Thursday, 7 July 2011

British Manufacturing

Evan Davis is making a very interesting series for the BBC, called Made in Britain.
It is often said that British manufacturing can no longer compete with the rest of the world, and that in Britain we do not make anything anymore. This series is showing how completely wrong (and self defeating) that view is.
The first and Second programmes can be accessed here - the third is about services.

A very brief and selective extract is to make the point that Britain is the seventh largest manufacturer in the world. That is hardly "does not make anything". If we accept that the USA and China are numbers one and two, and that Germany and Japan are three and four (at least for the moment) then the best we could hope to be if fifth. Being seventh shows that we are a bit behind where we would like to be - not hopeless. It is like complaining that because as Aston Villa we are not in the Champions League we cannot play football - not true (if we leave the views of Birmingham City fans out of this).

The thing is that once you start to believe this self defeating mantra it becomes self-fulfilling. I have made this point about the UK chemicals industry until people are sick of hearing it. The Chemicals industry is the UK's second largest export - but industry people keep saying it is dead, in terminal decline, not like the old days etc. etc. Of course their business is doing fine, in fact it is growing and they are expanding - but the industry is over, we can't compete..... They practically all say it and end up talking themselves into a pessimistic funk. Heaven help us if the government takes this gloomy myth as reality and acts on it.

One thing British industry needs is to stop running itself down. It is big, successful and there is room for improvement. But it is not over. The people who repeat this ad nauseum have an agenda that Britain is a busted flush. It is not. 7th out of 200 nations is grounds for neither giving up nor complacency.

I look forward to working with more successful British manufacturers in the decades to come.


Anonymous said...

Whilst accepting that therea are still some excellent manufacturers in UK, the perpetual trade deficits and the loss of major strategic companies and expertise has occurred over many years;
In an engineering career overseas in many different industries, the lack of a British presence in terms of equipment etc has been a continual experience.
All is not lost but there is surely a need to drop this complacent comment and by seriou
self analysis,try to stop the rot.
It is high time the professiobal institutes and trade organisations
and goverment got the UK act together!
John Godwin C Eng ret

David Hutchins said...

I beg to disagree with Evan on the inevitability of Britain having gone from 40 plus percent GDP in manufacture to something in the order of 12%. It was not inevitable. It was not only totally avoidable but, had British Industry behaved differently after WW2, we could have stayed well ahead of Japan. The fact that we did not was down to two main factors, first of all appalling lack of understanding of the then modern and cutting edge principles of production engineering based on participation and the incredible arrogance of our then so called industial leaders who refused to accept that they did not know best even when the facts were squarely to the contrary. History shows us that they were prepared to let their companies go down rather than accept that someone else knew better than they.
What advantages did Japan actually have? Both we and they were Island nations just off a major land mass, they had no natural resources of any kind, we had some, they had to import all of their raw materials, then sell back products to countries such as ours who could make them themselves and with the raw materials to do so. The Japanese have a small earthquake on average every day somewhere, we have none, we were close to the major world markets, and with the exception of the USA Western Seaboard, they were isolated. In the decade following WW2 Japan had a reputation for being junk merchants to the world, but overcame it by the production of high quality low cost products not through cheap labour but by excellent methods. Those methods were and still are available to us and have been proven in our society but industry stubbornly refused to accept it and even to this day we are slowly introducing methods that have been known since the 1960sas if they are revolutionary.
We need not have lost our Shipbuilding Industry, automotive including motor cycles, brown goods, consumer electronics or the aircraft industry.
All of this is sad but true.
David Hutchins,

David Hutchins said...

