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EXECUTIVE SUMMIT MANUFACTURING sponsored by

BQ manufacturing summit REPORT


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introduction

Welcome to the BQ Executive Manufacturing Summit report

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After decades of neglect, manufacturing is back in the spotlight and seen as playing a crucial role in the UK’s economic recovery. It is an especially important sector for the North East with its long tradition of manufacturing and engineering innovation. So it is particularly apt that at BQ Magazine we chose this as the region in which to launch the first of a series of executive summits to be held around the country to look at the future of manufacturing and discuss the challenges it faces. In this report we summarise the content of the debates – on skills, supply chain funding, infrastructure and innovation – bring you news of the sector and profile some of the North East’s manufacturers and entrepreneurs. This report will now be taken by the Department for Business Innovation and Skills to government ministers to inform their decision making when they look at a strategy for manufacturing in the UK. So enthusiastically was the summit greeted here in the North East and such has been the interest generated by similar proposed summits in other parts of the country, BQ Magazine is to host more summits for other sectors. We believe this is the best way to enable the business people – our readers – to have a real role in helping to shape the policies that affect them.

Contents 05 News 08 Newcastle College: making training count 12 Haskel Europe: keeping it lean 16 Debate introduction 20 Skills Debate 24 Supply Chain Debate 28 Infastructure Debate 32 Innovation Debate 36 Debate Summary 38 Manufacturing: The Future 40 Cotswold Manufacturing:opening doors 44 Nortech 48 Ben Staerck Furniture: taking a clincal approach

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NEWS

engineering company singled out as ‘one to watch’ is tipped to break into uk’s top 100 private businesses as turnover approaches £30m Express on line for Fast Track An expanding North East based manufacturer has been singled out as ‘one to watch’ in a league table of the country’s fastest growing firms. Team Valley based Express Engineering is the region’s only representative on a 10 strong list of operations tipped to break into the UK’s top 100 private businesses demonstrating most rapid expansion. Turnover grew by over 240% in 2012/13 to just under £30m, a milestone already passed in the first eight months of this financial year. Now the company has been highlighted in the Sunday Times Fast Track 100 supplement as a future contender. Finance director Mike Blakey said: “This is great news which proves that our policy of investing for growth during the recession has really paid dividends. “We are now equipped with the skills and capacity to take advantage of more confident markets and anticipate further significant expansion in the medium to long term. It would be fantastic to make the top 100 next year.” The Sunday Times Fast Track 100 league table – published each December for the past 16 years – ranks companies on sales over three years. As well as listing the top 100 it earmarks 10 more as ‘ones to watch’ the best performing of which will be announced at an awards dinner at Richard Branson’s Oxfordshire home next May. Blakey added: “It was back in 2007 that we launched our big investment initiative – before there was any inkling of the banking crisis, monetary squeeze and recession that was to come. When it did and our markets fell away, we had to decide whether to continue, scale down or even call off the initiative. “Although things were extremely tight, we opted for the former because we knew the businesses in the strongest position in terms of skills and capabilities would recover most quickly after the recession ended. So, over that period we have invested over £10m in new facilities, recruitment, equipment and acquisitions. We also continued with a robust training programme, which includes an apprenticeship scheme that has just seen the arrival of its 100th member. “This year we have bought out our Brazilian

Gary Samuels and Cllr Harry Trueman

BMS grows in Sunderland A Sunderland electrical engineering company has taken on extra manufacturing space and plans to create jobs to meet increased demand. BMS Electrical Services has expanded into a second unit at the North East Business and Innovation Centre (BIC), in Sunderland, five years after moving into the Wearfield site. The company designs, manufactures, installs and commissions electrical process systems for a range of industries from power and water to food and drink, and counts North East names such as Greggs and Port of Tyne Authority among its customers. BMS recently increased staff numbers to 10, including appointing a new business development manager, and plans to create more jobs in the New Year. The firm’s turnover has increased from almost £800,000 in 2011/12 to £1.4m in 2012/13. Director Gary Samuels said: “We moved into a second unit because we required additional manufacturing capacity and a larger shop floor area. “The majority of our work and customers are mainly North East based although we do work nationally and occasionally internationally when the need arises. However, we are attempting to become a stronger business within the North-East region.’’ The City Council has worked with BMS since it started up and is continuing to help the business. Samuels added: “To be honest, if you run a small business, you don’t have the time to spend hours and hours identifying business development support. “Sunderland Council was totally different. They have a grasp of what you want and they were really easy to talk to.”

partner in the 50/50 Sao Paolo Petrotec venture we launched in 2009, acquired the assets of Burdon Limited in Stokesley and secured a fresh capital injection from private equity investor LDC, which will support further growth.” Express Engineering now has 200,000sq ft of manufacturing space on the Team Valley, at Stokesley and in Brazil, from which a 375-strong workforce supplies precision engineering services to the aerospace, sub sea oil & gas exploration and production and power generation sectors. 05 bqmanufacturingsummit.co.uk

We are now equipped with the skills and capacity to take advantage of more confident markets and anticipate further expansion in the medium to long term. It would be fantastic to make the top 100 next year


NEWS

The electric vehicle (EV), revolution is gathering pace, and the North East is becoming a hub of infrastructure development and subsequent EV adoption

Enspec wins new wind project Sunderland-based Enspec Power has landed its 50th wind farm project, winning work at the Boggeragh wind farm in Ireland. This comes at the end of the company’s 15th year, which has seen turnover increase by 25% and exporting extend to 17 countries. Enspec Power, based at Glover Network Centre, Washington, designs and manufactures equipment to enable wind farms and other renewable sources to connect safely to the national grid and to comply with grid legislation. Enspec director Dave Jones said: “Connecting wind farms to the national grid can be a complicated process. Every wind farm must comply with a ‘grid code’ to ensure stability of the grid. We design and manufacture reactive compensation and harmonic filtration equipment to help assist with grid code compliance. During 2013 we have been delighted to see a big increase in demand for our products in the UK and from overseas.” The combined maximum output of every wind farm Enspec has worked on now exceeds 1500MW – enough power to supply 1.25 million average UK homes. Enspec, established in 1998, is supported by Sunderland City Council’s business investment team. Councillor Paul Watson, Leader of Sunderland City Council, said: “The enterprising way in which Enspec has driven forward into new global markets is a fantastic testimonial to the commitment of its staff and quality of its products. It’s great news that it has won major contracts and increased its exporting countries this year, exporting Sunderland-made products and expertise across the world.” Jones added: “We provide energy-saving equipment for high energy users in many sectors including renewables, industrial, commercial and consultancy. All of our markets have shown steady growth during 2013 but we have seen the most significant increase in enquiries from the wind energy sector which is great news for businesses like ours. It enables us to create jobs and invest in our business.”

Electric vehicles get £900,000 boost Five new initiatives based in the North East to develop low carbon technologies are to receive a £900,000 investment and create more than 100 jobs. The projects will receive cash from the Collaborative Projects Fund through Regional Growth Fund to work towards commercialising products and services that stimulate business growth and enable the UK’s transition to low carbon vehicle use. One of the successful projects, led by Route Monkey, will develop a software package to analyse usage patterns

of Electric Vehicles (EVs), to help work out residual values and maximise the total cost of ownership. This will help fleet managers to reduce their running costs and carbon footprint. There is currently little information on the long-term value of EVs and degradation of battery performance and an accurate forecast of performance will reduce leasing companies’ risk and financing cost. Route Monkey is working with Teesside University and Urban Foresight to deliver the project, which will create 18 new jobs. The other four projects are: 06 bqmanufacturingsummit.co.uk

AVID Technology Group and Newcastle University are working to develop an improved DC fan and water pump with new motor and controller assembly, which will improve performance, reduce weight and costs. The project will create 46 new jobs. Seaward Electronics and Teesside University are to develop an EV charging point tester which would ensure safety, functionality and efficiency of commercial and domestic charging points. Eight new jobs will be created. Sevcon and Wolverine Tube are to model and develop a novel High Voltage Low Power Inverter for use in EVs that can also improve the efficiency of non-EVs. This research and development project will create 25 jobs. Hyperdrive and Wylam Professional Services aim to develop products and associated engineering services in data loggers and GPRS enabled control ECUs for automotive, defence, marine and portable power applications. The project will generate three direct, and four indirect jobs. “This continued investment is great news for the companies directly affected, but crucial for the UK’s ability to develop a comprehensive infrastructure that supports the take-up of low carbon vehicles,” said Dr. Colin Herron, managing director of Zero Carbon Futures, which oversees the Collaborative Projects Fund. “The electric vehicle (EV), revolution is gathering pace, and the North East is becoming a hub of infrastructure development and subsequent EV adoption. It is vital for projects such as those supported by the Collaborative Projects Fund to continue evolving innovative solutions that help integrate or improve low carbon vehicle technologies.’’ The investment is a further boost for the region, which will soon be home to a centre of excellence for low carbon technologies. The Future Technology Centre which is owned and managed by Zero Carbon Futures, will be open for business in early 2014.


NEWS High growth for Active Active Composites is on the road to expansion after becoming the latest firm to complete the Business Northumberland High Growth Programme. The Ashingtonbased company, which manufactures polyurethane foam-based products for a range of end-users, took part in the programme which forms part of Business Northumberland. It offers established and start-up businesses in the county free support in reaching their full growth potential. It is a free service that provides advice and support to anyone thinking about starting a business and also offers coaching to existing businesses with growth ambitions. Active Composite’s managing director Alan Harold turned to the Business Northumberland High Growth Programme for support when he needed funding for expansion. He founded Active Composites in 2006. He said: “Our first few years of trading coincided with the economic downturn so times were tough. Winning the initial contract to supply

Nissan’s Tier One supplier R-Tek with the interior material for the side impact pads in the Micra came along at just the right time. “However, in order to meet the huge demand for the Nissan Qashqai we needed new premises, plant and machinery and that’s when I first looked into the Business Northumberland High Growth Programme.” Oxford Innovation provides business coaching and programme manager Mike Jobson worked with Harold to develop a growth strategy underpinned by funding. In order to finance the firm’s growth and move to new premises, Harold received a £70,000 loan from the Regional Growth Fund’s Northumberland Business Growth Programme. Jobson worked with the delivery team at Arch, The Northumberland Development Company, to ensure that Harold received the appropriate level and type of support to grow his business. Now from its new premises on the Wansbeck Business Park in Ashington,

Alan Harold holding his firm’s armrest inserts with Mike Jobson Active Composite’s 16 employees are gearing up to produce 600,000 armrest inserts for the 2014 Qashqai. Harold added: “I would recommend Oxford Innovation and the Business Northumberland High Growth Programme to any aspirational firm in the county. As well as providing very practical support to the business, Mike has been an inspirational personal mentor, coaching me through a very demanding but ultimately rewarding period of change. It is no exaggeration to say that without his support Active Composites would not be in the strong position it is in today.”

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CASE STUDY

keeping companies at the top of their game Newcastle College has been providing manufacturing industry with skills and training for more than half a century, as we report With nearly 60 years history of delivering training to local industry, Newcastle College has built a reputation for providing specialist engineering and science education and training. This ranges from subsea and aerospace to pharmaceutical and biotechnology, supplying new skilled workers for the manufacturing and engineering industries. Newcastle College and its partner Intraining – a fellow division of NCG – have been working together to build a presence in the region to offer employers a range of options to help fill the well documented skills gaps in the manufacturing sector. This offer includes: • technical and job related training – apprenticeships, bespoke courses or part-time degrees • free candidate screening and recruitment service • continuous improvement and lean implementation • management and leadership • industry accredited qualifications • soft skills – customer service, team working, communication, influencing In addition Newcastle College and Intraining have successfully bid to deliver in the region a new government funded training programme, Skills Support for the Workforce. It is aimed at responding to the challenging skills needs manufacturing employers are facing and enables businesses to receive free or discounted training on a wide range of courses from Level 2 to Level 7, serving those from the production line to the board room. A key activity has been building relationships, with employers requiring either to improve the skills of their existing workforce or needing help with skills shortages in their business through recruitment. Robin Ghurbhurun, deputy principal, Newcastle College says “Manufacturing in the region has continued to be a huge area of growth and to stay at the forefront we

influence and motivate young people who are going to be their workforce of the future.” We spotlight two North East businesses which have benefited from the vocational part-time degrees available at Newcastle College. In these foundation degrees, the curriculum is designed in partnership with employers to meets their needs and it focuses heavily on the practical skills required to work in their industry.

