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It’s been a little over three years since I joined Interim Partners and looking back over previous blogs it’s plain to see that not a lot has changed in terms of the macro-economic landscape. We’re still talking about recession albeit with the emphasis on double dip, on tough markets and the need to become ever more competitive, but what will prove to be the catalyst for the change that will bring about an upturn?
With growth stalling even in the BRIC economies, it’s difficult to see what will provide the impetus for growth. Could it be that we have to wait for the Euro crisis to be resolved before companies will pick up investment? It would seem that the political will is lacking with Europe’s leaders adopting a wait and see attitude rather than tackling the problem head on, as this would lead to the inevitable admission that the currency was flawed from the start and cannot continue to function in its current guise. It will also lead to a painful, if short lived, adjustment – something that is rarely a vote winner.
It’s difficult to see what else could provide the stimulus and I suspect that we will be forced to live with the current uncertainty until markets intervene and make the decision for the politicians. This looks increasingly likely to be sooner rather than later given the pressure from private investors in Greek debt!
We live in interesting times as they say…
Tom Legard is Head of Manufacturing at Interim Partners.
Click here to read other blogs on the Industry sector
I ask the question because I’m curious, and delighted, by Cameron’s veto of the latest European Treaty that is being cobbled together to prevent another financial meltdown happening in future.
Why delighted? In the main because the amendment to the Treaty does nothing to solve the Euro crisis and was very clearly another attempt to undermine the City in favour of Paris & Frankfurt. We haven’t seen the full implications of this yet, but will we be marginalised? I doubt it! Also, I must confess that I was delighted because I never thought a MP of any colour had the backbone in this current day and age to say “No!” (or should I say, “Non?”).
Why curious? Well for the simple reason that Manufacturing is more important to the UK than the City, but never gets the same attention! Manufacturing actually employs around 2.5 million people and contributes 12% of our GDP, whereas Financial Services employs 1.1 million people and contributes 10% of our GDP.
So why say no to a Treaty that protects the City when European legislation – employment directives, carbon levies, environmental and waste management directives, the list is long –continues to hamper manufacturers?
Is there an argument to say that Cameron should have said “Yes” on condition that UK manufacturing was freed from Brussels red tape?
On a final note, wishing all a Happy Christmas and New Year!
Tom Legard is Head of Manufacturing at Interim Partners.
Click here to read other blogs on the Industry sector
It’s very interesting to read that Vince Cable has nodded through a controversial European directive to give agency workers the same rights as full-time employees. It is estimated that this will cost firms £1.8bn a year.
Not only that, but the IoD is claiming that the Government “gold-plated” this directive and maintain that this law could have been introduced in a far more limited form – and this at the behest of the Unions!
So much for the Governments promise to cut red tape to aid business, but why is The Manufacturer reporting that the uptake to The Red Tape Challenge by manufacturers has been so embarrassingly low to date?
We can hardly complain if we don’t take our case to Downing Street – but why the inertia?
Tom Legard is Head of Manufacturing at Interim Partners.
Click here to read other blogs on the Industry sector
Vince Cable launched a new government initiative this week called Made by Britain. Inspired by Prince Albert and the Great Exhibition, it too is designed to show off British design, innovation and manufacturing expertise and is designed in part to answer calls for better government engagement with UK manufacturing.
The event launch was attended by multinationals including Tata, owners of among others Jaguar Land Rover, Corus, Brunner Mond and British Salt; the Swedish owned SCA Hygiene Products; the US and French Private Equity owned United Biscuits as well as financial institutions including RBS, owned by the British Taxpayer (and failing to meet lending targets to British SME’s.).
Does this last paragraph sum up the long term problems faced by UK Manufacturing or is it something else – red tape or poor education in our schools?
It’s a curious state of affairs that this Government is on the one hand keen to champion manufacturing and yet continues a long running UK policy that allows leading British firms to be easily swallowed up by international competitors. Less well known but former FTSE listed businesses that failed to hit the headlines when recently sold off include Tomkins to the Canadians; Chloride and Delta to the Americans and with it their profits and the source of cash for reinvestment, essential to maintain competitiveness.
Cambridge University has produced research that demonstrates if we increased our manufacturing exports by 10% while simultaneously reducing our imports by 10%, we could balance the deficit. So why is the UK so ready to sell off our leading companies and watch the profits repatriated elsewhere? Would we even have to reduce imports by such an extent to balance the books if we still owned these companies and would reinvestment in the sector then rival our German cousins?
With this research in mind, where is the focus of this support? For those with a darker sense of humour, this sense of frustration was summed up by the senior representative for SCA’s Hexham factory. He was at pains to emphasise at the Made by Britain launch that although manufacturing Loo Roll does not fit with headline policy for high value, niche products, it is an essential commodity that supermarkets demand is sourced locally and which involves highly sophisticated automated machinery in the production process. Is the support misplaced?
Mark Prisk our Business Minister was also championing manufacturing on a two day tour of the Midlands. He visited leading local manufacturers including Armitage Shanks, the US owned manufacturer of amongst other products, loo’s!