I beg to differ with Evan Davis that the contraction of British industry was inevitable or that it has been compensated for by the rise of service industries desireable though that may be. We could have had both and been as a consequence considerably richer both culturally and financially than we now are.
Following WW2 Britain led the world in shipbuilding with more than 50% of the global market, civil aircraft manufacture, Motor cycle manufacture again more than 50% of the global market, we had in the late 1960s over 10 of the best known TV and Radio manufacturers but by the 1970s this had all gone. Inevitable no!
Japan's post war industrial revolution began in the 1950s. Within ten years from zero they had more than 23 of the worlds largest blast furnaces had revolutionised the means of high volume manufacture and to this day, the world both East and West is playing catch up in the methods employed.
Could we have done the same? emphatically yes. Were the methods used by the Japanese available to us? Yes. Why then did we not do it? Two reasons stand out. Firstly an appalling lack of knowledge of the principles of modern manufacture by polititians at all levels. The clip that you showed Evan of Margaret Thatchers speech on this made me cringe but it was typical of the attitude of the Department of Trade at that time. Undoubtedly they wrote her speech! Secondly, the extraordinary arrogance and stubbornness of the then captains of British Industry. They knew full well what was going on but they proved that they would rather have their businesses go down rather than accept that the Japanese knew better.
What were Japan's intrinsic advantages? in a word None! They like we are an island nation but unlike us they have no natural resources of raw materials. They have to import everything, convert it and then attempt to sell it back to us. To do this they have to be the best quality and lowest price. We could have at least matched that had we had the will to do so. They have on average an eathquake albeit in most cases a small one every two days somewhere. As a consequence there are only a handful of areas where they can live. So they have to put up with densely packed populations around a few industrial cities, hardly an advantage.
In those early days they had a reputation for making cheap immitations of Western products and were known to some as the junk merchants to the world. They turned all of that around in less than a decade!
Bowl of rice a day? Well immediately following WW2 they would have been lucky to have got even that but those days did not last long. By the early 1960s their standard of living was comparable to ours.
This was an extraordinary revolution not equalled in the history of the world. The sick thing is that we could have done it as well! Easily if only we had the leadership and vision. Sad but true.

Anonymous said...

Dream, just dream....until the germans and the japanese build much better, faster and cheaper cars

monkeynut said...

An informative programme, but I found the bit [I will call] 'outsourcing to China is perfectly OK' is wrong, wrong, wrong. He should work in Shanghai, and talk to educated Shanghainese, to learn why. I did for 2 years.

Evan's point was logical. So we outsource the 'expensive' manufacturing bit - only 20% of value. So we keep the 'high end'. China does well. We do well. Sounds good until you consider the inevitable [which the Chinese know more than us]. This is a phase in China's development. In another 5 years, Brewin's business will be decimated by a 'similar' [but cheaper still] Chinese suit business.

They fully appreciate the advantage of 'brand values'. China will buy and/or build up those brand values. Where's the 'high end' for the UK then? It's only a matter of time. And (like manufacturing) only a matter of one sixtieth of the time before they develop these areas. Where next for UK? Inventing and innovation Evan might say. Really? When Chinese University Entrance Examinations would not be passed by the majority of UK University Dons?

Outsourcing to China looks 'OK' if you wear blinkers. Take them off and you recognise it for what it is; only the tip of the iceberg in a massive shift of wealth from West to East.

Freestyler said...

Good to see Brompton on the TV prog, the 'other' innovative, British bike company FactionBikeCo has got a exportable product too. Their Facebook page tells the story of how hard it is to get started in the first place no matter how good your idea is.

Anonymous said...

Evan what absolute piffle the chineese miracle is over !!!!, it was always going to be short term.Only lack of committment from banks, understanding complex costs by accountants, which have ruled here for over 30 years, has cost us all dear Real buisness is very simple high gross margins the pair above want equals low turnover of product,Our next big prob is we have "o" left in basic manufacture !! your guide is old and new marconi look to what happened there to see light

Shouvik said...

The decline of British manufacturing has been largely because of a political ideology, put forward in much of the modern British media, that industry did'nt matter and a 'post-manufacturing' society could rely purely on services and 'invisible' products (banking, law etc). How wrong this idea has been, is shown by the UK's continuing large trade deficit. Evan Davis is right to stress research, innovation and branding all of which add value to a product. However, if you travel to towns such as Burnley and Bolton, the old textile mills there didn't make the transition to more modern products, such as nylon and synthetic fibres. Also, in sectors such as car manufacture, the UK has to import a lot of components, so the value realised from the manufacturing is limited. To build a manufacturing base once more, will take years of investment, and a whole change of culture and political ideology.