Manufacturing in the region has continued to be a huge area of growth and to stay at the forefront we require skills, underpinned by high quality education and training require specialist skills, underpinned by high quality education and training. “Newcastle College and Intraining are uniquely positioned to work closely with employers to address these issues. We can offer businesses choices from apprenticeships up to degree level qualifications, plus a range of services that add value to an employer. The relationships we continue to build across the sector ensure that we can play a lead and expert role in driving forward the manufacturing productivity and skills agenda. “One of the other ways manufacturing sector employers are engaging with the College is a benefit-in-kind approach – guest lectures, factory tours, live project briefs, work placements and so on. These are great enrichment opportunities for the students but also a fantastic way for businesses to 08 bqmanufacturingsummit.co.uk

Helping with Pharmaceutical Skills Piramal in Morpeth is a pharmaceutical contract manufacturer. Part of an Indianowned group with operations around the world, it employs about 360 people at the Morpeth site where the business has operated under various owners for more than 40 years. The company is an Indian owned corporation with several sites around the world and in the UK at Morpeth where the factory has been, under various owners, for more than 40 years. Piramal bought the site about eight years ago from Pfizer. It makes pharmaceutical drugs which are shipped to more than 100 markets around the world. Clearly, for a company engaged in the pharmaceutical sector a highly skilled and trained workforce is crucial. Training manager Simon Dick explains: “Development is a high priority with the business and for everyone who operates at the Morpeth facility. We invest in learning, development, training and we try to do it on an individual basis “We do treat people as individuals and we look to give training that is suitable so they are able to perform in this industry. We look at the regulatory training, the technical training and for managers and supervisors we look at all the soft skills we need in the business. “We don’t just want to stay where we are, we need to get better people than we have currently got when we are recruiting. We are always looking to improve with regard to any role on the site at all.’’


CASE STUDY

For more than 25 years, the factory has used Newcastle College as a partner to help meet its training needs. Indeed, Dick studied at the college 25 years ago part time when he got his first job. For the past four years Piramal has had laboratory technician apprentices doing day release courses at the college and engineering technicians are also doing various courses. Additionally it currently has three students doing foundation degrees at Newcastle College - two doing analytical chemistry and one studying biotechnology. They attend the college one day a week over their twoyear course. Piramal staff attending the college are able to use already existing courses. Dick says: “At the moment we have taken what they have been offering. We have had conversations about tweaking them and adding specific modules but currently it’s straight off the shelf and they seem to fit what we currently need. “When we had six apprentices in 2010 to 2011 they did run a programme specifically for our students with just our

students in the class at any one time.’’ Working together has involved the college and Piramal learning from each other, particularly Piramal’s reporting requirements. “They have been listening to what we have said with regards to reporting and giving us the information we require at a decent time and not just at the end of every term because business doesn’t work on terms,’’ says Dick. “We need to know what’s going on today, tomorrow, next week. Education is different to business, that’s just one of those things and it’s a matter of trying to educate both parties to see why we need it as well as when we need it.’’ Piramal has also hosted visits by the college’s students. Recently a group of B Tech science students were given a tour of the laboratories to learn how their studies related to business. “We are trying to support them in that because we know they are going to be the future” says Dick. Helping to find the right people Freudenberg Oil and Gas UK, based in Throckley, part of the oil and gas division 09 bqmanufacturingsummit.co.uk


CASE STUDY of the Freudenberg Group, has some major recruitment requirements. The company, which manufactures bespoke specialised rubber products for the oil and gas sector was formerly Scott Matrix and was acquired by Freudenberg last August, as part of the group’s strategy to build a presence in oil and gas through acquisition. The new division has grown rapidly and intends to continue that trajectory. As a consequence, since then, the Throckley operation has gone from four to nine people and has doubled the size of the operation. “In a very short space of time, within a year, we have been integrated within the Freudenberg Group, we have doubled the size of the facility, we’ve doubled the size of the headcount and there’s new equipment coming in. The plan is to have huge growth so it’s very likely there will be more engineers,’’ says general manager David Scott. “When Freudenberg’s oil and gas division started there were some six engineers, now there are about 250. Unfortunately we can’t get any engineers up in Aberdeen where we have a site. It’s so difficult because they float around the industry in Aberdeen. That’s why we came down to the North East specifically to find people we could train as engineers, not necessarily to stay within the North East but to go elsewhere within the organisation. “We want to bring on young people to become engineers, whether to be a design engineer, a process engineer, a production engineer or a project engineer, it doesn’t matter, we want to bring on people to do different things here. “We are such a young organisation and each year we are looking at what we are doing and decide we need to have this type of person, whether it be male or female. As we evolve, we want to bring different people into the organisation, not necessarily just engineers. We need production people and IT people.’’ In its search for new blood, Freudenberg soon teamed up with Newcastle College. Scott, is an alumnus of the college where he studied chemistry and his daughters have studied there. But it wasn’t personal connections that lay behind the choice of partner. Ruth Scott, assistant to the general manager explains: “We thought about bringing on apprentices and young people to come into the company and we were looking for people with engineering skills. I looked at a number of places. Newcastle College responded very quickly and they sent two representatives out to see David and myself and we were very

Our positive links with Freudenberg will continue in what is an important relationship, not only for the college but for the North East as a whole impressed by what they had to tell us. Very quickly they sent a few candidates to be interviewed and we now have four of those candidates working for us.’’ David Scott says: “What we wanted to do here was to bring some new people into the company but with an engineering bias. Newcastle College had this subsea/offshore bias which we quite liked and we liked the practical side of that. We wanted to bring in people of different levels and different skills, so effectively we brought in a young guy who was 20 years old, a couple of guys who were round about 30 and a guy of about 25 at all different levels of their course: first year foundation, two second year foundation and one of the guys was in the final year of his degree. The intention was for them to come into the company to be trained to 10 bqmanufacturingsummit.co.uk

eventually become fully fledged engineers within the organisation.’’ As part of its relationship with the college Freudenberg has funded an annual Engineering Student of the Year award, whereby the winner, chosen by the college gets a £1,000 cheque. Scott says: “It cements the relationship between Freudenberg and the College. We want the students there – male and female – to endeavour to do well.’’ Andy Stephenson, director of the School of Engineering and Science at the college, says: “Our positive links with Freudenberg will continue in what is an important relationship, not only for the college but for the North East as a whole. It is vital for the region’s economy that we consult, develop and cement links with leaders in the industry.’’ l


CASE STUDY

LAYING THE FOUNDATIONS FOR GROWTH IN 2014 SIMON QUIN, SENIOR MANAGER COMMERCIAL FOR LLOYDS BANK COMMERCIAL BANKING, HIGHLIGHTS THE IMPORTANCE OF THE MANUFACTURING SECTOR TO THE ECONOMY OF THE NORTH EAST, AND THE SUPPORT AVAILABLE TO BUSINESSES There is no denying that the manufacturing sector has been through a difficult period over the past few years, adding pressure to SMEs operating in what has always been a highly competitive industry. But as the wider economic recovery across the UK has continued to pick up pace, there have also been encouraging signs of growth for manufacturers across the North East. According to a recent survey by the manufacturers’ organisation, the Engineering Employers’ Federation (EEF), Britain’s manufacturers have experienced a surge in activity, with output balances reaching the highest level for three years. Additionally, investment intentions have risen sharply and forecasts for 2014 have been upgraded as confidence has taken hold. To help support SMEs and mid-sized firms in the sector, we launched our Manufacturing Commitment in the third quarter of 2012 to provide £1 billion of new lending by September 2013, which we exceeded by 30 per cent having reached our target three months early. We have also trained more than 100 managers across the UK in partnership with the University of Warwick, the EEF and the Manufacturing Technologies Association, to be able to provide specialist guidance to manufacturing businesses. Lloyds Banking Group has also launched a £1 million-a-year sponsorship of the Lloyds Advanced Manufacturing Training Centre at the Manufacturing Technology Centre, Coventry. This centre will help address the sector’s skills gap in the UK and it will develop more than 1,000 engineering apprentices and trainees during the initial Lloyds Banking Group partnership. CASTING A WIDER NET It is also important for manufacturers to expand their horizons and explore overseas markets to continue to drive their growth. When it comes to moving into new export

It is important for manufacturers to expand their horizons and explore overseas markets to continue to drive their growth markets, fast access to flexible funding is especially important to help firms stay ahead of the game and compete successfully for new contacts on a much larger stage. Manufacturing firms play a key role in driving the growth of the economy, as well as supporting related sectors such as oil and gas, so it is vital that these firms have access to the necessary capital to fund their growth ambitions in the coming year. In recognition of the importance of manufacturers to the UK economy, there are a number of Government initiatives that have been introduced to provide SMEs with access to finance for growth. The Funding for Lending Scheme (FLS), launched in July 2012, made funding available to banks and building societies across the country to ensure more lending is available to businesses, particularly SMEs. The Lloyds Bank FLS offer provides a one per cent discount to SMEs for the duration of the lending, and since its launch, 11 bqmanufacturingsummit.co.uk

we have committed £6.3 billion to our small business customers under the scheme. In addition to loans, asset heavy companies can obtain funding which can be secured against a business’ assets, making them particularly suitable to manufacturing firms that have large and expensive items of plant and machinery. These include invoice finance, factoring, invoice discounting, asset based lending and asset finance. Whatever a manufacturer’s growth needs are, it is important to work with its banking partner to ensure that it has access to the support and guidance necessary to realise its plans.

For more information please contact Simon Quin: simon.quin@lloydsbanking.com, or 07912 099375.


INTERVIEW

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interview

firm cuts waste to become fighting fit Lean manufacturing is a vital tool for many companies operating in the sector. Peter Jackson talks to one about its implementation Wearside manufacturer Haskel Europe began the lean journey in earnest in 2006. Lean manufacturing aims to reduce costs, increase productivity and gain a competitive advantage by eliminating waste, time and energy. It seemed right for Sunderland-based Haskel, which designs and manufactures bespoke high pressure systems and products, as managing director Stephen Learney, explains. “In a growing company with customers across many countries it fits well with our priorities of examining every stage of the supply chain process to ensure value and effectiveness.’ Lean manufacturing works best when all employees are involved and committed. “We’re fortunate at Haskel in that all 81 of our staff are actively engaged and contribute to the success of the strategy in action,’’ says Learny. “Our culture change started by adopting relatively easy lean elements such as 5S, to eliminate the more obvious waste.’’ For the uninitiated, 5S stands for seiri, seiton, seiso, seiketsu and shitsuke, which, in a nutshell, means organising workspaces for maximum efficiency, by ensuring that the correct tools are always available in seconds rather than minutes across the factory.