This policy of focussing on ‘knowledge based industries’ at the expense of less glamorous manufacturing also extends to the defence sector, a sector that comprises large elements of both knowledge based industry with traditional manufacturing. Yet business leaders in the sector have ‘reluctantly given up telling government of the sector’s annual contribution of £35bn to national GDP since “they do not listen.”’ And this, the one sector where the UK still owns leading global companies including BAE Systems and Rolls-Royce!
Are Vince and his minions merely paying lip service or are they serious, in which case how should they manifest this support?
Manufacturing in the UK is competitive at the moment not because of government support, but in spite of it. A weak pound is a major factor in the sectors current good fortune, but when the BoE follows the ECB in raising interest rates this will undermine that position and that’s when support will really be needed. Let’s hope it’s there!
Tom Legard is Head of Manufacturing at Interim Partners.
Click here to read other blogs on the Industry sector
Rolls-Royce is a truly great British success and the name is still synonymous with ‘the best’ you can buy, even if the company is almost unrecognisable in its modern incarnation with the exception of their world famous logo.
In no small measure this is due to Sir John Rose who retired as Chief Executive. During his 15 year tenure at the helm of the UK’s most prestigious manufacturing business, he took the business to new heights with a record order book and more than tripled the share price.
His success however does beg the question for UK Manufacturing – if he can do it, why can’t others?
Tom Legard is Head of Manufacturing at Interim Partners.
Click here to read other blogs on the Industry sector
This time last month I was particularly bullish about manufacturing, reflected in the performance of the Manufacturing Practice at Interim Partners where activity has been double that of Q1 last year. Since my last blog though, I’ve subsequently noticed a definite slowing of activity that has also been felt by a number of interim managers I talk to. Has Osborne got it wrong and is ‘irritating’ Ed Balls on the money?
GDP output for Q1 is looking likely to have grown 0.8% against a forecast of 0.5% according to estimates (up from a 0.3% increase this time last year) which will provide a major boost for Osborne, but OECD estimates will give Balls ammunition as they predict the UK growth to be one third the pace of other major economies.
Confidence in the manufacturing sector saw a fall in the March PMI index to a 5 month low as manufacturing growth was weaker than expected, although still very much in positive territory – one all!
There is no doubt that the Government is taking flak on many sides and there is a deep sense of unease about spending cuts, with pundits asking why we can’t follow the Americans with their QE program to stimulate growth (although I see no mention of adopting their labour laws!). However, Osborne retains the support of business with Lord Jones giving a robust defence of his budget and the OECD urging him to stay the course amidst concerns the US recovery, based as it is on QE, is unsustainable and storing up future problems.
Despite the uncomfortable feeling that recovery is still very fragile, it’s looking like Osborne has made the right call. After all, what are the alternatives?
Tom Legard is the Head of Manufacturing at Interim Partners.
Click here to read other blogs on the Industry sector
Spring is in the Air!
Where did January & February go? Suddenly, the snow is a diminishing memory, the sun is shining here in Harrogate and the evenings are getting light again!
The manufacturing sector has also an upbeat feel, decidedly more so than this time last year when the interim market was very sluggish and opportunities scarce. What are the drivers for this? Is it due to confidence instilled in business by the Coalition’s policies to cut the public sector budget; is it due to the competitiveness of Sterling that is behind the drive in exports; or is it due to sentiment, that like the seasons, is changing for a sunnier outlook?
The Coalition cuts are looming large but for those of us operating in the Private Sector, the cuts have yet to be felt and as Ben Broadbent comments in The FT ‘fiscal tightening in the past coincided with growth, not recession.’ Perhaps the risks to the economy touted by opponents of the cuts are being overstated? From my perspective, activity for the Manufacturing Practice in Q1 is forecast to be more than double that of Q1 2009 which would indicate that history is repeating itself.
Sterling remains competitive from an export perspective, and UK manufacturing grew rapidly in February pushing the PMI index to levels not seen since the heady days of the 1980’s (although interestingly China is going the opposite way)! Certainly all my clients are reporting strong orders and increased activity and although still some way below the levels prior to the recession, planned projects shelved during the dark days of 2009/10 are being dusted off for review.
All good stuff, but it strikes me that the more upbeat feel is also due to a number of positive announcements. For example, Thai owned SSI announced it is due to complete the acquisition of Redcar Steelworks and create 800 new jobs; Jaguar Land Rover has confirmed £2bn of contracts for 40 UK companies to supply the new ‘baby’ Range Rover; Hitachi confirmed that it will be creating 500 new jobs in Co. Durham to fit out their Agility Trains; activity in the construction picked up in February with Persimmon announcing 2010 profits double that of 2009 and finally, the M&A deal market is beginning to gain some momentum.
There remain many clouds on the horizon for manufacturers none the less. The tumultuous events in the Middle East and North Africa have pushed oil prices above the $100 mark with inevitable consequences for Q2 output; the European Debt crisis has gone quiet but is far from over, and the MPC are becoming more hawkish in their view of interest rates with I suspect, negative consequences for many struggling homeowners and companies. It remains to be seen whether we’ll be caught in a storm by these events, but I suspect the oft quoted ‘Double Dip’ when GDP unexpectedly dipped in Q4 is something we have avoided…
I look forward to hearing your thoughts.
