1) Renewed Government focus upon manufacturing & specifically engineering and other Science Technology, Engineering & Mathematics (STEM) subjects.
Since the ‘fall from grace’ of the finance sector in the 2009 crash the UK Government has recognised that a successful economy depends upon trade and manufacturing. This has given impetus to a tranche of new initiatives aimed at supporting the Engineering and manufacturing sector at all stages in the supply chain. Much of this focus has tended to be biased towards the Aerospace and automotive sectors where Government believes it can realise the best returns for what are limited resources but this nevertheless has a positive impact on all suppliers to these sectors and related areas. In 2014 they published an industrial strategy; (www.gov.uk/government/uploads/system/uploads/attachment_data/file/306854/bis-14-707-industrial-strategy-progress-report.pdf) which developed specific strategies for what have been ten sectors; specifically:-
- Agricultural Technologies
- Information Economy
- International Education
- Life Sciences
- Offshore Wind
- Oil and Gas These sectors have been underpinned by the identification of five cross-cutting themes:-
- Access to Finance
- ‘Other issues of cross-sectoral significance ‘
The result is a two dimensional matrix strategy in which each of the primary sectors has been given ministerial sponsorship and a number of specific initiatives to further their cause. Recognising that many sectors (including that of the BFPA) do not naturally fall into the primary industries identified in the government strategy, BIS has agreed to provide support on a case by case basis for other sectors willing to undertake their own initiatives and ‘dove-tail’ their strategies into that of the Government. BFPA in conjunction with EAMA has undertaken one such initiative for the Engineering and machinery supply sector. This initiative is still in the early stages of development and the BFPA CEO sits on the steering group managing it.
2) Access to funding
For some years access to funding for companies in the manufacturing sector has been a major issue – especially in the SME sector where risk of non-repayment of loans is highest. Consequently much work has been undertaken by organisations such as the BFPA in lobbying government to put the finance sector and banks under pressure to reduce or remove what were widely accepted to be disproportionate terms of business. One consequence of this inflexibility has been that many companies have found alternative means of funding their activities and with the return to healthy economic growth many now have strong business pipelines and no longer require the kind of support previously required from their banks. In essence, the tables have turned somewhat and banks are now seeking to repair their reputations as unco-operative and parasitic institutions and become much more business friendly. Whilst we shall never see a return to the old personalised banking of the sixties and seventies many banks, notably Lloyds have made significant progress in this aspiration and with the support of government there are now a number of new sources of finance available from both the banks and a number of government departments. E.g.
- The Advanced Manufacturing Supply Chain Initiative (AMSCI)
- The new Regional Growth Fund initiative (RGF)
- The Growth Accelerator Programme
- The R&D Tax Credit system (hmrc.gov.uk/ct/forms-rates/claims/randd.htm)
- Funding Circle (www.fundingcircle.com )
- The new business bank www.gov.uk/government/uploads/system/uploads/attachment_data/file/203148/bis-13-734-building-the-business-bank-strategy-march-2013.pdf Business banking insight website
- Lloyds SME engagement strategy (Business Finance Guide now available)
- whilst the Governments ‘Business is Great’ campaign and website now offer a selection of related services at:- www.greatbusiness.gov.uk/
- Another very good source of information relating to access to funding is now available at: www.gov.uk/government/uploads-sme-access-to-finance-measures
3) Prompt / late payments:-Like access to funding, late payment regimes and disproportionate terms of business, particularly amongst tier one suppliers in the manufacturing and engineering supply sector have long been the catalyst for complaints and lobbying initiatives. The Government recently undertook a public consultation on the subject and the CBI is developing a policy document on the subject as part of a new lobbying initiative. BFPA contributed to the consultation exercise and are involved in the associated CBI workshop. The problem is not easily addressed as any robust action puts the customer relationship at risk and SME’s, particularly those at the lower end of the supply chain, are loath to be too stubborn or proactive. Nevertheless, the BFPA continues to work on this topic and Government interest in the subject can only help. Threats to instigate a ‘name and shame’ policy would appear to be having some effect but there is still a long way to go and government are afraid of upsetting the larger companies so close to an impending election. Perhaps one of the more encouraging developments was the publication of the Governments new Small Business, Enterprise and Employment Bill in June 2014, which includes a number of clauses relating to companies having to publish their payment practices whilst smaller companies now have greater rights to invalidate contractual terms that are disproportionately restrictive or quite simply, demonstrably unfair.
4) Skills shortages
With improvements in access to finance, the UK skills shortages in the engineering sector have long since been the primary obstacle to business growth. The statistics are well known:- 80% manufacturers are experiencing recruitment difficulties and two-thirds of those say this is because candidates lack technical skills:
– 146,200 job vacancies (22%) in 2013 were unfilled because of inadequate skills, compared with 91,400 (16%) two years earlier. (UKCES SURVEY)
– 100,000 STEM graduates are needed a year just to maintain the status quo (The Royal Academy of Engineering)
– In the UK some 23,000 engineers are graduating every year. (But India is producing eight times as many, and China 20 times as many.)