“Each time-saving adds up to make a significant difference when building a complex piece of equipment,’’ says Learney. “We then moved on to more in depth techniques such as kaizen and value stream mapping (VSM). Based on the principle that a business’s long term success is dependent on how much value it adds for its customers, VSM looks at the whole value chain.’’ Kaizen, or continuous improvement, focuses on elements of the value chain, and encourages staff to work on ideas at any time

and newsletters, all of which build goodwill and productivity of our employees. As staff have seen the results of streamlined operations following lean manufacturing techniques they have become enthusiastic about the process. “Because we manufacture many bespoke products, Haskel makes different equipment and systems for its customers every day. This makes it challenging to apply standard cost measurement tools to identify their true costs. “Using lean techniques we developed a

The effect of kaizen on the workforce was totally positive. It helped to empower staff to participate, which boosted their morale and input. We have regular meetings... all of which build goodwill which will improve an aspect of the business. Together they highlight the importance of eliminating waste from beginning to end of the value adding process. “The effect of kaizen on the workforce was totally positive,’’ says Learney. “It helped to empower staff to participate, which boosted their morale and input. We have regular internal meetings, groups 13 bqmanufacturingsummit.co.uk

tool that measured key attributes important to our customers including lead time through every step and the build up of cost from engineering through purchasing, assembly and delivery. Fine tuning of this tool has enabled us to identify and remove waste in processes.’’ He cites the example of one core Haskel product, the portable gas booster. Through


INTERVIEW

Haskel service team members (l to r) Gareth Powell, David Mackay, Victoria Douglas, Graham Fox, David Coulton and David Kipling value engineering techniques Haskel saved 12% in so-called hard costs, and more in soft costs such as invoice processing and by eliminating three stages of the manufacturing process. “With lean manufacturing we cut our inventory costs by maintaining just enough stock to complete orders,’’ he says. “Large stocks of materials can clog up funds which can be put to much better use by investing in the future of the plant. “We also apply lean manufacturing techniques to Haskel’s office processes, which have again led to significant elimination of waste. As a result, productivity in our internal sales process has improved by over 50%. “As well as making Haskel more efficient, adopting the lean strategy also makes the plant more cost attractive through sharing savings with our customers, and more visually attractive to visitors, because of the emphasis on organised workplaces. “I believe many more companies across the region could benefit from adopting a lean manufacturing strategy – particularly during troubled economic times such as these. It’s helped us improve quality, reduce costs, boost productivity and win new customers.’’ l

Dedicated to meeting the customer’s needs Haskel has created a dedicated nine-strong service and repair team for its customers across the UK and Europe. The company made the decision to create a full-time service and repair team as demands for servicing of its products have risen significantly recently. Graham Fox, service manager, says: “The new service team has the skills, strength and depth to carry out fast turnaround repairs and maintenance at the customer’s or our plant quickly and effectively.  “Each of our service engineers is highly trained and customers rate their ability and understanding of sometimes complex equipment. “Haskel products are often critical to a customer’s operations, so we have invested in a full time-served team to minimise downtime for customers and extend the life of their equipment.” The team includes Graham Fox, service manager; Victoria Douglas, service co-ordinator; David Ross, senior service engineer (mechanical); Gareth Powell, PLC Engineer; David Coulton, service engineer; David Kipling, service engineer; David Mills, apprentice PLC engineer, Dave Mackay and  Phil Howell, service technicians. Fox added: “Because we know each of the Haskel products inside out, from standard pumps and boosters to the most complex systems, we’re best placed to do any servicing or repair work effectively and efficiently. It’s a great move to create a dedicated service team who are committed year round to looking after our customers’ products.” The company is also offering product training courses for customers, either at their business or at Haskel’s Sunderland or Aberdeen offices. Fox said: “Regular servicing offers our customers peace of mind - and makes commercial sense for their businesses.”

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• Innovation in design – through digital engineering and computer aided design, as well as reverse engineering. • Innovation in product development – based around product lifecycle management and design for manufacture. • Innovation in process improvement – using our expertise in productivity improvements, lean methodologies, and adoption of new technologies to improve the manufacturing process.

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Our partnership Our partnership with with was OurAMAP partnership with AMAP was in raising skill in AMAP the was critical critical raising skill levels raising the skill levels levels ofthe our of of our our employees, employees, employees, helping helping us to deliver helping us to us to deliver deliver in a in a fiercely competitive in a fiercely competitive fiercely competitive market. market

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Steve Steve Pallas Pallas Training SteveNissan Pallas Nissan Training Manager Manager Nissan Training Manager

The University of Sunderland support the skills needed within manufacturers through: • Workforce Development • Graduate Recruitment • Internships • Management & Leadership, including executive coaching • Partnerships and collaborative projects For further information contact Adrian Morris, call 0191 515 3888 or email adrian.morris@sunderland.co.uk or see www.sunderland.ac.uk

Collaboration Innovation Dissemination CollaborationlIIApplication Application Il Innovation Innovation I lDissemination Collaboration Application


Central to the BQ manufacturing summit of 2013 was a series of four back-to-back debates addressing the issues facing a sector which is so important to the North East economy

under the microscope Leading figures came together at the manufacturing summit to take a long hard look at the state of manufacturing in the region and the challenges facing it. More important, these decision makers and opinion formers from the worlds of industry, professional services, academia and government – both as part of the debating panels and as part of the audience – explored ways of overcoming these challenges and even of turning them to the North East’s advantage. >>

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OVERVIEW

The summit was held against a backdrop of awareness of the need for a fundamental economic readjustment in the UK as a whole, where, for too long, manufacturing has been regarded as outdated and unwanted. BBC home news editor Mark Easton, who chaired the event, began by pointing out that 40 years ago a quarter of the population was employed in manufacturing – a figure that now stands at just 8%. But, since the banking crisis, the country has realised that the neglect of manufacturing and an over reliance on services is not sustainable and the economy should be rebalanced back in favour of making things. Here, perhaps, the rest of the country can learn from this region. As Easton went on to point out: in the North East manufacturing still generates 16% of the region’s GVA and that the value of goods exported, relative to the size of the local economy, is greatest in the North East, at 33% compared to a UK average of 22%. “You are truly global traders,’’ he said. “The majority of everything exported from here goes to countries outside the EU.’’ However, he also pointed to the North East’s “massive economic challenges’’: the highest unemployment rate in England, the smallest overall GVA, one of the lowest life expectancies in England and a huge carbon footprint.

The importance of manufacturing was a theme taken up by Lord Digby Jones, a former director general of the CBI and minister of state for trade and investment, who addressed the summit via video link. “You are part of the most important sector of our society,’’ he said. “You create wealth. That’s why you are so vital to how this nation is going to recover in the 21st Century.

“We need the nation pulling together and it all starts today with you,’’ he said. “It all starts with magazines like BQ to make sure that they can constantly push the message forward.’’ Following Lord Jones, Easton cited a Department of Business Innovation and Skills, BIS, report on the future of manufacturing, looking ahead to 2050.

Manufacturing is so very important to the rebalancing of our economy. I don’t want the service sector to diminish at all, I want it to grow but what I want is for them to be in greater balance in the economy, so as the cake gets bigger the share of manufacturing goes up It is the private sector which is going to drive it.’’ He added: “Manufacturing is so very important to the rebalancing of our economy. I don’t want the service sector to diminish at all, I want it to grow but what I want is for them to be in greater balance in the economy, so as the cake gets bigger the share of manufacturing goes up.’’ He said that manufacturing would prosper if emphasis was placed on value-added, innovation, quality and brand. Lord Jones also stressed the importance of the education system in providing the skills industry requires.

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The report focuses on how skills, supply chains, infrastructure and innovation will all play a major role in manufacturing success. The report was also referred to by Sue Houston, assistant director for BIS, Yorkshire Humber North East who told the summit that government wants to work with industry and is keen to provide the right environment for manufacturing. She said: “Some of the things that people have said today have been very good proposals. Making better use of what we’ve got and thinking outside the box is what we need.’’ l


40 years ago a quarter of the population was employed in manufacturing. Now it stands at just 8% 19 bqmanufacturingsummit.co.uk


skills debate SPONSORED BY

sector must act now to raise its profile Bridging the skills gap to meet manufacturers’ demands – what is being done and what more needs to be done? Mark Easton: “Where do you think the gaps are? What is the scale of the problem we are facing, in terms of a properly skilled up workforce ready to expand manufacturing in the North East?’’ Angela Anderson: “That’s the problem, we’re not ready. Recruiting engineers with experience is difficult because of the competition we have from outside areas and the difficulty we have retaining skilled engineers in the area. Also in the pipeline of young people coming out of schools and colleges to fill a lot of the jobs that are coming to the North East.’’ Ralph Saelzer: Said the solution lies in recruiting apprentices to become graduates but it was difficult because of the hassle, costs, changes in legislation. “Probably the most important thing is the cost.’’ Jim Hubbard: “We need to raise the profile of manufacturing. I don’t think there’s sufficient awareness among pre-16year-olds in schools of the importance of manufacturing. If people who were thinking of going into a profession could see the kinds of things that are going on in subsea and other manufacturing areas it would spur them at an earlier age. We do inspire them in college, we have equipment that’s not available elsewhere, we have 115 students on Level 2 and 3, people with no qualifications wanting to be in manufacturing. So there is a small section, but we need to get more people in. Robert Trimble: “The key issue we face in trying to recruit students onto degree programmes is the lack of numbers wanting to come into that. That starts in the schools around Stem subjects being seen as hard. The number of students doing the relevant GCSEs and A-Levels in Stem related subjects such as Maths and Physics is slowly rising in some areas but there’s generally not enough doing it and it’s generally around a perception of manufacturing.’’ Angela Anderson: “We have extended our recruitment service to 16 to 24-year-

TAKING PART Angela Anderson, managing director, Zenith People Stephen Learney, managing director, Haskel Europe Jim Hubbard, director STEM, Newcastle College Ralph Saelzer, managing director, Liebherr – Sunderland Works Vince Taylor, head of strategy and performance, Sunderland City Council Robert Trimble, associate dean, Faculty of Applied Sciences, University of Sunderland Christian Warden, UK operations manager, Semta

olds because there are issues with youth unemployment and we do a lot of work in schools. There is a conflict in many respects between schools’ time from a league table point of view and manufacturers’ targets in terms of getting people in. There’s a real issue there. A recent Ofsted report highlighted that schools weren’t doing enough around careers education advice and guidance and not giving young people enough information support on which careers are available, where the jobs are now.’’ Mark Easton: Asked why, given the North East’s manufacturing heritage, enthusiasm for the sector isn’t reaching young people? Vince Taylor: “It doesn’t stay with them. What happens around the age of 13 and 14 20 bqmanufacturingsummit.co.uk

is that they are starting to make GCSE choices and they are starting to get into the academic funnel. Obviously some academic routes are very important to manufacturing but some are less so. There is that enthusiasm for making stuff and there is quite a bit of stuff in the curriculum. Two things happen, one of which is that they are still thinking subject, not end game and sometimes they are making early, not very well informed choices and dropping subjects, so they are not doing triple science, they are doing double science and that can close off options. There used to be someone to tell you: if you make that choice, if you drop so and so you won’t be able to become an engineer or whatever. A lot of education is learner driven now, the pounds follow the individual, we’ve sort of given up on the idea of trying to get people into sectors. You’ve then got a whole set of institutions sitting in between the individual at one end and the manufacturer at the other. We’ve found that when schools have got together with manufacturers directly and put pupils and their parents in front of them, manufacturers tell them what a shortage of engineers or whatever there is and that this is a job for life.’’ Mark Easton: “Christian, tell us about the development of apprenticeships.’’ Christian Warden: “Until we as a country see that the route of apprenticeships is equally respectable as the university route then we won’t become globally competitive or get this. In schools at the 13-year age group you start to be pushed and the more academically enabled will be moved on to the university route and those who are not so will be pushed towards the apprenticeship route or moved out of school as quickly as possible. Until we make a level playing field where we see that people can – and lots of business leaders, lots of CEOs of large companies have come through an apprenticeship route – until we see that that’s a valuable way to gain a career we are not going to achieve this wealth and global competitiveness.’’