Tom Legard is Head of Manufacturing at Interim Partners.
Click here to read other blogs on the Industry sector
With Christmas fast approaching, I’m curious to hear the views of the interim community as to what is in store for 2011 – will it prove to be another tricky year, or do the manufacturing output figures, ahead of forecast for another consecutive quarter, bode a more prosperous year ahead?
The debate about Public Sector cuts in the media have subsided to an almost inaudible squeak courtesy of the weather, the Euro, and ongoing debate over tuition fees, which also leads me to ponder an earlier headline – UK Manufacturing to Collapse in 2015. Will fee increases exacerbate an already tight skills shortage that could actually presage a collapse, or will they have little if any impact? I’m interested to hear your thoughts.
I digress – the year ahead. 2010 has not been the easiest year for many interim managers I talk to, but there has been a marked improvement in recent weeks and despite low volume for the higher £750+ per day roles, there remains encouraging levels of demand at the £500-600 level. This reflects the same pattern as Q4 2009, although demand is up by 25% for the manufacturing sector. My only concern is that if this trend follows into 2011, we can expect a 37% drop in activity levels looking at statistics for this year, with no real movement until Q2.
I think we all share concern that the Eurozone could cause a fairly major headache later next year, partly because exports could be hit if the Euro crashes and Sterling loses competitiveness, but more likely because it will suck up precious credit reserves, much needed for growth.
The global economic recovery is strengthening, underscored by a glance at the Commodities index (cause for concern in its own right!), driven in the main by continuing growth and appetite for resource in the Asian economies.
Forgive the analogy, but instinct tells me that whilst next year will be more ‘The Ghost of Christmas Present’ than ‘Scrooge”, it remains in my view a pretty tough outlook for interim manufacturing specialists. I would be interested to hear your thoughts on what you expect will be the main drivers for the next year.
Finally, my thanks to all my interim managers and clients. I’ve thoroughly enjoyed working with you all this year and I look forward to building on our successes to date in 2011 and beyond.
Wishing you all a very Merry Christmas and a Happy and New Year!
Tom Legard is Head of Manufacturing at Interim Partners.
Click here to read other blogs on the Industry sector
You have to laugh, after all the howls of anguish from Labour and the Unions about the cuts announced last week, we’re now told that economic growth over the past six months has now hit 2% – the fastest pace of expansion seen over two consecutive quarters for 10 years!
This was driven by rising activity not only in manufacturing (the largest contributor to this growth), but even Construction – an area we were told that would be consigned to oblivion and cause a double dip! More interesting, this is the first reflection of the Coalition’s period in Government.
So why all the fuss? Why do the Doom Mongers seem to hold sway? The Coalition is arguably not cutting spending – in 2015, spending will still be higher than it is today (ignoring inflation) so why the anguish? In real terms, spending will fall back to 2006/7 levels – is that really cuts? Was that such a period of austerity? When looking at the spending cuts from this perspective, you have to wonder why all the hand wringing and dark talk of a stagnating economy!
What about the argument that these cuts don’t go far enough? Surely, the best stimulus would be tax cuts, or reducing red tape for businesses that would provide a huge shot in the arm for UK Plc’s? Adding 10% to companies energy bills in the name of combating global warming – £1bn a year additional tax – is hugely counter productive, especially given that Manufacturing is leading factor in our economic growth and will bear the brunt?
I would be very interested to hear whether our interim managers feel that the cuts are regressive or progressive, and whether you think they will hit you in the pocket over the coming months? Please share your thoughts with me.
Tom Legard is Head of Manufacturing at Interim Partners.
Click here to read other blogs on the Industry sector
Many will have read the comments made by Professor John Bryson at the RGS conference earlier this month, where he said that a skills shortage threatens the survival of UK manufacturing within the next 5 years. But is this just scaremongering in the face of savage Public Sector spending cuts, or a realistic assessment?
Today, Jaguar have unveiled a World first at the Paris Motor Show. An electric powered supercar capable of speeds over 200mph and unbelievably capable of covering more than 550 miles without needing to be recharged through a plug – the nearest competitors can manage is 100 miles! And guess what? The technology was designed by a British Engineering business based in Shropshire – can it really be possible for the UK to have companies with such advanced engineering teams faced with such dire outcomes?
And what about the skills required for the Aircraft Carrier projects – if BAE Systems have already invested £1bn in the project and have 10,000 people involved, how much have other key suppliers invested, and how many people do they have involved?
I think these predictions are designed to make a point and to caution a Government poised to slash spending in University research budgets. UK manufacturing is now generating more in terms of value than at any since 1966 when manufacturing employment peaked, by focussing on high value, precision engineered products – not something that can have been achieved without a steady flow of new entrants to industry.
What are the views of the interim community specialising in manufacturing and engineering – are you really a dying breed and all set to retire in 2015 along with the designers and manufacturers behind the Jaguar success story and the Aircraft Carrier projects?!
Tom Legard is Head of Manufacturing at Interim Partners.
Click here to read other blogs on the Industry sector
