Strong supply chain can help UK advanced manufacturing compete globally, says Jaguar Land Rover exec

Out-Law News | 30 Jun 2014 | 4:21 pm | 3 min. read

A flourishing domestic supply chain can help the largest UK advanced manufacturing companies compete in a global market, a new report has concluded.

In a review of the UK's advanced manufacturing sector and its supply chain (52-page / 1.82MB PDF) commissioned by the Labour party, Jaguar Land Rover executive director Mike Wright said the interests of large and small UK companies operating in industries such as car manufacturing, life sciences and aerospace should not be "set ... against each other".

"Small and medium sized business in the advanced manufacturing supply chain are crucial to the overall success of the sector," Wright said in his review report. "Proximity and adjacency are important: they help strengthen relationships and communication, allow for shared resources and spill-overs, and enable shorter and more efficient logistical chains."

"We are more likely to have successful large firms if we have a thriving UK-based supply chain, and vice versa. We should never set the interests of large and small businesses against each other. Not only are they interdependent – suppliers want anchor clients, who in turn want to be close to their suppliers – they also both benefit from the same investment environment," he said.

Wright said that it was a "necessity" for all advanced manufacturing businesses in the UK, regardless of size, to export. It is not sustainable for the companies to "rely entirely on the home market".

Specialist in manufacturing supply chain contracting Jayne Hussey of Pinsent Masons, the law firm behind Out-Law.com, said SMEs in advanced manufacturing industries, especially those operating down the supply chain, need more support to access and develop export markets.

"SMEs in the advanced manufacturing sector may, on their own, lack the necessary skills and experience to grow their business internationally," Hussey said. "There is a lot for businesses to do when seeking to expand their exports, from knowing which markets are best suited to explore opportunities in, to understanding the often complex regulatory environment in those countries, and identifying and undertaking due diligence on possible partner companies with which to expand overseas operations."

"Accessing available finance in another issue which SMEs must addresss, but there is a general feeling within the industry that it is difficult to pinpoint where to go in order to seek the advice, guidance and possible access to funding they need due to the many government or semi governmental agencies that provide such services," Hussey said. "There is a need for one central organisation to be identified as the 'go to' body for such services to ensure clear and proper support on exporting."

A separate report by aerospace trade organisation ADS Group said that the UK's aerospace industry is currently growing at ten times the rate of the UK economy generally. A survey of aerospace companies found that growth opportunities identified by the companies are generally being drive by new export opportunities.

Aerospace exports are already worth almost £11 billion to the UK economy it said, but 68% of respondents to the ADS Group's survey said they expect their business to grow at least 10% in the next year with increasing export trade a critical factor in achieving those ambitions.

The UK government recently awarded the University of Sheffield's Advanced Manufacturing Research Centre £7 million of funding to conduct research into large titanium castings for the next generation of aircraft. The university said the largest castings are not currently produced in the UK but that up to 27,000 new planes were needed between now and 2030. Delivering the capability of producing the castings in the UK therefore "represents a huge potential growth area for the UK".

In his report, Wright called on the UK government to increase its funding to support advanced manufacturing businesses' research. He said the amount of public funds made available to UK-based advanced manufacturing companies is dwarfed in comparison to the public money spent in countries such as Germany and China.

"Additional spending on science and technology should be the first priority for any additional public resources to support advanced manufacturing," Wright said. "As a country we spend far too little on research and development: China spends ten times more in absolute terms, while Slovenia and Estonia spend more as a proportion of their gross domestic product."

"We are just starting to invest in the organisations and systems that link research with business innovation, for example spending £440m in 2013 through the Technology Strategy Board. In the same year Germany spent £1.6bn on its Fraunhofer Institutes alone. Other countries see this agenda as a matter of foremost national importance. For example the Japanese prime minister personally chairs their Council for Science, Technology and Innovation. We have a lot of ground to make up in the face of exceptionally determined international competition," he said.

Wright also highlighted a lack of people with the right skills as "the single biggest strategic challenge for advanced manufacturing in the UK". He called for a drive towards increasing the number of "skilled apprentices or graduates".

"The supply of UK domiciled engineering graduates has not meaningfully increased in a decade and remains far below replacement level," Wright said.

Jayne Hussey said that a long term strategy for the manufacturing sector is necessary rather than a focus on "short–term ‘quick political wins’" and that more needs to be done to address the continued skills shortage.

"The sector needs support to ensure it is positioned as delivering good career opportunities for school leavers and graduates," she said.