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Stephen Learney: “The frustration is not having enough candidates for specific roles. There are engineers out there, they are very expensive. We take on typically three apprentices a year out of a workforce of 60.’’ Mark Easton: “Do you feel the product coming out is exactly what you want?’’ Stephen Learney: “It never is. The apprenticeship finishes at a stage and then there’s another few years of work to be done.’’ Jim Hubbard: “Parents are the key now to the future of manufacturing.’’ Mark Easton: “We can’t rely on parents can we.’’ Jim Hubbard: “They are an integral part of it. Some of them have had bad experiences in manufacturing. We have to overcome that and say manufacturing is potentially a job for life now.’’ Mark Easton: “You’re in charge of Stem. What proportion of your pupils are women?’’ Jim Hubbard: “In the engineering section it’s 3%. We would love it to be more. Women are very good in science subjects but then they finish school, for some reason, they are told, no science and manufacturing are not for you.’’ Angela Anderson: “Our experience is that

girls are good and talented when it comes to engineering subjects but there is a lack of take-up when it comes to degrees. From a recruitment point of view, when you get a good girl engineer come through they are very easy to place.’’ Mark Easton: “We’ll take questions from the floor.’’ Pamela Petty, managing director Ebac: “Apprenticeships are valued in manufacturing. It’s more about the education system and how we change that. How can we get that message back through education?’’ Graeme Parkins, managing director, Dyer Engineering: “I’ve been to lots of these events and there’s never anybody from the Department of Education. Where are they?’’ Richard Smith, student at Newcastle College: “I’m 29 and I find it really hard for myself to get an apprenticeship. I’ve applied for over 60 and I keep getting knocked back because of my age.’’ Christian Warden: “The only reason that

you’re finding it hard to get an apprenticeship is because of government funding associated with the apprenticeship programme. We are telling people that you should be able to do an apprenticeship at any age. If you look at our research, post 25-year-olds are far more successful in their apprenticeships than the 16 to 18 year-olds. On the other point, manufacturing has always been the standard bearer for apprenticeships. This will not change until schools are not measured just on how many people they can get into sixth form or into universities. When we take away those league tables and measure how many people can go on to an apprenticeship or into something that adds value to their career, that’s when we’ll start to see a change.’’ Ralph Saelzer: “As a manufacturer, for every apprenticeship place we offer we are far oversubscribed. We get between five and 10 applications for every place we offer. We started an initiative called Business School Discovery Week which is about linking schools

Our experience is that girls are good and talented when it comes to engineering subjects but there is a lack of take-up when it comes to degrees 21 bqmanufacturingsummit.co.uk


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We do very well in attracting ex-pats – people from the North East who have gone away and come back again. We are less successful in getting people to move to the North East with business and it was a real success and we will continue in the new year. All the secondary schools have signed up and we are really expecting something from that.’’ Mark Easton: “Rob, when students leave college and move on to the world of work, are you confident they will then find a job?’’ Robert Trimble: “In terms of our engineering graduates who coming from an accredited engineering course, the stats in terms of employment are very high, they are 90% each year. The engineering and manufacturing jobs are out there.’’ Mark Easton: “Could employers be doing more in terms of bringing young, enthusiastic people in?’’ Christian Warden: “Undoubtedly they should but I don’t think it’s just manufacturers, I think it needs to be a joined up approach of schools, of teachers, of parents, of manufacturers. The media need to get behind it.’’ Mark Easton: “Ah, so it’s my fault.’’ Christian Warden: “Exactly. You’ll see

everything on the front page about the loss of jobs in manufacturing and the downfall of manufacturing. You see very little with regard to the growth in manufacturing. There’s huge amounts of growth in the UK within manufacturing, there’s huge amounts of success stories that we should be shouting about in manufacturing and apprentices and some of the great innovations that come from people who have gone on from apprenticeship to really succeed in what they are doing.’’ Mark Easton: “We’ve got time for a couple of more questions from the floor.’’ Daniel O’Mahoney from Bradley O’Mahoney Public Relations: “We’ve talked a lot about apprentices, I’d be very interested to know how well we think companies in the region are doing to retain the quality staff that they already have and also how well we are doing in attracting qualified people from other parts of the UK to come here to fulfil the urgent need that we already have to move these companies forward.’’ 22 bqmanufacturingsummit.co.uk

Stuart McGivern from Key Performance Innovations: He said he left school at 16 and a major turning point for him was working for Nissan who taught him how to think. “Employers can teach people, sometimes better than colleges. Education doesn’t necessarily tell you how to think, it tells you how to pass exams.’’ Mark Easton: “Attracting people from other areas of the UK, Angela, do you look outside the region for people?’’ Angela Anderson: “We do look outside the region. The jobs market has become global, certainly national.’’ Mark Easton: “Is the North East a place people want to come to?’’ Angela Anderson: “We do very well in attracting ex-pats – people from the North East who have gone away and come back again. We are less successful in getting people to move to the North East. Once we get them we convert them and they don’t want to leave but, on the whole, I think it’s quite difficult to get people to come to the North East.’’ Mark Easton: “Stephen, as an employer, what do you make of Stuart’s view that schools are good for getting people through exams but it’s going to be employers who ultimately teach people how to think?’’ Stephen Learney: “My perception is that that’s not entirely true. There are some schools that put a lot of emphasis on getting kids ready for life but I am very aware, certainly when I look at the standard of Stem subjects in the apprentices we bring in that it’s not where we want it to be. We are not very successful in recruitment from outside the region. We put a massive amount of effort into keeping our staff once they are here. We have to keep benefits up to the highest standards right across the board.’’ Jim Hubbard: “Schools are in a position where they want to be at the top of the league tables so they do try to get as many people through A* to C. That lets other people down within the school because they concentrate on the people that they know can do that so all the other things we talked about such as careers gets pushed to one side.’’ Robert Trimble: “In the HE sector we don’t have that concentration on getting through exams. Most people who come to the university have a fairly sketchy understanding of what an engineering or manufacturing career is but probably by the time they get to the end their first year, they realise the routes they have. If they go on a placement they know where they want to go.’’ l


Because making stu well is something to be proud of‌

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supply chain debate SPONSORED BY

greasing the wheels Why funding the supply chain is crucial to maintaining trading momentum. As many small businesses struggle to get the finance to fulfil big orders, how can these problems be overcome?

TAKING PART David Arthur, partner, Tait Walker Simon Barker, chief technical officer, Radfan Craig Iley, regional director, North East and Cumbria, Santander Darren Race, chairman, South Durtham Engineering and Manufacturing Forum and Business Network and md e4 Learning Solutions Phil Todd, personal business advisor, Intraining Richard Turner, vice president global manufacturing, Technip Umbilical Systems Michael Vassallo, investment executive, FW Capital

Mark Easton: “Let’s start with Simon. How would you describe the challenge of the supply chain and the problems you were facing?’’ Simon Barker: Described the difficulty for Radfan in launching a new product which didn’t have any existing markets and so little idea of the initial demand. When they launched they sold 750 units in four days in March which exhausted their stocks. “The best we could do was stick up an out of stock value list and just get people to sign up and be patient and wait 17 weeks for us to get more stock in.’’ Mark Easton: “How many suppliers are you dealing with?’’ Simon Barker: “We manufacture it ourselves but we work with eight suppliers. Fortunately we only have the one overseas supplier. That makes it a lot easier because that’s the only really long lead time we have. For everything else we get parts within three or four days of when we need them. That’s how we dealt with it, to have one long lead time supplier and have everything else as close as we can.’’ Mark Easton: “Phil, what are the dos and don’ts of trying to set up an effective supply chain.’’ Phil Todd: Said companies should be aware of what support is available. Intraining would happily work alongside a company to develop a business plan and help identify the most suitable out of several organisations

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that could help with a product launch. Craig Iley: Agreed that banks should be considered a key component of the supply chain. “I would advocate the kind of relationship with your bank that you have with, for example, your two key customers or your two key suppliers. They provide something that is essential to your business. But, do you know enough about your bank and what they can offer? How many people do you know in that business? How much do you know about their business model? From Santander’s point of view, we are very interested to have those discussions and to understand your business and to tell you about our business and the things that we can do.’’ Mark Easton: “What can you do? A lot of it will be about cash flow.’’ Craig Iley: Described a Santander product called Supplier Payments which can offer a way of funding the supply chain which could be cheaper and more effective than methods such as invoice discounting or factoring. David Arthur: “It’s all about communication. It doesn’t matter where you are in the supply chain it’s about making sure you link up the customer payment profile right down the supply chain profile, making sure you’ve got your timing right. It’s all about planning, being ahead of the game and looking at what’s on the horizon, making sure you have flexibility in your cash flow and going out there and getting money when you don’t need it. If you leave it too late and go when you are desperate for money you won’t get it. The supply chain then falls down. Clearly the financiers are worried about overtrading situations when smaller suppliers get large orders but there are more and more products out there which are often specific to certain industries and sectors and you have to go and get the right advice to match the funding with what you want. Make sure you get the right advice on things like R&D tax credits and get your tax planning and tax structures right.” Mark Easton: “Michael, as a venture


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We need to raise the profile of the SME community because they don’t have the market brand and reputation. We need to get bigger companies to see these small organisations as part of their family capitalist, what advice would you give to Simon who has suddenly got a huge order?’’ Michael Vassallo: “There is money out there.’’ He described the options of lending against customers or against the value of stock. Simon Barker: Said venture capitalists were the only people his company could turn to as the company was pre-revenue so banks and their products were not available. “It just means we have to give away chunks of our company, which is fine and you have to do it.’’ Mark Easton: “When you spoke to VCs were they welcoming? Do you feel they understood what you needed?’’ Simon Barker: “Generally yes. You can’t expect them to know the ins and outs of your supply chain, that’s not what they do. Mark Easton: “Richard, what are your takehome messages on supply chain planning?’’ Richard Turner: “It’s all about money. It’s difficult for companies further up the supply chain, particularly if you’re on 60-day payment terms and you’re paying your suppliers weekly and you suddenly get a big increase in demand, then from a cash flow and working capital point of view you have a problem that needs to be solved.’’ He said the challenge was for companies to do more for less and become more efficient in their operations. “As a nation, we have become cash junkies and lots of companies are completely reliant

on subsidy and there’s an expectation generally that there’ll be a grant for this or something else for that. There’s now an expectation that everybody’s balance sheet should be funded by somebody else. What we need to develop are companies that can stand on their own two feet with a healthy cash cycle and have an improvement initiative within the business to become more efficient.’’ Darren Race: Said smaller companies have the greatest potential for growth. Some of the complexity in engineering is being passed down the supply chain and sometimes the complex processes become the problem of the SME. A small company could be supplying between 10 and 20 organisations and they have greater flexibility in decision making. “We need to try to create and raise the profile of the SME community because they don’t have the market brand and reputation. We need to get the bigger companies to see some of these small organisations as part of their family. We are starting to see this now, we are starting to see this partnership emerging. If you can foster a good relationship it will benefit both parties over the longer term.’’ Mark Easton: “We’ll take some questions from the floor.’’ Paul Shelton from Teesside University: He asked how we could nurture networks that could serve manufacturing. Michael Vassallo: Said there were a lot of 25 bqmanufacturingsummit.co.uk

forums, particularly in Tees Valley. “As far as the funding side of it, in the last few years suppliers have been funding their customers. I’d urge all the larger companies to try to pay more quickly. A few years ago bank lending stopped and the easiest thing to do was just not pay your suppliers very quickly and that’s one of the biggest issues we see. Craig Iley: “On networks, at Santander, it’s very important to us to be part of your network. For example, we provide a trade portal which helps people identify markets that they want to operate in if they wish to export.’’ Phil Todd: Said there was a lot of support available for small and medium sized businesses. “There are quite a few small engineering forums and manufacturing forums. Perhaps there’s a need to do a bit more through the LEPs to say what is actually available now.’’ Darren Race: “We have got a lot of networks in the North East already and there are some of them in the room already. County Durham has got three engineering forums. Since the demise of the RDA, do we actually have any co-ordination or leadership in the North East? I would say we don’t. I think it has become


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even more fragmented than it was and that’s an issue for us, especially when you have a fragmented economy. You need someone to sometimes bang heads together, with a bit of impartiality to get things to happen. There’s great design, innovation and potential in the North East but we need some co-ordination and some coherence and framework and the right people to come together to take us in a particular direction.’’ Mark Easton: “I just want to take a straw poll here. Who’s happier with LEPs rather than having a regional RDA? That’s a strong feeling for an RDA.’’ Simon Barker: “Networks and portals are great but there are millions of them. Isn’t Santander’s job to lend money to fund supply chains and get those supply chains moving and help fund businesses?’’ Craig Iley: “Our job is to support our customers where they need us to support them. Sometimes it’s finance and sometimes it isn’t, we try to be innovative. Funding SMEs accounts for something like 45% of my business so I’m very much aware of the importance of it but it’s important that we try to look at other things as well. As far as traditional finance is concerned, that’s something that we are very keen to do, we are very keen to grow our market share in the UK, so if anybody feels they’d like to borrow some money from us we would be very happy to have those conversations.’’ Richard Turner: On various new types of funding he wondered whether the funds were really available. “The perception I get is that it’s easy if you want to borrow £500,000. It’s difficult if you want to borrow £50,000. If you are a reasonable sized company and want to borrow a large sum of money, generally by hook or by crook you can get the funds. But if you’re much smaller and are after a smaller amount then it doesn’t seem to be available.” Darren Race: “One of the challenges the forum members face is that many of them are less than 50 people. We had 10 companies that wanted to bid for regional growth fund which is a complex process to go through for an SME, it can almost turn into a full time job and also you have to reach a certain value of threshold to be eligible for some of these pots of money. What we did was we pooled those particular aspirations and ambitions and we bid for them collectively. Sometimes you need somebody to broker a bigger deal.’’ Mark Easton: “David, I want to ask you about finance and smaller companies.’’ David Arthur: “The harsh reality is that in

46 out of the last 48 months bank lending to the SME market has fallen. Banks are still in the middle of restructuring their own balance sheets, they have a severe credit limitation on what they are allowed to lend into. They clearly want to lend to the M part of the SME market much more than the S because the security is there and there’s less risk. The startup is a no-no for bank funding. In most of the corporate finance deals we have seen over the last four or five years there is little or no bank funding and where there is, it’s quite a long way up the food chain. “Talk of £500,000 is too low for where the threshold is, I think you are talking about £1m plus. That’s why you are seeing the growth of some of these online peer-to-peer lending and crowd funding scenarios starting to build up. You can go out there and get a loan made up of hundreds if not thousands of different people lending small amounts. This has been unregulated so far and there’s a concern the regulator is looking at this and will take 26 bqmanufacturingsummit.co.uk

a broad brush approach to regulation and might nip off an idea before it has had a chance to flourish.’’ Mark Easton: Craig, you’re not lending to small companies is the charge. Craig Iley: “I think that’s a bit harsh. Communication and working with your advisors is really important and it’s very important that you can give your bank visibility on your business and help them understand how it works. Bank lending has fallen overall to SMEs and I saw the latest figures yesterday that showed bank lending to SMEs has fallen 6%. At Santander, our lending to SMEs has grown 14% in the 10 months to October.’’ Mark Easton: “Simon, as a manufacturer, what are the points that really strike you from the conversation here?’’ Simon Barker: “It’s the different types of financing to fit the different types of challenges you’ve got. It took us five months to solve our funding problem – that is the most challenging thing.’’ l


infrastructure debate

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staying switched on

Improving our regional infrastructure: how can manufacturers collectively and individually bring about improvements and press for change in areas such as road, rail and power?

