Business Leader Magazine teamed up with Allied Irish Bank (GB) to host a roundtable that brought together leaders of the UK manufacturing businesses, to discuss the issue facing their sector.
Can you tell readers more about your businesses?
Richard Tonkinson: “We manufacture bathrooms offsite for use in a range of sectors including hotels, hospitals, apartments and student accommodation.
“We’ve taken the business from £2m to £30m turnover in only fourteen years.”
Chris Smith: “Marshfield Bakery employ 95 people and manufacture around 70 tonnes of flapjacks per week.”
Tim Harrap: “We manufacture 4.5k tonnes of cheese per year, which is significant but still small compared to the big boys. We have been described by our customers as a bespoke cheese maker.”
What are the key challenges manufacturing businesses are experiencing?
Paul Falvey: “As you’d expect the main issue many of them are facing is Brexit and how do they prepare for the various eventualities.
“With Brexit, some businesses are taking the view that there is nothing they can do. However, we know what the worst-case scenario is – a no deal and World Trade Organisation (WTO) tariffs – so you can prepare and work back from that scenario.”
Mike Dinnell: “Brexit and what the manufacturing sector is going through now is just another name for what it has been through for many years.
“This sector has already had headwinds such as problems with supply chains and political agenda. It’s just a case of getting back into your supply chain and working it through.
“Where we can help is that we want to understand your business and get underneath your working capital and find out where you may have cash trapped and supporting the growth ambitions of the business.”
Stephen Dilley: “Again, the challenges right now are about Brexit and clients of ours are looking at their operating models where they either import or export to the EU.
“Part of this is looking at whether businesses set up an EU footprint and if this should be a franchise model.”
Richard Tonkinson: “We are looking at our supply chain and how we ensure security of it regarding critical components and any imported materials.
“This also means making sure our direct suppliers are holding the stock we need.”
Simon Howes: “We run the barometer of manufacturers and in the latest one we’ve seen the lowest confidence in manufacturing ever and it’s been running since 2009. Businesses intentions for growth, investment, employment are all down at the lowest they’ve been.
“This is because a lack of clarity is resulting in a lack of confidence.
“Regarding how Brexit will pan out, 52% of manufacturers believe it will have an overall negative impact against 36% who are saying it will be positive.
“There is also concern about the free movement of people and perhaps to combat this we’re also seeing more businesses looking at automation and robotics.”
Paul Falvey: “We’re also hearing that many businesses are stockpiling and that factories are full, but this isn’t to do with Brexit but because of capacity and rates. Brexit will only make this situation worse, potentially.”
Tim Harrap: “Half of our cheese is export and half of that is into Europe. Are we sitting on our hands? There isn’t much we can do. Some clients have been discussing whether we stock more products, but we don’t have the capacity for this as we’re a ‘just in time’ business.”
Chris Smith: “We export significantly to the USA. For our UK operations we cannot ignore the impact potential vehicle delays at our borders may have on availability of lorries when we need them, exacerbated by a national shortage of HGV drivers with some 18k plus vacancies reported.
“Many of the ingredients we use are grown and processed outside the UK and traded in euros and US dollars, so we must be mindful of currency changes.”
How do you feel you’ll be perceived as an importer, post-Brexit?
Paul Richards: “Many of our European suppliers are almost offended by the decision that has been made and have taken it personally. It’s as if we don’t want to be their friends any more.
“In terms of what our customers are saying – we’re an unusual importer as we import cladding.
“What is significant, is that our Belgian suppliers put the idea of building a factory in the UK on hold due to Brexit.
“They originally saw an opportunity to benefit from the ‘Made In Britain’ label and put a British stamp on products and export to the US and Scandinavian countries.”
Mark Lippett: “The challenges we’re facing are limited compared to others around the table as we trade in dollars, so we’re dealing at arm’s length from our suppliers. We never bring product into Europe unless our customers are using it.
“One issue has been that partners have been slightly offended and personal interaction did change for a little bit.”
How are businesses reacting to challenges around skills?
Jason Kirby: “12% of our workforce is from the EU and its around same amount outside of the EU. We do have some issues with recruiting outside of the EU as it means visas and it’s a harder playing field to
Mike Dinnell: “We were talking about skills ten years ago and no doubt we’ll still be talking about this in another ten years’ time. How many businesses are now looking at their operational design and considering things such as automation and robotics to help with this?”
What should we do to promote manufacturing and make it more attractive?
Simon Howes: “I was one of the last wave of apprentices in my town and then the factories closed and the ‘dirty manufacturing’ tag came in. The issue I see is that many manufacturers are SMEs and if you’re Airbus or Honda your skills needs are much better looked after. You will have a link up with the college and a ready supply of labour.
“So, how do we aggregate the voice of SME manufacturers and make it meaningful? Automation is one way but it’s quite hard to automate when you’re making ever changing designs. Some regions also have an issue where key STEM skills migrate out of them and skills are then lost.”
Chris Smith: “There are good examples of businesses that put recruitment infrastructures in place some years ago and are now reaping the rewards of having a strong pipeline of talent in place.
“We started this 6 years ago when we were just 18 people and we now have 95 skilled staff. Another West Country manufacturer I know of has a member of their team whose principal role is to work with the local community and schools to attract future talent.
“Working with schools, universities and other providers enables businesses to think ahead and plan to fill future skills requirements.”
Are businesses thinking about technology and automation to solve recruitment issues?
Richard Tonkinson: “It would be interesting to see how it works and we can look to put this in place if we have workers – who are concerned about political environment and currency exchange rate.
“They still want to work for us, but they may want to work remotely and technology is allowing us to look at alternative options.”
Henry Herbert: “In our business attracting talent can be difficult, as old bakers would have gone to college and then come to us, but all of that is shut now so the pipeline is challenging. We have bakers coming from French colleges, which is great, but how long is that going to last?
“Do we grow our business, so it is more automated, or do we stick with the more labour-intensive model? Having the skilled staff is vital, because if you just shoe horn people in it can be a nightmare.
“I guess we need to create our own bakery university. Or do we change our business model and bring in more automation? This is a challenge because we’d need to keep updating our machinery in line with product changes.”
Are we seeing more manufacturing businesses looking to export?
Paul Falvey: “Not hugely and we wouldn’t always encourage them to do that as it’s not always a sensible business strategy. Surely you exhaust markets you already understand before you look at expanding into other ones.”