– 830,000 graduate-level STEM experts and 450,000 technicians will be needed by 2020 Government is seeking to address this problem with a number of new initiatives:-
– Instigation of the UK Commission for Employment & Skills
– Established University Technical Colleges (UTC’s) www.utcolleges.org – New £30M fund to secure supply of engineers and boost number of women in sector
– New support for apprentices (Trail blazer initiative)
– Raft of new NGO initiatives such as Engineering UK
– The Talent Retention Scheme. (TRS) This list is not exhaustive and the plethora of apparently un-coordinated initiatives in this area, many spawned from well-meaning, semi-private organisations frustrated by government inaction does little to provide clarity.
Inward investment into the UK economy created or secured more than 112,000 jobs in 2011 to 2012 according to UKTI’s inward investment report for 2012 to 2013. The government wants to double the UK’s exports to £1 trillion by 2020 and attract more inward investment in UK infrastructure projects. A challenging target in language!
They claim that; “We are determined to remain one of the top countries for ease of doing business, by providing more support for British businesses to export their goods and services, and reducing corporation tax to competitive levels.” A worthy aspiration.
One of the steps that they have taken includes the establishment of a government department called UK Export Finance.
UK Export Finance supports exports through a range of products and services. These include guarantees to banks for loans used to purchase UK exports and insurance against non-payment. Its remit is to complement and not compete with the export insurance and finance available from the private sector.
In 2011 UK Export Finance broadened its business domain and product range to provide support for exports sold on short terms of payment. It offers a Bond Support Scheme and an Export Working Capital Scheme and, to help smaller exporters access the right support, it operates a network of regional Export Finance Advisers.
UK Trade & Investment (UKTI) offers services to businesses who are looking to or already exporting overseas. They also help overseas companies who want set up and invest in the UK.
International trade advisers are able to provide advice on a range of UKTI services to UK companies, including financial subsidies, export documentation, contacts in overseas markets, overseas visits, e-commerce, export training and market research. They are located in over 40 local offices around the country. UKTI also has sector specialists who can provide support to specific industries. Companies can book a face to face meeting with a trade adviser.
UKTI trade teams located in embassies, high commissions and consulates work with companies to identify overseas opportunities or the right contacts and potential partners in a specific country though the Overseas Market Introduction Service (OMIS) although much of the data in the OMIS reports is derived from the sector Trade Associations and they are not inexpensive.
UKTI’s Passport to Export is an assessment and skills-based programme that gives new and inexperienced exporters the training, planning and ongoing support needed to succeed overseas. Passport to Export also helps companies to research and visit selected markets.
The Tradeshow Access Programme (TAP) provides grants to help businesses who want to take part in overseas trade exhibitions and increase their knowledge about markets.
Experienced exporters are able to apply for the UKTI Gateway to Global Growth scheme which offers a 12 month programme of specific support focused on their needs.
UKTI’s Export Communications Review gives companies advice on language and cultural issues to improve their competitiveness in export markets.
UK companies can get free independent advice on how to carry out marketing research through UKTI’s Export Marketing Research Scheme. It can help them decide if they should export to a new market and how best to deliver products and services. It can also provide financial support for a marketing research project in certain circumstances.
UKTI established the UK Advisory Network in 2007 so government and the private sector could work closer together on giving help to investors setting up in the UK. The network gives companies easier access to private sector expertise.
The government is also simplifying and reducing corporation tax to encourage inward investment. The current rate of corporation tax is 21% making it the fourth lowest in the G20. The government is lowering the rate of corporation tax to 20% in 2015 which will be the joint lowest in the G20
Through their UK networks overseas, the Foreign and Commonwealth Office provides information to UK businesses to help guard against risk when operating overseas. They also offer timely political and economic updates which highlight key factors in emerging markets and help businesses identify and pursue new opportunities.
The Foreign and Commonwealth Office is establishing a new government-owned company, the British Inter-governmental Services Authority (BISA), to help the UK benefit from government to government contracts with other countries.
BISA has been specifically set up to manage these contracts and help facilitate and deliver opportunities for British companies across the entire supply chain, from major prime contractors to SMEs. It is not yet trading but in 2014 it is expected to grow into a fully operational company, with its own chief executive and board. More information can be derived from Jolyon Welsh, Head of Government to Government Contracting, FCO, by email at email@example.com
The FCO’s Business Charter, published in 2011, shows how Foreign & Commonwealth Office (FCO) resources can meet the needs of British business. It is part of the FCO’s work to create lasting prosperity for the UK, explaining the specific contribution that the FCO makes to support business across the world.
UKTI has an ongoing programme of research that looks into the effect of exporting on UK companies across the economy.
UKTI’s publication ‘Bringing home the benefits: how to grow through exporting’ found that for many UK companies the decision to grow through exporting has been profitable. Those companies who venture into new export markets tend to be rewarded both directly through boosted turnover, and indirectly through improved levels of efficiency, innovation and credibility. Early analysis of BFPA member companies suggests that the full export potential in our sector is not being fully realised and there would be merit in exploring this issue further.