TAKING PART Jon Bird, head of sustainability, Northern Power Grid, Graeme Mason, planning and corporate affairs director, Newcastle International Airport Dr Colin Herron, managing director, Zero Carbon Futrures, James Ramsbotham, chief executive, NECC, Dianne Sharp, managing director, SCM Pharma, Andy Tuscher, region director – North, EEF, Mark Whitehead, partner, Ward Hadaway

Mark Easton: “Coming here this morning, the short journey from Newcastle Central Station to the Baltic took me about 45 minutes. Power capacity is difficult in some areas. What can manufacturers do? Dianne, what are your biggest gripes in terms of the infrastructure. Dianne Sharp: “The lights don’t stay on, not consistently. I lost a batch of product on Friday because we had a power cut in Prudhoe and Prudhoe isn’t that far out of the middle of Newcastle and it’s a common occurrence and that batch went in the bin, costing us and our clients thousands and thousands of pounds. We were able to build a new building at Newburn four months faster than BT were able to link the Prudhoe and Newburn sites by phone and by computer linkage. My staff come from

all over the region because they are very specialist and, because of how difficult some of the transport arrangements are now, we have lost staff. I have had someone leave this year who was very talented but couldn’t do the travelling any more. It was impacting on her family life so much, so she found a job in the south of the region rather than have to do the A1 every morning.’’ Andy Tuscher: “Energy security is one of the hidden concerns manufacturers are articulating and it’s not just now, it’s for the future. We are hearing more and more examples, not just of power going out.’’ He cited the example of a business that had got an order, needed to expand, approached the Grid and, finding it needed to put a substation in, concluded it was easier not to fulfil the order. 28 bqmanufacturingsummit.co.uk

Mark Easton: “From a chamber of commerce point of view to what extent is what we are hearing felt across the sector and across business?’’ James Ramsbotham: “It is definitely felt right across the business sector and the tragedy is is that the North East is not a problem that needs to be solved, it is an asset that we need to be maximising on behalf of UK plc. We are one of the few regions that has a surplus of water, has a surplus of energy and is able to deliver all this stuff. The problem is that there is no national strategy for it and too much of this is being driven to take power down to London and the South East, which can’t make enough. We should be benefiting much more by what we do up here for ourselves and, particularly because we are the best exporting region, we need to be supporting exports,


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exports is going to be what gets this country out of the mess that it’s in. This region is the one that’s doing the best, we should be doing a lot more, but it’s a national issue rather than just a regional issue.’’ Mark Easton: “Jon, it can’t be right in the 21st century that you can’t guarantee people a decent electricity supply.’’ Jon Bird: “We can guarantee a decent electricity supply. What we cannot guarantee is that it never goes off. We know about the Prudhoe problem, we’ve been fixing that one. The fact is the lights stay on 99.99% of the time. If you’re in a town or close to a town it’s obviously much better, but in the rural areas it’s more difficult. Our cables run two and a half times around the world and you can’t keep an eye on every single one of them every single minute of the day. Inevitably with some of the older stuff, particularly if people have been getting near it with diggers or something like that, there can be issues but we do solve those sorts of things as quickly as we can. It is mostly problems in the local network. I’m not trying to deflect things but the problem we are facing over the next few years is whether we have enough power stations and that’s another question in itself.’’ Mark Easton: “Is the power being exported south?’’ Jon Bird: “There are two sides to this. This is a national issue, the fact is that there is more power trying to go south to where the demand is. It does mean that if you are a user of power then it is cheaper here.’’ Mark Easton: “Mark, in terms of the legal situation, are there legal remedies?’’ Mark Whitehead: “The biggest issue around legal matters affecting infrastructure is the fact that the government keeps playing around with the policy and that scares off funders which then has an effect on the ability to deliver on projects to allow manufacturers to have stable environments. At 10.30am today

We can guarantee a decent electricity supply. What we cannot guarantee is that it never goes off. If you’re in a town or close to a town it’s obviously much better, but in the rural areas it’s more difficult the Treasury released a national infrastructure plan and in that they announced that they are changing the strike prices for onshore wind and favouring offshore wind. There’s an argument as to whether that is a genuine policy decision that has come from need or whether it’s Tory MPs satisfying Tory voters in the shires. The knock-on effect is that global funders decide the situation is too uncertain and walk away.’’ Dr Colin Herron: Said we had to use energy differently and pointed out that the Nissan Leaf’s 24kw of battery storage could be used to power a house during a power cut and several cars could be used as back up for a business. “We’ve got to start thinking more about what we do with infrastructure, how do we integrate it, how do we have energy storage, should we have stand-alone

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communities? Just going back to saying we need another power station, we need more cables might be fine for the here and now but what are we doing for infrastructure in 10 and 20 years? How are we going to cut our use by 30%?’’ Mark Easton: “Graeme, you’ve updated your master plan. Is this going to reduce the North East’s giant carbon footprint?’’’ Graeme Mason: “Aviation has certainly got its act together over the last few years in terms of minimising its carbon footprint. In order for the economy to grow, aviation needs to grow, so it’s about focusing on improvements to aircraft technology and making sure we get a lot more flights for a lower carbon impact. Our master plan is to get up to eight million passengers by 2030 and to deliver more game-changing air services. Before the


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Emirates service started in 2006 the value of exports flown out of Newcastle was less than £20m a year; this year it will be over £250m in value. Our aim is to deliver more of that. Of course, there is carbon impact from that growth, but we get the economic benefits of that if it happens here rather than somewhere else. Mark Easton: “How good is the infrastructure in terms of roads and rail network?’’ Graeme Mason: “At the moment, not great. We benefit from having the Metro into the airport. Our forefathers were visionary in delivering that and also in linking the airport to the trunk road network. But there are challenges on both the A19 and the A1, many of which – but not all of which – are being solved.’’ Mark Easton: “I’ll open it to the floor.’’ Andrew Wood: “We are across the road from Dianne and on our factory we have solar panels and they cover all our energy needs. But telecommunications down there are absolutely awful.’’ Dianne Sharp: Said it wasn’t true of residential customers who were given priority. Jon Bird: “Let’s put it this way: if we end up in a couple of years’ time with a problem with the number of power stations we’ve got, which people do you think the politicians will want to keep the lights on for? That’s not up to us, that’s political priorities.’’ James Ramsbotham: “It’s a huge issue for all Western democracies: over time, more and more of us live and work in different constituencies but we vote in the constituency where we live and increasingly politicians play to that fact. When we vote, we vote with our domestic head on, rather than our business head. We’ve got to find a better way of making sure business does have a voice.’’ Mark Whitehead: “We live in a NIMBY culture. Nobody seems to like anything, whether it be any form of energy source. The amount of money that the public sector spends on infrastructure is currently on a par with Barbados. We’ve got a long uphill climb.’’ Mark Easton: “Jon, what I’m hearing is that people don’t trust the Grid to provide what they need and solutions seem to be putting electric cars in the car park or solar panels. It’s going it alone isn’t it, being independent of you?’’ Jon Bird: “No, it’s working with us.’’ Mark Easton: “[For connections to Aberdeen] what’s really needed? Is it road, rail ships? Andy Tuscher: “I would say it’s road and

We have the most longstanding route to Scotland. The trouble is, it was built by a young Italian called Hadrian and we haven’t done a lot with it since rail. We’ve talked about HS2 before, but I think what the region’s manufacturers would far rather have to take capacity off the rail network is a freight line, so you could have a parallel line at a fraction of the cost of HS2 and free up capacity on the rail network. James Ramsbotham: “We have the most longstanding route to Scotland. The trouble is, it was built by a young Italian called Hadrian and we haven’t done a lot with it since. The speed limit in that route is 40mph because the Highways Agency controls strategic routes in this country and they have decided because they are only responsible for England that strategic routes can only connect English cities and because there isn’t an English city north of Newcastle lorries are restricted to 40mph, which means all the traffic is restricted to that.’’ He said the North East is the biggest part of Aberdeen’s supply chain and built 75% of the rigs off the North Sea coast. Mark Easton: “People are not prepared to have a house built on the edge of their village, let alone a factory.’’ Mark Whitehead: “We are going to have to face tough choices: do you want the lights on, or do you want a power plant close by? Things have changed since all these projects were built in the 1960s and 1970s. We don’t have a centralised system for delivery of these infrastructure projects in energy and the type of plant being built now is smaller and much more localised and it’s odds-on you are going to be living near one. Teesside power station has closed and that was nearly 2GW of power 30 bqmanufacturingsummit.co.uk

and the power stations being built now tend to be 50MW. They are 20th the size and, by virtue of that, we need 20 more of them.’’ James Ramsbotham: “Across Europe, we have the cheapest energy, yet we’ve got ourselves into a situation where everybody believes we’ve got the most expensive. Business-wise it’s not quite as cheap and that displays the wrong balance we’ve got.’’ Andy Tuscher: “There needs to be clear leadership and strategy, not just for one government term but for the next 20 plus years.’’ Jon Bird: “It will always be a political issue. The government has put an awful lot of levies onto the energy price. They are stealth taxes. It’s a political football at the moment.’’ Graeme Mason: “Where we would like to see some trans-government action is in relation to national airport policy. The biggest single hub connection for the North East is not Dubai, it’s Heathrow by a significant margin and we really need to see that airport expand in order to safeguard our access into it.’’ Mark Easton: “Dianne, what are your take home messages from the discussion we’ve had. Dianne Sharp: “Price is not the main factor. For us it’s continuity of supply and at the moment we are having to put an awful lot of money into back-up systems. I don’t think business is looking for any easy answers, we need a long term strategy and for business needs to be equal to political/residential needs and that our voice is heard.’’ l


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innovation DEBATE SPONSORED BY

taking on the world Innovation and world class manufacturing capability: how can our manufacturers become world class players in the global market? Mark Easton: “Without innovation manufacturing doesn’t have a future. Innovation doesn’t have to be new technology or a new product, it can simply be making something we already have much better. Pamela, what is the secret of innovation?’’ Pamela Petty: “For us innovation comes secondary in the business. Business is to create wealth and employ people and we add value to everything that we do and we look for innovation to achieve that rather than innovation being a purpose just for itself.’’ Mark Easton: “Geoff, how critical is innovation for the survival of manufacturing?’’ Geoff Ford: “Innovation is critical for the survival of the North East. As a region we are politically and economically disadvantaged. This region is of no interest whatsoever to any political party. Labour know they’ll get in at the next election so they don’t need to do anything and the other parties know there’s no point doing anything because they know the outcome, so we are left to fight for ourselves. Now stripped of our RDA and minister for the North East we have no voice in the Cabinet. So, the North East must innovate or die. I think we are capable of doing that. I looked in the dictionary last night – innovate means introduce new methods, ideas or products. I think ideas comes first, think differently and challenge norms and think outside the box and, at my age, the challenge is remembering where I left the box. Address issues head on and the North East,

by working together, will survive and prosper.’’ Graeme Parkins: “What we do is a relatively simple process, we cut shapes out of raw material and we join them together and we make components to send to other manufacturers. In terms of the technology in our area there’s nothing on the horizon that’s going to turn the world on its head. The big change I think we need to make is in the servitisation of our business and looking at production as an offering of an overall service package so we can give more value to our customers and tune into what our customers are needing. We could do this by looking at other industries. Take the example of the retail sector where if you order something on line you get an acknowledgment straightaway, you get a delivery date, you can look it up and see what the status of the order is. Delivery rarely fails and, if it does, you’ve had that much information you are already placated. We have got to learn to act a lot smarter like that instead of just getting an order and keeping our cards close to our chest.’’ Tom Taylor: “Innovation may not be the end, the end is about value but it’s the means to the end. China and India are churning about a million graduates and PhDs and MBA students and they are going to be able to provide the things that our kids study at school cheaper and in quantity in the future. We saw what happened when innovation hit manufacturing industry in the 1980s, we are now seeing that happening to the legal and other services as

