After years in shadows, British industry shows signs of revival

Written by Reuters | Updated: Jul 25 2014, 07:02am hrs
New business is coming from unexpected places to help power the whirring, high-tech lathes on the factory floor of Future Advanced Manufacture, one of the companies spearheading Britains manufacturing revival.

Even the Germans are starting to deal with us, which is unheard of, said Future AMs managing director, Craig Peterson.

Manufacturing accounts for only a tenth of Britains economy, compared with more than a fifth in Germany, Europes leader in the sector. But British factories are in the midst of a resurgence.

A major business survey this month showed the balance of manufacturers reported that domestic sales rose during the second quarter to the highest level since records began in 1989.

Future AM produces and tests parts for companies including plane maker Airbus and Schlumberger in the oil and gas industry. Among its new clients is a German space and aerospace company, which Peterson declined to name. It buys propulsion parts from the firm based in Cheltenham, England.

Nearby, many other manufacturers are thriving, making the region one of the leaders of Britains industrial revival along with the East Midlands which is home to train and car-makers.

With less than a year before the next general election, clearer signs of a more balanced economic recovery would be a boon for the ruling Conservative Partys prospects. Toughened by years of economic malaise at home and by crisis in their biggest export markets in Europe, Britains manufacturers are finally clawing back their lost output, although it remains 7% short of pre-crisis levels.

Exports so far have not picked up as hoped, one of the disappointments of the economic recovery. But there are signs that might be changing.

British manufacturing export orders growth has outpaced the world average for 15 months in a row, a run unmatched since global records began in 1998, showed Markits purchasing managers indexes. EEF, Britains industry group for manufacturers, said the experience of the financial meltdown and the debt crisis in the euro zone spurred factory bosses to seek new markets. Whereas China in 2007 was only the 11th largest export market for British manufacturers, last year it was the seventh. Russia and India are expected to enter the top-ten in the next few years, according to EEF-Barlcays research. Surging orders worldwide for the next generation of airliners have also boosted British manufacturing, particularly in the countrys south west which is home to major aerospace and defence plants owned by Airbus and BAE Systems.

ADS, a group representing the aerospace and defence industry, says the order backlog for airliners equates to around nine years work for British companies.

The automotive industry is booming too, having weathered some heavy blows over the last 10 years.

MG Rover Group, the last major British-owned high-volume carmaker, folded in 2005, and last year Ford ceased vehicle assembly in Britain after more than a century although it still makes engines there. But the likes of Nissan, BMWs Mini unit and Tata Motors Jaguar Land Rover have invested heavily. Nissan will next year begin producing Infiniti luxury cars from its plant in Sunderland, north east England. The Society of Motor Manufacturers and Traders expects car production to exceed its 1972 record high of 1.92 million by 2017. British manufacturing is brilliant at the moment, said Graham Mulholland, managing director of EPM Technology in Derby, which makes hi-tech composites for production cars and Formula One racers and is seeing double-digit growth this year.

Despite the upturn, manufacturers still face hurdles.

The manufacturing resurgence has been less strong in England's north west and north east. The unemployment rate in these regions sits above the national average of 6.5 percent, unlike the south west and East Midlands. And the strength of the pound remains troublesome for manufacturers, having gained around 3.6 percent against the U.S. dollar over the last six months.

"It's always tough. At the moment we're obviously not as competitive as we should be over in the U.S. because of the weak dollar," said Peterson from Future AM.

The Confederation of British Industry, cites political risk as the main threat to the recovery, ahead of the Scottish independence referendum in September and next year's 2015 election.

Consistency in government and monetary policy is key, said EPM Technology's Mulholland. We don't need fandango new ideas - we need to have the ear of government, he said.

Attracting skilled staff also presents a challenge as factories big and small ramp up their hiring. A survey from the Recruitment and Employment Confederation showed engineers topped the list of most in-demand staff last month. We estimate that, thanks to burgeoning order books, the evolving sector and 82,000 retirees, this country will need an additional one million engineers by 2020, said Ann Watson, chief operating officer of skills council Semta.