uncertainty, hope springs eternal. Election and energy price concerns couldn't deflate the overriding mood of optimism. UK sites were riding high on a surge in domestic orders and, with cash reserves piled high, poised to invest in new plant, people and premises.
Exotic international orders were providing pay days for some. But, in general, the bright lights over UK-wide export growth to Beijing had dimmed as storm clouds rumbled over the global economy, the roundtable heard. "I've seen a lot of concern in China and India," said Mark Bown, senior advisor – Operations Excellence Office at global generator manufacturer, Cummins. "They're trying to grow their domestic market because of concerns about exports... it's happening across the world."
British manufacturers could offer some instruction in the quest for self-sufficiency. Delegate discussions over value stream mapping and lightning lead times were indicative of years spent honing operational efficiency during the recession.
Rob Love, site leader at gas sensor manufacturer City Technology, commented: "If there's a process then there's an opportunity to improve and eliminate waste. If you've got the right metrics in place, you keep driving improvements in good times or bad."
The single mindedness that had served sites so well during recession could now be tinged with some resentment as conditions improved warned Bown of Cummins. "When the country started to suffer, manufacturing had to reinvent itself and reduce costs. The service industries, including the banks, took a step back. Now manufacturing has clawed itself out, it feels like: 'okay now you want to know us.'"
Banks were determined to reconcile, said Dave Atkinson, head of manufacturing, at Lloyds. "We've got a lot of work to do to rebuild trust," he reflected. "The reason why we've invested so heavily and made some really bold pledges like a £5m investment to support the training academy at the catapult centre at Ansty in Coventry to put 1,000 apprentices into the sector is to demonstrate we're fully committed to the sector, not just this year or next, but for the next five years."
It's a nod to long term thinking bound to resonate with a sector that holds stability in high regard. If banks can deliver on the promise, then the days of manufacturers stockpiling cash reserves for a rainy day – so evident in WM's Outlook survey – may well come to an end.
For a sector that prides itself on lean inventory levels, that has to be something worth aspiring to this New Year. Atkinson concluded: "To make that commitment as a business owner to look 10 years ahead when we haven't had a proper industrial policy or the confidence the banks will be there with you through the cycle, it's no wonder stockpiling cash has become your way of doing it. We just want people to have that choice between doing it with the banks or by themselves." ¦
check out the Outlook survey results at
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Forecasts for 2015
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"This, combined with our process control and quality systems, ensures we can supply ink of the highest quality and consistency. It also differentiates us from our competitors and allows us to build very successful relationships with print platform suppliers and, with more
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looks bright."
Adam Murrell, CI process specialist, Fujifilm
"The domestic market is up 14% this year and Germany is up 18%. But, across our markets, it evens out to 5-6% growth. This year we're launching a business in China. We'd go into Brazil and other countries, but it's a resource issue."
Barry Engstrom, group MD, HepcoMotion
"We are looking to grow with cash reserves and self funding because I hate banks with a passion. They'll lend you an umbrella when it's not raining. 2014 has been flat, still very profitable, but we didn't push on as much as expected. "
Gary Livingstone, MD, LG Motion
"We have a government that makes it difficult to get significant investment with its corporation tax strategy versus other countries like Poland, Russia and Turkey who are looking to grow manufacturing at the expense of the West. We need an outlook from government where there's some sacrifice being made to grow manufacturing."
Colin MacLeod, site manager, 3M