32 bqmanufacturingsummit.co.uk

TAKING PART Geoff Ford, chairman Ford Aerospace and Ford Components Graeme Parkins, managing director, Dyer Engineering Pamela Petty, managing director, Ebac Cameron Ross, leading manufacturing advisor, MAS Paul Shelton, assistant dean, SEEBP, Teesside University Tom Taylor, director of future business, CPI Graham Turnbull, director, Tool and Die Kaizen

qualified people come into the service sector. The way forward for the UK is the application of good new ideas, to innovate. A country of our size can take a big market share in innovation, so to me it’s vitally important because it’s what’s going to provide the jobs and the money for the future. The thing about innovation is, it’s very risky. It’s quite a long term endeavour and companies have to do it over a number of years. Some innovations may take a company five years to get a return. It may be long term, it’s also fast paced, you have to move very quickly and be responsive to what’s going on. What can you do to de-risk things? We run a shared asset model, so we’ve got some government assets that allow SMEs and others to try things out on expensive equipment without having to buy it themselves, so VCs can invest in people, not machines. The other key thing is to shut


innovation DEBATE SPONSORED BY

ideas down when they are not working. You’re betting on horses in innovation and you’ve got to shoot the ones that are not going to work. If you’re not having to invest in expensive assets it’s easier to pull out. The other thing is, you’ve got to collaborate. A lot of innovations happen when SMEs with good ideas work with OEMs who can take them to market. Our German colleagues astonish me by just how collaborative they are, they are very prepared to work together for the common good. In the UK we seem to have a slightly more intense sense of competition up and down our supply chain. You’ve got to manage your IP very well but it’s an expensive thing to do, so you need good advice.’’ Graham Turnbull: “You’ve got to test things before you deploy them. How do you know a leap of faith is going to bring rewards? With a lot of clients we help them to simulate ideas before putting them into operation. One of our clients wanted to invest £12m in 19 new processing machines because they believed the capacity of their manufacturing facilities was at maximum, but by simulating the process and training the management

The thing about innovation is, it’s very risky. It’s quite a long term endeavour and companies have to do it over a number of years. Some innovations may take a company five years to get a return team to innovate their processes we were able to prove that wasn’t the requirement and managing the existing processes better was a better way to go.’’ Mark Easton: “So Paul, you are going to have to take some risks?’’ Paul Shelton: “Inevitably, but, as Tom says, you can de-risk a lot of this working with the catapults. There should be more of them, in Germany there’s any number of them for each and every sector. Working with universities can also be a good way to re-risk. In Italy a lot of the companies are getting together themselves, not with government organisations, and looking to spread risk between themselves. They take the view that it’s much better to have a competitor down the road than one in South Korea.’’ Mark Easton: “Cameron, what kind of innovation do you think industries in the 33 bqmanufacturingsummit.co.uk

electronics and automotive area should be focusing on?’’ Cameron Ross: “A couple of points on what has been said. Firstly, I don’t think innovation has to be risky. If it’s appropriate, then it’s not risky. There’s also a danger that this box of innovation becomes about product innovation, it’s also about system, it’s about management and leadership and the way we do things. We have to look at all these things and also realise, it isn’t just a management team who are innovating. They are there to facilitate it but it’s also for employees. With every employee you get a free brain – use it. It’s about the management team creating the environment that will allow the innovation. It’s not necessarily about challenging the status quo, for a lot of us it’s about `where’s the opportunity for the business’?’’


innovation DEBATE SPONSORED BY

Mark Easton: “Geoff, there is a sense you have to stir things up, isn’t there?’’ Geoff Ford: Said the impetus to challenge could be generated by partners and advocated business strengthening relationships with academia. “We’ve got some very good universities in the North East and I don’t think we use them enough. Ford did a Knowledge Transfer Partnership with Newcastle University about two years ago and the outcome was absolutely brilliant.’’ Mark Easton: “Paul, what’s in it for universities?’’ Paul Shelton “It’s part of supporting the |local economy in a way they should be doing as part of the social fabric of the region. Some of it is altruistic, some of it we do for money, there are some academics who come from an academic background and it means that they’re getting an interface with industry which gives them credibility in the lecture theatre.’’ Mark Easton: “Pamela, coming back to your first point that you are focused on the business and making money and adding value but if you carry on doing what you are doing the world will go past you.’’ Pamela Petty: “We’ve never had two years the same, we do change the things that we do but probably our worst performing years have been when we have let the design team lead the business. I think there’s a grey area between innovation and invention and it’s not about products, it’s about processes, about service, how you get the things out there, how you improve what you are doing – it’s all the way through. It has to run through the business and everybody in the business has to embrace it, but you shouldn’t just do it for the sake of it. Mark Easton: “Steve Jobs would have said

you have to let the designers do it, you have to take the risk, otherwise you are never going to get the iPhone or iPad.’’ Pamela Petty: “Steve Jobs was very focused on the things he wanted to achieve with things like the iPad and I suspect he had a whole team of people who weren’t coming up with ideas every 10 seconds but were thinking about how they could engineer a solution to give him the thin iPad and the performance that he wanted. It was driven more I think by him seeing a gap in the market and then tasking his team to achieve that.’’ Graeme Parkins: “It’s not just down to management. I had a guy on the shop floor came up with an idea on laser profiling that saved us thousands of pounds.’’ Cameron Ross: “There’s a skills issue around management and leadership. They have the cability to allow innovation upwards, downwards and sideways.’’ Geoff Ford: “We use MAS and we find it extremely helpful. They can be the conduit between management and the shop floor, they can bring us together and they can challenge things. I’d invite everyone here now to come to our two companies on three sites and just observe, listen and comment because they will see things that I can’t.’’ Mark Easton: “Questions from the floor.’’ Ian Malcolm, managing director of ElringKlinger: “Looking at the subjects already debated, innovation can be spread across each and every one of them, starting with the skills gap, looking at how we get education and business talking together. It all seems to be about doing things differently and that is what I believe innovation is all about. It’s not the world changing idea, it’s continuing to make that small incremental change.’’ 34 bqmanufacturingsummit.co.uk

We’ve got some very good universities in the North East and I don’t think we use them enough. Ford did a Knowledge Transfer Partnership with Newcastle University about two years ago and the outcome was absolutely brilliant Dr Colin Herron: “How do we innovate the region to make it world class and an obvious place for people to invest?’’ Mark Easton: “Geoff, how would you innovate the North East?’’ Geoff Ford: “Use what’s already there. We’ve got the chamber, we’ve got RTC, we’ve got numerous organisations. Some of their work is duplicated and that needs to be addressed. There should be manufacturing forums in every borough in the North East in my view.’’ Paul Shelton: “It’s encouraging business to take that little bit of time out to use some of those organisations to network, things like CPI, the universities and the manufacturing forums.’’ Graeme Parkins: “Geoff and I have similar kinds of businesses and we already share experience and knowledge. Good companies will always be successful, so you shouldn’t be afraid of sharing good practice. As a region we are quite buoyant in the oil and gas game at the moment. Aberdeen is absolutely crazy and the amount of work that’s going to come down here will mean plenty of work for all of us and if we all work together we’ll succeed in the North East.’’ l


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DEBATE SUMMARY

talk backed by action assistant director of bis, sue houston, was impressed by the sector’s passion and enthusiasm, and will raise its concerns with ministers BQ Executive Manufacturing Summit was no talking shop. The issues it raised will be taken to government ministers. The manufacturing summit was attended by Sue Houston, assistant director for the Department for Business Innovation and Skills (BIS) Yorkshire, Humber and North East. She not only gave the keynote address but will deliver the messages from the summit to colleagues and ministers. How did she think it went and what particularly struck her? “I thought that it went extremely well,’’ she says. “It was clearly very well supported by business in the region. It was definitely giving the message that manufacturing is alive and well in the North East, in different states of

who were there. “There was very clear support for Lord Digby Jones’ message about Made in Britain and the pride that brings and the desire to do more of that. “Another very clear message was around the strength of networks and people using existing forums – let’s not create new organisations and bodies to take things forward, let’s use what we’ve got. There was also a clear belief that sharing knowledge and experience and best practice, working in collaboration is a very good way forward. “There was also a lot of commonality about the key issues, whether they be concerns and challenges or good things that were happening in the region. Concerns about

One of the things that struck me was the passion for the wider benefit to the region rather than just individual companies, which I felt was a good thing as they were looking beyond their own organisations

progress but there was a very clear message that there’s a lot of good manufacturing, a lot of quality and desire for it to improve further. “Clearly there’s lots of passion and enthusiasm. One of the things that struck me was the passion for the wider benefit to the region rather than just individual companies themselves and which I felt was a good thing because people were looking beyond their own particular organisations. That was spread across both the large and the small companies

things like skills is a big issue I constantly hear and that was very much reinforced, but also a desire for people to get involved and do something about it. Geoff Ford and what he has done with his academy being one example of that. “On energy security policy and infrastructure challenges, again there were some challenging messages but also some good practice going on, so generally a lot of positivity and recognition that there’s more we can do, but 36 bqmanufacturingsummit.co.uk

more we can do together with a desire to do more of this.’’ Was it useful for her? “I thought it was really good to get a lot of people in the room and to talk about many of the issues I do pick up when I’m out and about in the region. Plus, of course, an additional benefit for me was to to meet companies I have not had chance to meet, and I have subsequently visited some of the companies and do have plans to visit others as a result of that forum. “In the main it was an opportunity to share information about what government is doing with a spread of manufacturing businesses as well as a reinforcement of many messages but again the thing that did strike me was the passion and enthusiasm to become more involved and do more collaboratively. Some of the things I got to understand in a little more depth, particularly in the panel debates - when people were discussing and emphasising some of the challenges that they faced and how they have overcome them. It was perhaps a little bit more in depth on some issues but broadly the sort of messages I would have expected to hear. It was hugely encouraging to feel that passion and get the view from colleagues and businesses around the region that they want to do more together.’’ She said that once she received this report she would take it to relevant government ministers and that she has already shared the messages of the summit with her colleagues. She added: “It’s brilliant that we have started this here in the North East. I think it was a good place to start. I was very pleased to have been a part of it.’’ l


It was clearly very well supported by business in the region. It was definitely giving the message that manufacturing is alive and well in the North East, in different states of progress but there was a very clear message

37 bqmanufacturingsummit.co.uk


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OVERVIEW

sector back in vogue Now that manufacturing is back on the agenda and has won new respect from ministers, Peter Jackson wonders what the future holds How times have changed. It would have been unlikely 10 years ago that the BQ Executive Summit would have been held, or, if it had, that it would have aroused the same interest and enthusiasm. Back in those heady pre-Lehman days, the service sector, particularly financial services, was where the UK’s future lay. Manufacturing was regarded, at worst, as being dirty and dangerous and, at best, as something to be left to nations in the Far East or Eastern Europe, where wages were lower and such occupations were more the norm. Manufacturing was compared to agriculture. Just as the majority no longer worked on the land and we no longer grew most of our own food, so it was no longer necessary for most people to work in factories and we no longer needed to make our own stuff. With the collapse of Lehman and the banking crisis all that changed. It became clear that the UK had put far too many of its eggs into a financial services sector that was suddenly much reduced and dangerously weakened. Little surprise then that the new Coalition government made it a central plank of its strategy to rebalance the economy away from services and towards manufacturing. Almost overnight manufacturers went from irrelevance to being the nation’s saviours – or at least the only saviours on the horizon. Now the sector is in fashion and government and media are treating it with a new respect. This is particularly good news for the North East with its long manufacturing tradition. So it is welcome news that manufacturing seems to be leading economic recovery. The latest quarterly survey by the British Chambers of Commerce (BCC), of almost

