News Script: The future of the UK's manufacturing
MA coursework 2015
This report is aimed at a UK audience of educated 16+, ABCs, for an economics/ business slot on Newsnight/ Channel 4 10pm News.
Cue: British manufacturers face uncertainty over future tariffs and trade agreements, following the decision to leave the EU.
However, in recent years, small to medium-sized businesses in the engineering, aerospace, pharmaceutical and automotive sectors have seen growth in the UK. These industries were once sent overseas for cheaper costs, but now they are returning to Britain.
Our Business Correspondent, Anna Fleck, has gone to find out what’s next for British manufacturing, and whether the engineering sector can withstand the tremors of the recent referendum.
Britain was once the workshop of the world. But since the closing of the mines, manufacturing has gone into serious decline.
In the early 2000s, companies sent their work to countries that offered cheaper labour. This is known as ‘offshoring’.
Len was fired from Philipp’s electronics company in Cambridge, when they decided to send their work to Mexico.
Len Howlett, Senior Chief Research Laboratory Technician, Cambridge University: I should think there was probably about 150 people made redundant, just from our work area in the radio paging department. But eventually, they shut the whole building and there were a lot more people laid off, 400 people.
Len helped build a production line for 5 million radio pagers in only 10 months. Despite the fact his team exceeded the company’s annual target, one of the production lines was broken down and sent to Guadalajara, Mexico.
Len Howlett, Senior Chief Research Laboratory Technician, Cambridge University: Apparently no matter where you make stuff in the world, the costs of the raw materials are about the same, but it’s the labour that bites you, see, and they reckoned because the Mexicans didn’t need to be paid as much as us, they could make them instead of us. Which was a bit sad, so we ended up breaking the whole line to pieces and we were made redundant and they sent us away.
Now some companies are coming back to the UK. This is called reshoring.
Ian King, Productivity and Performance Division, EEF: The common mistake is people just look at the piece part cost, labour cost. Then add additional inventory, defect, responses. Once you start adding those costs in, it’s actually not that much cheaper [to send work abroad].
Cambridge Precision is one such example.
This engineering company specialises in small batches of high-tech engineering parts for planes, defence and even medical robotics.
Richard Hobbs, Chairman, Cambridge Precision: So some of the parts we do here for the aerospace sector. They are sort of 'criticality one' sector, components that cannot actually fail. A niche sector with full accountability and traceability, and so the quality is second to none. I think that is one of the driving things for a lot of reshoring - the whole level of transparency available here in the UK, in comparison to what had previously been offshored.
By being at the top of a very niche market, Cambridge Precision is more resilient to external shocks like the UK's exit from the EU. Companies like Cambridge Precision must remain at the forefront of digital technology to succeed in the highly competitive global market.
Richard Hobbs, Chairman, Cambridge Precision: I think we've moved away from the myth of dark satanic mills, and now have become very, very high-tech. With this change, there has been the transition of skills, once traditional craft skills that are now more computer-based, craft-based. Quite an evolutionary step.
This evolution towards automisation, or computer-controlled work, means that jobs for middle-skilled workers have basically disappeared.
Chris Horne, Machinist, Cambridge Precision: I think they have let too much of the skills and the industry go, relying just on becoming um I don’t know, a computer-driven Research and Development country, or just a financial hub of the world, as they say. Because there’s a lot of people that need to get involved with the industry, which would give them a job.
Manufacturing lobby group EEF found that businesses that offer high-quality customised goods for niche markets are more successful.
Ian King, Productivity and Performance Division, EEF: We are seeing far more customers now wanting bespoke product, rather than mass-produced volume. Customers saying we want that rather than like this. And that becomes far easier with a local supply chain.
Brompton Bicycles makes customised fold-up bikes. For many, it’s the ‘Made in Britain’ trademark that makes them so desirable. And so, the company never saw the need to leave the UK.
Brompton is based in West London. With 80% of its sales being exported, the company is thriving both here and internationally.
Nick Charlier, Communication's Executive, Brompton Bicycle: I think the Made in London message is really important. The fact it is made here resonates. People know it is made well here. In Asia, it's a particularly strong thing, the British product. You know it will be built well.
Nick Charlier, Communication's Executive, Brompton Bicycle: The reason our bikes are made to such a high standard is because they are built in London. They always have been. All staff trained over 10, 20, 30 years. If we moved away from London, even within the UK, we would lose that skill because they all live locally. We would have to almost start again. It would be detrimental to the business if we moved away from London.
EEF says that confidence in the manufacturing sector dropped by 10 percent across the UK after the June referendum.
Swati Dhingra, Economics Lecturer, London School of Economics: A lot of companies want to come to the UK because of the European base from where they are going to service the rest of the EU. That option now is not that attractive. Still, there are a lot of benefits to offer to other companies. London, England, the UK, still have a lot of benefits to companies. But if tariff barriers and non-tariff barriers come into place, to trade with the EU, it will make it a much less attractive place to do business from. Which is why I think Brexit is not going to be the push to bring manufacturing back. What could be a push is if some big industrial strategy comes into play.
Tony Burke, Assistant General Secretary, Unite the Union: What we need is a government that has a strategy. We can’t have decent public services, we can’t have a decent national health service unless you have a strong manufacturing base, that we make things, and so we have to keep arguing that. Instead of slogans, we have got to invest in manufacturing. We have got to invest in the supply chain.
Reshored companies with niche markets appear to be less affected by Britain’s exit, and in many cases are even experiencing short-term increases in exports with the fluctuation of the pound.
However, for the time being, at least, the longer-term impacts on British manufacturing don’t look overly optimistic. This is Anna Fleck reporting for City News.
In: Britain was once…
Out: …Anna Fleck reporting for City News.
Dur: 7.09 mins