Rhys David says correcting wrong impressions of British manufacturing cannot mask serious underlying problems

June 26th, 2011

BBC journalist Evan Davis’s series Made in Britain (BBC2 Monday nights) is providing a valuable corrective to the idea that Britain no longer makes anything. Indeed, we do, and we remain among the world’s top ten manufacturing nations even though we have been slipping slowly down the rankings for some time to our current position at sixth.

However, the well-worn examples that Davis chooses – donning a flying suit for a ride in a Typhoon jet fighter, testing a  new McLaren road car on the race track, balancing on a Brompton foldable cycle – were there not simply because they present good televisual images, but for a broader reason. The truth is that although Britain remains an important manufacturing power, it now mainly operates in such niches. Today the depth and integration of manufacturing it was able to offer only a few decades ago has all but disappeared.

Of course, nobody suggests Britain should seriously try to compete in the mass manufacture of, say, plastic toys, products that even the Chinese will probably come to regard before too much longer as too low-skilled. Nor are we ever likely to get back into textiles and clothing manufacture where the requirement is for vast runs of material from capital intensive equipment and low cost labour to stitch and add refinements. Much better from the manufacturer’s point of view – as Burberry decided at the cost of its Welsh workforce – to design it here and make it elsewhere, thereby lowering costs while still retaining its ‘Britishness’.

What we are missing, however, is a whole range of high technology sectors which for one reason or another have been allowed to wither and then drift away. Take for example power generation equipment. Fifty years ago, foreseeing the rising demand from an increasingly wealthy world for electricity generation, Harold Wilson’s Labour government persuaded Sir (later Lord) Arnold Weinstock of GEC to merge under his leadership the two other UK companies then operating in this field – AEI and English Electric.

Today only vestiges of these three once great British companies remain. Far from being in a position where a British manufacturer could compete for contracts for new power stations in China, India, or anywhere else, we are now no longer able to build the largest ones for ourselves. When our mostly foreign-owned British utility companies need to install new generation equipment they have to turn to Japan, Germany, the US or France.

Or take transport equipment, a sector in which Britain through its great railway engineering and shipbuilding companies (not to mention its motor industry) could once provide for its own needs and win a sizeable share of world markets. Now, if and when the main line to south Wales is electrified, the locomotives will almost certainly be bought from Hitachi of Japan, whose main competitors in this sector are Siemens of Germany and Alstom of France, the latter having acquired chunks of Britain’s former locomotive building capacity.

Or take chemicals. We still produce large quantities of chemicals, particularly speciality chemicals in Britain, including in Wales where Dow Corning is one of the jewels in our somewhat battered industrial crown. But, outside pharmaceuticals, which is the British flag-carrier for the chemical industry these days? ICI, which once bestrode the world with its US counterpart, Du Pont de Nemours, operating from huge sites in Cheshire, Manchester, Billingham, Slough, and even Pontypool and Penrhyndeudraeth, has been dismantled. It survives as one of the paint making  arms of what was once a smaller company, the Dutch Akzo Nobel chemical group. Its vast chemical operations on Tees-side have been split up between various different privately owned and US companies. The integration that previously existed there – ensuring markets for the products of different plants – has been lost.

Of course, we do have a strong pharmaceutical industry (though largely under US control), and we punch above our weight in the oil sector and in mobile telephony. Evan Davis was able to wax lyrical, too, about the importance of brilliant British products such as GKN’s driveshafts, now used by more than half the world’s motor manufacturers. Yet even here it is likely that most of the machinery used in the spotless factories where these high grade components are produced will have come from Japan or Germany and that very little will have been made in Britain.

We are also important manufacturing partners in the Airbus consortium, based at Broughton in north Wales and Bristol. But even here, the original owner of the Broughton factory where Airbus wings are made – BAE Systems – sold its 20 per cent ownership stake to leave it an entirely Continental company. Britain no longer has the capacity to make a full civil airline on its own. Unlike Brazil or Canada for example, the UK-owned aircraft industry is now entirely devoted to multi-country military projects.

Does this patchy picture of a niche product Britain matter? After all, Tata are happy to keep Port Talbot going with a massive £180m rebuilding of one of the blast furnaces, Nissan have just decided to spend £192m in Sunderland because it is the best place to build their new Qashqai vehicle, and BMW is to expand Mini production in Oxford and Swindon at  a cost of £500m?

Yes and no. It is good to have the vote of confidence this implies in UK skills. It is a recognition, too, of Britain’s openness to the world and to foreign investment. Would that all countries made it so easy to acquire their industrial and other assets. At the same time it puts Britain in the position of always being the recipients of new investment and rarely the decision-maker as to when and where it should go – a chronic problem of course in Wales.