8,000 businesses showed that key indicators for the economy are higher than before the financial crisis hit in 2007. And, in the manufacturing sector five indicators, including orders and employment, are at all-time highs. Based on its survey the BCC expects economic growth of 0.9% in the fourth quarter and its chief economist David Kern says that “higher full-year growth in 2013 and 2014 could follow”. Of course, one swallow does not a summer make but the BCC was not alone. According to latest Markit/CIPS Manufacturing

rather than later, although Bank of England governor Mark Carney has subsequently given himself some wriggle room on this. If rates rise too soon it could prove to be a severe setback for manufacturing. Further afield there are still plenty of question marks. The US economy seems to be staging a recovery but it is by no means locked in and could still suffer a relapse; there is every prospect of a return of crisis in the Euro Zone and the Chinese economy could still falter. Any of these three events could hit the UK and reverse recent gains. At home there are longer term issues to

Manufacturing was regarded, at worst, as being dirty and dangerous and, at best, as something to be left to nations in the Far East or Eastern Europe... Purchasing Managers’ Index (PMI), the UK’s manufacturing sector continued to see strong growth at the end of 2013. It recorded a level of 57.3 for December, which, while down slightly from November’s near three-year high of 58.1, was still well above the 50 mark that indicates expansion. Markit said that the latest figure suggested the manufacturing recovery remained “on track”. However, it is not yet time to put out the flags. The news may be better but there are still plenty of things which could derail a manufacturing led recovery. Interest rates, for example, remain at historically low levels but the other side of the coin is that the only way is now up. The Bank of England has signalled that rates will not rise until unemployment falls below 7%. With unemployment falling there are fears that this could happen sooner 39 bqmanufacturingsummit.co.uk

be tackled – access to finance; skills and infrastructure. While posing no immediate threat to recovery they all serve to create a headwind for manufacturing in the longer term. These might all come into the category of what former US Secretary of Defence Donald Rumsfeld famously described as “known unknowns’’. But what about the “unknown unknowns’’, things of which we are unaware of? On the positive side there is perhaps shale gas with the potential to bring down energy costs or 3D printing which could revolutionise manufacturing or other disruptive technologies still around the corner. One thing is for certain: the future for manufacturing. Whatever it holds, manufacturers can console themselves with one thought – at least they now know they matter. l


success story

Cotswold Manufacturing has weathered the economic storm and is now poised to implement ambitious growth plans, as Peter Jackson reports Cotswold Manufacturing aims to double its turnover in two years to £10m after expanding into new premises on the back of a £750,000 investment. The company, based on Teesside Industrial Estate, Thornaby, has developed its own door manufacturing centre, expanding into an adjacent factory, increasing its floor space by 29,000sq ft to 82,000sq ft. This means it can now produce its own doors for doorsets and screens for the residential and commercial sectors, such as schools, hospitals and offices, on site. This marks the latest stage in an impressive record of growth. Set up in 2005, the company now employs 59 people and is on target to see last year’s £5m turnover grow to £8m this year, with a forecast of £10m the following year. The business’s history is outlined to me by Ken Napper, one of the three founder owners and directors. Born and bred in Hartlepool, he went into retail management after his A-Levels. He says: “Looking back, it wasn’t the right move but it was fantastic from an experience perspective.’’ He did various jobs throughout the region, until in 1995 he started work in the doorset industry, manufacturing pre-hung doors and frames. “I worked for a number of employers and picked up a lot of skills along the way,’’ he says. In March 2005, he and colleagues Barry Ditchburn and Stuart Burnett decided to set up their own company. Sales director Ditchburn started his career in the industry in 1969 and has sold joinery products throughout the UK ever since. Operations director Burnett, a time-served engineer, joined the industry in 1995 after spending many years working for British Steel. What prompted them to do it? “It was a mixture of wanting stability,

door to success is wide open

40 bqmanufacturingsummit.co.uk


success story

41 bqmanufacturingsummit.co.uk


success story wanting a future for ourselves and taking all the knowledge we had gained over the years to create a new innovative company to deliver real customer service and quality.’’ Was it a difficult decision? “We discussed it with our families and explained why we felt it was necessary and the right thing to do. It was obviously a risk but we were professional people so put the relevant strategies and contingencies in place to make it happen. It’s always difficult when you are going from a paid job into selfemployment and you take on all these risks and all these financial burdens. However, it was a calculated risk worth taking.’’ Prior to investing in the new centre, Cotswold’s manufacturing was a process of assembling components supplied from elsewhere. “Historically the business was about buying the doors in from other people and buying the frames pre-machined and putting them together. Cotswold Manufacturing isn’t just about the product that we make, it’s about the services we are able to provide. It’s about delivering to people on time,’’ says Napper. “We wanted to make doors to improve our quality control, serviceability and to attract new customers who historically would not have bought from us because we didn’t make the doors ourselves. The business model has always been about attention to detail and quality of service.’’ It has had a further benefit. “It has allowed us to employ more people in the North East, which is what the North East is crying out for,’’ says Napper. “It also provides the launch pad for ambitious growth plans. With further development over the next 18 months we expect to employ more people and take a greater share of the market.’’ The company aims to be number two in the UK market place, which it should achieve when it reaches an annual turnover of £9m to £10m – its target for the next 18 months to two years. This would mean the creation of a further 20 jobs.

Cotswold Manufacturing currently sells across the UK but it has no current plans to export to Europe. This is not through any lack of ambition but because the regulations and requirements for door frames on the continent are sufficiently different to make it too difficult. “It’s a very different market,’’ says Napper. “Have we ruled out exporting? No, but we want to grow the business in the UK. Exporting could be the thing for the future but certainly not for us at the moment. Having said that, if a Spanish or German company came and said we have a job for 1,300 doorsets, would you supply them to UK standard specification, we would say yes.’’ Partly as a result of the new manufacturing centre, the business continued to grow through the economic downturn. Unlike many manufacturers, Cotswold didn’t experience great difficulties in accessing finance. “When we started in 2005, we were three owner-directors with very little funds,’’ laughs Napper. “We received a small grant from Stockton Borough Council of £3,000 and we put that towards a new server which formed the building blocks of our IT strategy. We have since gone on to invest more than £400,000 and still continue to do so. IT and innovation are very important to us.’’ Three years later they approached One North East for assistance in funding expansion and secured a grant of £120,000 which went towards a £200,000 investment in state-ofthe-art CNC technology. “We bought a 5 axis CNC machine, with a robot to load and unload the doors onto it. We were the first joinery company in the UK five years ago to bring in a robot to work with a CNC,’’ he says. “That helped us move forward and become what we are today. “I wrote the business plan for the door manufacturing centre three years ago, more in preparation due to the recession, then picked it back up last year when we heard

The company aims to be number two in the UK market place, which it should achieve when it reaches an annual turnover of £9m to £10m – its target for the next 18 months to two years

42 bqmanufacturingsummit.co.uk

about Regional Growth Fund assistance. It was all about timing. We went on to spend £750,000 on a fantastic new door manufacturing centre which is now one of the best in the UK. We put a significant amount of our own funds towards it, but also received substantial Regional Growth Fund assistance and we took out a loan to fund the balance.’’ Not that the economic headwinds of the past five years have passed Cotswold by. Napper says: “It has been a very challenging time indeed. Lead times are shorter, the industry skill base has diminished, margins are tighter and we have generally had to re-engineer our business to enable us to remain competitive and ahead of our competition. “But, whereas a lot of our competitors have shed people, we have gone the other way and employed people so we have seen difficulties as presenting opportunities.’’ Cotswold is confident it is well placed for the recovery it now detects even in the beleaguered construction sector. “We felt the recession last year when the order book fell off a bit but it’s difficult to assess because from January last year we had the new door production line. We have now noticed the recession has lifted. The joinery industry isn’t large and we all talk to each other and the industry as a whole feels like it has picked up.’’ How has Cotswold Manufacturing been able to buck the trend and come through the downturn relatively unscathed? “Customer service,’’ says Napper emphatically. “There are many ways you can deliver customer service but it has to start with micro-management and quality within the business. If you have a solid, well organised and professional structure and culture internally, as we have, customers will benefit.’’ The company focuses on training, putting some staff through NVQ Levels 2 and 3 and others through professional development such as CIPs. “We also look to offer apprenticeships where we can. We want to develop young people and bring them forward, to develop our own business and to develop them as people,’’ says Napper. As a manufacturer, where would he like to see the sector heading? He says: “Let’s stop importing goods from abroad and start making more goods domestically to get the UK really moving.’’ l


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case study

I grew businesses for others, now i’m doing it for me Bryan Bunn, who has spent his working life in manufacturing and engineering and now heads his own rapidly expanding firm, is passionate about training engineers, as Peter Jackson discovers

Bryan Bunn’s roots are firmly in manufacturing. He grew up on Teesside at a time when it was still an international centre for the process and chemical industries and his father worked at Tioxide in Billingham. He himself left school at 16 and started a technical engineering apprenticeship with ICI in Billingham, at a time when the chemical giant employed about 27,000 in the town and another 45,000 at Wilton. He says: “When I left school it was the done thing that you went into a technical apprenticeship. I think I knew one person in the town who actually went to university and they were considered a superstar.’’ Now his company Nortech, which he founded just two years ago with four employees, employs 80 people serving the process, oil & gas and steel industries with project management and design engineering. Based at Wynyard Park on Teesside, the company had a turnover of £1.1m in its first year and by its second year end in March 2013 this was up to around £8.2m. Bunn is hoping to reach £10m to £12m this year. However, success was not preordained. “It wasn’t part of a plan,’’ he says. “If I’m honest, I wasn’t always focused. I was a typical young engineer. I worked as a contractor, so I was somewhat transient. I

went where the work and the best money was. I was fortunate that I got on some good jobs and learned a lot and built some good relationships.’’ He went through a divorce which led him to reappraise his life and, around the same time, in the early 1990s, he worked with another engineer, a senior manager called Tom O’Brian, who saw Bunn’s potential and mentored and developed him. “He saw something in me I didn’t realise I had and started to push my buttons and things started to happen very quickly for me.’’ He worked for DuPont and Day & Zimmerman and then technology and engineering company Paul Wurth as its general manager, setting up their operation in the UK. However, as with so much manufacturing at the time, operations were moved to the Far East. Bunn was given the opportunity to be Paul Wurth’s agent in the UK, although he realised that that on its own would not make for a viable business, but it did provide the underpinning for the newly formed Nortech while it picked up other business. He says: “It was only 2010 that things were happening, that made me stop and think and realise there was an opportunity there. I’ve never been frightened of not having a job. As an engineer, you have to be a very bad 44 bqmanufacturingsummit.co.uk

engineer or a bad person to be out of work and I don’t consider myself either of those. “It wasn’t out of necessity, it was something where I thought I’d rather look back if I failed and say at least I tried.’’ But he didn’t fail. He was experienced enough to successfully run his own business. “I’d grown and run businesses for other people quite successfully and I thought, if I can do it for them, surely I must have a good chance of making a success of it for myself. One thing I will do, I will work even harder. The more I got into it and did my groundwork, the more I realised that there was an opportunity in the marketplace that was just right for taking and if I didn’t somebody else would for sure. Once I’d got to that point I’d already built up my personal momentum and I had the family support, so it fell into place.’’ Was it as easy as he had anticipated? “Setting up the office and putting in all the systems and procedures went very easily, as I had the benefit of having done that previously for other people so I knew what to do. I knew the pitfalls and the core things you really needed to focus on so that went quite well. “We’ve had such a rise in the business, from starting to where we are now has been a fantastic journey. It’s only in the last six to


