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Thursday, 21 March, 2002, 08:40 GMT
The death of British manufacturing?
Ford Dagenham plant, against the Union Jack flag
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By Emma Clark
BBC News Online business reporter
line

Part of a series of special reports on the state of British manufacturing

For 47 years Russell Luckock has run his engineering company in the Midlands by the seat of his pants.

His corporate strategy has amounted to getting up in the morning - and investing in new machines.


All I want to do is ride out the storm and hold the team together

Russell Luckock
A.E. Harris
During the last half-a-century, he has also watched UK manufacturing dwindle from a powerful industry into the sickly sector it is today.

Just before Mr Luckock joined his engineering company, A.E. Harris, after the second-world war, almost half the workers in Britain were employed by the manufacturing industry.

Today less than 15% of the UK workforce makes a living from the sector.

Click here for a Q&A on UK manufacturing

Dark satanic mills

Since the service sector took over the British economy, manufacturing has become seen as a worthy-but-dull industry, past its sell-by date.

Russell Luckock, A.E. Harris
Mr Luckock believes manufacturing is essential
Many people leaving university today would never dream of going into industry.

Even Mr Luckock admits that none of his three daughters wanted to join AE Harris, preferring other professions.

"Manufacturing is perceived as an industry of the past and not of the future - and we need to change that perception," says Ian Greaves, a partner at KPMG in Birmingham.

"Information technology and the services sector seem sexy, highly profitable and the place to be.

"By contrast, manufacturing seems like dirty, old, greasy metal-bashing."

Terminal decline?

Whereas manufacturing once accounted for almost 40% of the UK's output, it now represents less than half that.

It has declined steadily over the past 30 years, giving way to competition from abroad, particularly the Far East where labour is much cheaper.


Britain is a rich country - we don't want to do repetitive things with our hands

Professor Tim Congdon
"I pay a press operator between 4.50 and 4.75 an hour, whereas in China it costs 40p an hour," says Mr Luckock.

This has led some economists to argue that manufacturing in the UK is no longer a viable proposition.

"Britain is a rich country - we don't want to do repetitive things with our hands," says Professor Tim Congdon, chief economist at Lombard Street Research.

"We should do unique and specialised tasks requiring the use of our brains."

Survival of the fittest

Even die-hard manufacturing experts believe that British industry needs to adapt to the new conditions.

KPMG's Mr Greaves, who works with many Midlands manufacturers, says companies need to "change or die".

"For old manufacturers with old machines and a workforce stuck in its ways, things are pretty dire," he warns.

"But if you are flexible and forward-thinking and open to new ideas, you're alright."

One company in Birmingham has certainly risen to the challenge.

Over the last four years, Hydrapower Dynamics has turned itself from a manufacturer of hose assemblies into a provider of engineering services.

The catalyst for change was a dramatic decline in business and competition from bigger companies.

"If we hadn't done that, we would have remained small and not grown," says Mr Browne.

"And eventually, we would have had to batten down the hatches."

Recession bites

Hydrapower's services business helped keep it afloat during the latest downturn.

By contrast, the manufacturing side has seen its profits fall by 12%.

Unlike the booming service industries, manufacturing has been in recession since January 2001.

At A.E. Harris, Mr Luckock has seen a 20% drop in revenue.

But they are the lucky ones - many other Midlands manufacturers have gone bust in the last six months.

A strong pound has exacerbated the situation by making it much harder for UK companies to compete on price with their European rivals.

Green shoots?

In recent weeks, however, industry surveys have suggested that manufacturers are feeling more optimistic about a recovery.

Both Mr Luckock and Mr Browne believe conditions cannot get much worse.

The Confederation of British Industry predicts that growth will return to the industry in 2003, after falling by 1.5% this year.

  Click here to see graph of quarterly manufacturing output

"There is an element of green shoots coming through," says Andy Scott, a director at the CBI.

Economic lynch-pin

But how important is it for the UK that manufacturing regains some of its dignity?

"It is essential to have a manufacturing base - it is part and parcel of this country's well-being," argues Mr Luckock.

Certainly, more exports by the manufacturing industry would help to reduce the UK's trade deficit which has suffered from the UK's love of imports.

The CBI's Mr Scott also argues that manufacturing underpins the economy by supporting many of the service industries, such as distribution, transport and financial companies.

'Natural progression'

On the factory floor, most companies face more immediate problems - like surviving.

"All I want to do is ride out the storm and hold the team together," says Mr Luckock.

And then?

"Well, it's natural progression isn't it? If we can hang on a lot of the capacity will have gone out of the market. The companies left behind will benefit."

Perhaps even the gloomy cloud hanging over the manufacturing industry has a silver lining.

  Click here to return

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KPMG's Ian Greaves
"I think that manufacturers who are not prepared to change could well be a dying breed"
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