It means that it is ultimately finance managers, designers, patent experts, human resources officials and other skilled professionals in Stuttgart, Osaka, Toulouse (as well as in Berlin, Tokyo and Paris) who are making the big decisions about which multi-million contracts to bid for in the developing world. Britain is usually pulled along at a later stage as the grateful sub-contractor, so long as it is still considered a worthwhile location rather than, say, in Slovakia or Poland. It is also perhaps why provincial cities on the Continent – such as Munich, the home of BMW – are so much more vibrant and prosperous than some of their hollowed-out counterparts in the UK, where company headquarters, and hence decision-makers are thin on the ground.

Nor are industries such as those described above, inevitably over time going to drift overseas in the same way as the basic production of consumer goods. The kind of manufacturing in which our continental neighbours, the US and Japan specialise, will go on requiring vast amounts of highly intelligent graduate labour, ever more sophisticated IT processes and costly production equipment. These are just the kind of jobs Britain and, of course, Wales will need – alongside those in new entrepreneurial small businesses – if it is to reduce its dependence on financial services and draw young people into well-paid careers.

In many respects Britain is just Wales writ large a bit later on. The loss of control over British manufacturing destinies over recent decades has been experienced for even longer in Wales. The result is that we have been left almost entirely at the mercy of decision-makers from beyond our borders. And because the consequences have become apparent across the UK, with the financial collapse of 2008, attention is at last being paid to the issue through the “rebalancing of the UK economy” that politicians promise. How it will be achieved, or even whether it can, remains to be seen.

Evan Davis, for all the cheerleading inherent in his approach and the superficiality which a medium such as television with its requirement for visuals demands, has at least brought manufacturing to our attention again and for that we should be grateful.

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Rhys David is a trustee of the IWA. He writes on economic and business affairs.

4 Responses to:“Britain is just Wales, writ large a bit later on”

  1. David says:

    The first thing that needs to be done is to cut salaries at middle and upper layers of the public sector and that includes the BBC. Paxman for example on…..£800k. Why should the most educated venture into industry when the public sector is a road to riches without the risks? Also, the City of London has become too big and like the public sector, is taking the most gifted engineers and scientist to take part in lucrative (for them and not the rest of us) financial engineering.

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  2. Robert Davies says:

    An absorbing but at the same time, disturbing article. We must have a larger element of independent manufacturing in Wales & UK

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  3. A Banker says:

    Spot-on Rhys. Your sense of history serves us well.

    A small story to echo your comments. Civilian mobile telephony was invented by Racal. To capitalise on this in 1985 it launched a subsidiary, Vodafone, to exploit one of two UK cellular telephone licences, the other being held by BT. Well Vodafone grew. Under pressure from the City to realise value Racal publicly listed 20% of the Company in 1988. In 1991 it fully de-merged the two companies because the value of its mobile telephone subsidiary was greater than the value of the core business. We all know where Vodafone is now, but what about Racal? It was involved in a number of areas with defence electronics being the most significant. In 2000 the rump of the Company was acquired by French company Thomson-CSF and Racal was more or less eliminated.

    Here are a few lessons that flow from this story; 1. A British company, Vodafone, is the world’s largest mobile operator; 2, BT, quite possibly to its regret, moved out of mobile telphony when it sold off Cellnet. It is saddled with a legacy fixed line retail business and with customers shifting from fixed to mobile the long term prospects are not encouraging; 3. For an industry invented in the UK, it is sad it does not possess a single manufacturer of mobile handsets or infrastructure; 4. Cambridge is home to Arm Holdings and Cambridge Silicon Radio. They are two of the world’s leading designers and developers of chip technology for mobile communications. But neither manufactures chips; 5. To conclude the UK can still invent and innovate but when it comes to manufacturing at scale we don’t seem to make it. It requires huge dollops of patience and capital and with institutional shareholders (for which read you and me for this is where our savings are managed) too frequently obsessed by quarterly results the world needs to be turned on its head.

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  4. Rhydgaled says:

    While Alstom of France did have a plant in the UK, where I believe it constructed the original fleet of Virgin’s Pendolinos. However, the 4 additional Pendolinos and the extra carriages to lengthen some of the existing fleet from 9-car to 11-car are being built overseas because Alstom shut down their UK plant.

    The last train plant in the UK is located in Derby and is currently supplying DMUs to London Midland. This is owned by Canadian firm Bombardier and has been in the news recently regarding job losses due to a lack of orders in the past few years and Siemens winning the Thameslink stock order.

    Unfortunately Hitachi are not likely to build any locomotives for the UK, the planned trains are a diesel multiple unit with a pantograph, which will have to carry diesel engines and fuel around with it. Much better in my opinion would be to order an electric multiple unit version of the train for the East Coast mainline to cascade the 1990s British-built electric trains there (which DO have locomotives) to the London to Swansea route (which would need electrifying, along with the Severn Tunnel diversionary route) and switch the electric locomotive for a diesel one at Swansea for the trains that proceed to Carmarthen and Pembroke Dock.

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