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case study eight months I’ve realised that some decisions, which seemed right at the time, mean I’m now having to put fixes in place.’’ One such lesson was getting the right bank. “You’ve got to have a bank that understands the nature of your business. We are an independent business and cash flow is the most important thing and it’s one thing that will sink any business like ours very easily if you don’t get it managed correctly. Having learned that, only in the last month have we managed a transition to a new bank. Now that we know our business better and we have a track record the bank understands they are giving us the right level of support. “It’s the same with accountants. Getting the right financial support in place at all levels is something that I didn’t realise would take up so much of my time. Having done that, I now understand more and I also understand we need to employ professionals so I have recruited a financial director.’’ The business has grown dramatically. Where would he like to see it in a few years? “There’s a couple of things we don’t want to be,’’ he says firmly. “We don’t want to become too big because one of the things that differentiates us in the marketplace is our quality of service and delivery and our flexibility and it’s easy to lose those when you get to a certain size. Having worked with big organisations and having had to manage those realities against client expectations it’s something that’s stuck with me. “On the oil and gas side we wouldn’t want to be anything more than 120 to 150 people. Once you get above 120 to 150 with direct report structures and knowing everybody personally, which adds value to the business and the employee, I think you can lose that. We don’t want to be too big – 400 to 500 people would be too big for sure.’’ As far as the region’s manufacturing sector goes, he is bullish about the offshore sector pointing out that about 70% of the North Sea’s oil and gas facilities were made in the North East. These facilities now need renewal and replacement. “Eight to 10 years ago the big players like BP and Shell started to sell on what were considered to be mature assets and smaller independent companies bought them. With changes in technology what has been realised is that there’s still a hell of a lot of oil and gas out there. We are working on projects now that are giving a further 15 years life extension to operating facilities. We see another five to eight

years of a buoyant oil and gas market.’’ He sees further engineering and manufacturing activity coming from the programme to replace the country’s nuclear power stations and the extraction of shale gas. He feels UK manufacturing has been neglected and skills have been lost. “We haven’t been training technical apprentices and engineering was a dirty word. It wasn’t sexy or interesting for people and engineering underpins everything we do,’’ says Bunn. He is particularly proud that Nortech has taken on its first two apprentices and is supporting five youngsters on degree courses. “Everybody has got to do their bit. Two apprentices and five graduates doesn’t sound a lot but for a two and half year old company it’s not bad and I’m really pleased about that,’’ he says. “There has to be a recognition that if manufacturing is going to be part of the UK GDP we have not only to have the right short-term support but the long-term vision.

He adds: “I think we undersell ourselves as a region. We have a trait to look on the downside and we need to change that. We have so many good things going for us. I think generally we have a great infrastructure.’’ He says there is a feeling that Tees Valley doesn’t get a fair crack of the whip compared with Tyneside but this, he believes, can be put down to bodies in the north of the region working together, whereas Tees Valley is riven by internal rivalries. Does he believe a culture of innovation is important for the manufacturing sector? “Yes, absolutely, but I’m also a great believer in the 80:20 rule. Innovation is your 20% but 80% is a bedrock of certain things in engineering that don’t change. Innovation is great but we shouldn’t take our eye off what are proven practices and approaches in technology. If you put too much focus on innovation, you focus on the 20% and you ignore the 80%, where you get the value.”

If I’m honest, I wasn’t always focused. I was a typical young engineer. I worked as a contractor, so I was transient. I went where the work and the best money was. I was fortunate that I got on some good jobs and learned a lot and built some good relationships

“You can’t just stop and start it, it has got to be a continual process and, while companies should stand up and be counted, I think the government needs to do something. Why shouldn’t the government put a national apprenticeship programme in place and train people and make them available to the supply chain? I was very fortunate, I was an ICI apprentice and when I look back now, that’s exactly what ICI did. I was one of 104 apprentices in my year at the Billingham facility and Wilton had a similar number. They over-trained to cover for natural wastage and to ensure that people who were moving out of ICI went into the local supply chain and were trained to ICI requirements. Why shouldn’t we do that at a national level? “There are so many agencies involved looking after their own self-interest, all with pots of money that overlap but at the same time there are massive gaps. It’s a nightmare.’’ 46 bqmanufacturingsummit.co.uk

The great challenge he sees is to get young people interested in engineering as a career. “I’m very supportive of local efforts to try to attract people back into engineering. It’s hard work sometimes but there’s a good quality of life. These guys are earning a lot of money, plus there’s a great camaraderie and opportunities to travel. It ticks a lot of boxes. “We have to do everything we can to make it seem attractive and buoyant to get people to want to be part of engineering.’’ He believes that for too long in the UK engineers have not enjoyed the kind of status they do in countries such as Germany. In the UK we use the same term of engineer to describe someone who services a washing machine rather than someone who builds a bridge. He started out as an engineer, does he now see himself as an entrepreneur? He adds: “I don’t walk about with that label on my shirt but I’m passionate about what I do.’’ l


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interview

Ben Staerck may only be 27, but he’s already taking his County Durham manufacturing and retail business global, as Peter Jackson reports Ben Staerck has taken his business, Furniture Clinic, to an annual turnover of £1.7m and more than 60 employees in 11 branches across the UK since launching in 2005. He has just opened a New York outlet for the sale of the Burnopfield-based business’s leather cleaning and repair products and he’s projecting a turnover of £2.9m for next year. And how big could it get? “Oh, the business could be turning over £50m a year plus, or something like that,’’ he says. “It could potentially go higher, I think that’s achievable in the UK, we don’t even know what we can do in America yet.’’ Closer to home he is currently in negotiations with Durham County Council over the acquisition of a 3.5 acre site over the road from his current site, where he wants to build a 30,000sq ft factory to be operational by January 2015. He also anticipates employing about 10 more people over the next year and the five-year plan, which includes the new factory, involves the creation of 56 jobs. Last year Furniture Clinic’s exports amounted to about £250,000. It is forecast that the US

operation, which is a separate company, but part of the group, should turn over about £350,000 in its first year. Furniture Clinic has been built on the foundations of his father Keith’s business. Keith’s business was demonstrating and selling a wood cleaner and leather cleaner at shows such as the Ideal Homes Exhibition or county shows. He made the leather cleaner himself but outsourced production of the wood product which was made according to a formula which he had been given by a French polisher friend. In 2004, Ben, who was still at school, built a website for the business and they named the site Furniture Clinic. The idea was that it would provide Keith with an income during the week between shows. “I built the website and it sort of sat there and did nothing, so I did some research and learnt how to use search engine optimisation and internet marketing and all different types of ways to promote the website,’’ says Staerck. It paid off and sales started to come. About a year later, he was due to go to university to do a degree in business and economics. But the pull of plunging straight into a real business was too strong. “I guess business was really something I wanted to do, but I never really planned on doing this business. It was only because the website was successful and was earning a good income for me when I was 17.’’ In 2005 they set up a limited company and Ben was made a director. They continued to grow from there, still with the same two

products which they mixed themselves at home in Newcastle, but then gradually expanding the product range. “A lot of it was natural growth,’’ he recalls. “The products we did were good products so people talked about them and recommended us. Those products cleaned leather and protected it but people wanted them to do a lot more. People would buy a leather cleaner and ask if we had an ink remover or if we could fix a scuff on leather. We basically just responded to what the customers wanted. Over the years we have added more and more products to our range.’’ There was growing demand not only in the UK but also abroad. They took their first premises in a business centre in Team Valley in 2006. Initially they took one unit but soon expanded to take on two, then three. In 2010 Furniture Clinic moved to its current location on the Hobson Industrial Estate in Burnopfield. It is now just waiting for the mortgage to be confirmed for the new site. It opened branches throughout the UK to offer a nationwide repair service. He says: “We were supplying all these products to people but some of them don’t want to use them themselves and would always prefer a professional to do it, so we set up branches to offer that service.’’ Only about six customers a day will actually go to Burnopfield, but before it opened its branch network, people visited from all over the UK. “We had someone drive up from Kent once,’’ recalls Staerck. “He had a Rolls Royce and

boss aims high with clinical business plan 49 bqmanufacturingsummit.co.uk


interview wanted to buy products to restore it. This year our repair department has had furniture from Norway and we get quite a lot of people sending Jaguars in from Germany. We have every single Jaguar colour match since 1948.’’ Furniture Clinic repairs and refurbishes furniture, car interiors and a sister company Hand Bag Clinic has about 100 handbags being repaired at any one time. “We have had customers send in a parcel of handbags and the total value of the bags has been about £20,000,’’ says Staerck. In Burnopfield the company makes paint, dies, cleaners, polishers and fillers. “If you can imagine a problem you can get with a piece of leather we make a product to fix it.’’ Furniture Clinic supplies the general public through its website, furniture shops with products to supply to their customers, it supplies extended warranties on furniture, and also related retailers such as handbag shops. It also supplies manufacturers, including a renowned luxury car maker to remove minor blemishes when leather for upholstery has been trimmed, as well as some internationally famous fashion houses. Keith retired from the business in 2012. The New York business and Handbag Clinic are separate companies but are owned by the Staercks. Furniture Clinic gets a lot of US visitors to its website every day but there was a disincentive for them to buy. Staerck explains: “If they ordered product for £20, it would probably cost them £20 to have it shipped over there. The conversion rate of US visitors was minute compared to the conversion rate of UK visitors. It was obvious the reason they weren’t buying was the extortionate postage prices. “Before we launched we probably did about 100 orders a month to the States. We opened a branch in New York in October and already we are doing about 50 items a day, so the amount we’re are selling over there has increased phenomenally.’’ He expects to employ about six in New York but the products will still be manufactured in Burnopfield. By any standards, Furniture Clinic’s history is a success story. What’s the secret of that success? “The way we offer and package our products makes it a lot easier for the consumer to understand and use,’’ he says. “If we talk about a product to restore leather, if you go to one of our competitors, you might need

The bigger we’ve got in terms of cash flow the easier it is now to do new things. I really want to get the company to a position where it’s as big as it can be. Until we get to that stage I’m not going to rest six products and you have to find out what they are and order them individually, whereas we package them all together with a kit with instructions and a video to show people exactly what to do.’’ Furniture Clinic’s rise has largely been without setback, although the move into the US proved more difficult than anticipated and was three times over budget. “We got a loan from the bank for about £50,000 and we have ended up spending the best part of £150,000 on it,’’ says Staerck. “That was underestimating just how bureaucratic it was. Americans are very picky and fussy and worried about everything. For instance we were forced to spend £12,000 on insurance, which was unnecessary but without it the landlord wouldn’t have let us operate from his premises. Because that delayed signing the lease it meant the person who went out there to run it had his visa application process delayed, which meant he didn’t get a social security number so we couldn’t lease a car in the conventional way, so we’ve hired a car since August and we’ve spent something like US$2,000 a month.’’ Other problems which commonly beset growing businesses have not proved to be an issue for Furniture Clinic. “There have never been financial bad times, 50 bqmanufacturingsummit.co.uk

especially with a lot of our business coming from the internet which is all paid pro forma, we’ve never been in a position where we’ve had a bad cash flow or have had to chase debt,’’ says Staerck. “We’ve largely funded everything ourselves. We’ve had some finance from the bank when we brought a production run, we got a mortgage on this place and we are looking for a new mortgage facility with the bank.’’ The company does all its own R&D, developing new products and keeping up with changes in the market. Leather used in furniture, for example, has changed in the last 20 years. Prior to 1990 most leather was treated with a solvent based paint to give it its colour. The leather changed with use, not, as consumers thought, because the leather went hard but because the paint stiffened. Products to restore it, softened the paint to make the leather feel softer. Since then, most leathers have been treated with a water based paint which stays soft and flexible so Furniture Clinic has developed products to protect that painted layer to prevent it from staining or marking. “We are forever bringing out new products,’’ he says. “In the last couple of months we have developed products for restoring the colour to fabrics, products for restoring suede, fixing holes in suede, restoring convertible roofs and in February we are launching a range of products for maintaining saddles, we’ve launched motorbike leather wear kit, car interior repair kit.’’ He says: “We are an innovative company – always looking for better ways of doing what we do but also diversifying a lot as well.” This includes a huge potential market with a range of products for shoes such as polishes and products to change the colour of shoes. “If someone was getting married and wanted matching shoes they could buy our product and change the colour of all the shoes to match. We’ve actually teamed up with Jimmy Choo; out of their bridal store in Sloane Street they will be offering a range of colours.’’ He says: “The bigger we’ve got in terms of cash flow the easier it is now to do new things. He is not worried by competition – he believes the company has built a brand and reputation which would make it hard for someone new to enter the market. He says the business could comfortably be turning over £50m a year. Is that a target? He adds: “I really want to get the company to a position where it’s as big as it can be. Until we get to that stage I’m not going to rest.” l


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