The big issue
1 min read
Size matters. The longer your list of OEMs, the greater the chance of a vibrant supply chain. Sadly we simply don't measure up when it comes to UK-owned manufacturing giants and it's holding us back. We now have a plethora of SMEs and micro manufacturers who miss out on the benefits of a big brother. Large companies drive investment in skills and R&D, foster partnerships and aid product development.
A land without giants is an asphyxiating environment, according to SMEs at this month's manufacturing summit. The problem was also highlighted in a white paper published last month: Britain is burdened by broken supply chains, the authors argue. Our fragmented pool of small firms is over dependent on the sourcing whims of Shanghai and Chicago.
It leaves us a heavy net importer and carrying the millstone of an £84 billion trade deficit on manufactures. Few will be fretting while a weak pound and strong demand for exports means the UK makes hay. But record PMI results cannot paper over the cracks.
We'll never bring back our ICIs or British Leylands. But there is an opportunity to encourage a new crop of UK-owned large manufacturers. The ambition is out there in our top SMEs. Just look at Brompton Bicycles (p18).
However, expect growing pains. Raising capital investment is no mean feat and private equity buyouts may jar with entrepreneurs' will to control businesses.
Germany offers a unique third way. The state of Lower Saxony owns a large share of Volkswagen AG. The region has a say over its biggest employer and benefits from VW investment in local facilities including Bundesliga football club Wolfsburg.
This could be a great way for the UK to go. It would bring investment to deprived regions. And twinning Manchester United or Liverpool FC with a local manufacturer offers a fabulous way of changing youngsters' perceptions of the sector.
In a month where Teessiders were left pinning their hopes on a Thai steel giant to save local jobs, there is a compelling case for mirroring the German model.