Anonymous said...

Anonymous said...
There are a combination of fators that determine how great a nation will become. As a foriegner living in Britain, I have travelled around the world and have come to the conclusion that the main hindrance to economic/industrial growth lies on the political ideology. People are indirectly encouraged to become lazy due to the heavy reliance on the welfare system. Ideas are killed off before making the drawing board. The British still find it difficult to learn from other societies even when these societies have better ways of doing things. The media should be more involved in creating awareness in education, entrepreneurship, and industrialisation, rather than looking for a phone to hack or gossiping on irrelevant issues. One more thing, Britain should realise that the world has changed. She needs to change too if she wants to continue to be a world player.

Ross Dalgetty said...

It annoyed me with evan davis's assesmnt of the new building in london, was it called the wedge? A chinese owned hotel is on the 10th floor... But thats ok, we'll get 20% in tax and we'll be able to sell them accountancy and other services... Say another 10%. Maybe its just me, or does no one else see the fact that 70% remaining is then going back into the chinese economy as opoosed to the british if it was a british owned and run business? Yes, we're good at making money for nothing, but at what price do we sell ourselves out?

Shouvik said...

In response to yesterday's programme on the role of services in the British economy - this is actually nothing particularly new. The City of London was the banker of the global economy from 1870 - 1939. As the centre of what became known as the sterling area, the City financed everything from railroads in the US, copper mines in Chile and industrial diamonds in South Africa. Today, City-based institutions speculate in property (mortgage-backed securities) and related assets and foreign exchange, instead of putting money into real assets that can actually produce and generate real wealth. Countries that succeed economically stress education and skills. If British services, such as education and consultancy (both featured in yesterday's programme) can generate real wealth through the use of knowledge, then they will be able to contribute positively to the overall balance of payments situation in the country.

Anonymous said...

I don't believe its such a good idea to send manufacturing to china,Evan said that it made alot of people richer yes but many were rich in the first place but to many people have been made poorer and many unskilled workers cannot find jobs.This country needs some major manufacturing investment we have to to many small scale manufacture's that employ small amounts of already skilled workers and products produced are usually to expensive for most people.

Anonymous said...

I have to disagree with Evan on British bike manufacturing and Brompton. The manager of Brompton claims that their products are superior than competitors in the far east due to the British design and hand made detailing. This is just romantacism covering up basic flaws in what the company are capable of. The fact is that the far east are world leaders in bicyle manufacturing and design with the abilty to form materials and robot weld to a much higher standard than Brompton can ever dreaom of. Brompton build from cheap high tensile steel, and use ancient joining techniques because they simply do not have the technology that others do. Brompton's reasoning for using steel is completetly misleading, as others have used aluminium (and other materials) to great success.

It is simply wrong to suggest that they are an example of 'low volume, high quality' goods when they are soundly beaten in all areas by those building in China and Taiwan. They are cheaper AND better. Unfortunately people fall for the 'hand built' labeling when it means nothing in the bicyle world except for bespoke builders building to order.

Michael said...

The programme seemed largely to ignore the facvt that UK is in long term relative economic decline? It also ignored the structural problems in the UK economy which disadvantage manufactures; such as fiscal and economic policies which favour consumerism to generate economic growth, such as the regulatory web, such as the strategic multi-lateral trade relationships (and the question of whtehr we have a relative strategic advantage). Surely, if we were serious about manufactures and exports in UK we would load taxation onto consumption, expand access to credit to business not personal and government revenue spending, invest in skills training not just "accademic" qualifications, encourage languages skills and learning inc mandarin, german and french, discourage property speculation and encourage business investment instead.... etc. The UK economy is based on consumersim - usually of foreign goods, property inflation, and high corporate taxation, which all makes making things here more expensive and sellling things here too easy. And this is the context in which we have moved to a "service based economy".