Ed – tell us what you will do for manufacturing ?

Ed Miliband

Now that Ed Miliband has being elected Leader of the Labour Party perhaps we should expect some real policies to revive the U.K manufacturing industry.  Ed has mentioned “broadening the industrial base” but there is precious little on the official Labour Party website to illustrate what this means.

The last Labour Government presided over the biggest decline in manufacturing industry EVER ! from 28% GDP in 1996 to a pathetic 10% in 2010.

“So what ?” you may ask.

Well, manufacturing is important for the following reasons:-

1) Jobs tend to be higher paid than those in administrative rolls.

2) Every job in manufacturing creates 10 others in the Supply Chain.

3) Products manufactured in the U.K generate important foreign income and reduce the trade deficit.

4) Making things generates a sense of self worth and pride.

5) Manufacturing provides valuable Tax revenue.

If we seriously want to reduce the current account deficit and claw our way out of recession we need some real policies to revive the manufacturing sector based on new product development and innovation.

So Ed – tell us what you will do for manufacturing ?



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North South divide……..

In the 1980’s Britain was a divided nation in more ways than one.The industrial strife of the miners strike and the subsequent pit closures took a terrible toll on the Economy of the North with high unemployment and social deprivation rife in cities like Newcastle, Liverpool, Manchester & Sheffield. No one captured this division better than the comedian Harry Enfield with his cockney character “Loadsamoney” and his Newcastle counterpart “buggerallmoney”.

Whilst these caricatures caused hilarity both North and South they represented real, deep cultural divisions.

Of course the South has always had it’s own problems of density of population, high housing costs, congested roads, increased pollution and pockets of real deprivation alongside unbridled wealth.

In the 1990’s onward there has been tremendous progress in the North. Cities like Newcastle, Manchester & Leeds are unrecognisable compared to 20 years ago. Rather than squander money City councils like Salford have done a tremendous job in bringing new investment to previously deprived areas and building new, modern infrastructure which is the envy of the world.

The massive cuts announced by the coalition Government risk undoing all of that and there is a real danger that their impact will be felt far more sharply in the North where there is a much greater dependency on Government and Civil Service jobs.

This must not be allowed to happen. There must be Government incentives for New Businesses to set up in the North. In these days of electronic communications there is absolutely NO good reason for New Start ups to be located in the South East. Newcastle, Leeds, Manchester & Liverpool all have excellent airports and rail and road infrastructure. There are skilled and educated workers available at a fraction of the cost of workers in the South East.

This is not a plea for sympathy, it is a demand for equality of opportunity.

If we want to avoid another North South divide, with all that entails, we must encourage Business Investment in the North.


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A true story……

Customer Focus

Customer Focus

Back in 2006 Reflex Semiconductor was a medium sized electronics business with Sales Revenue around $200 million and a respectable Net Profit of around $5 million.

The company had several hundred customers and  a diverse and mixed product range.

Unsatisfied with performace the Board decided to appoint a new President of Marketing.

This guy was called Max Cutter (I kid you not) and he summed up his philosophy in his joining speech.

” Guys, I want to re-focus on our core business. 80% of our profits come from 20% of our customers but 80% of our efforts are in supplying the lowest contributing 20%”  (He was obviously familiar with the Pareto rule)

“I want to re-focus our business (hang on Max, how long have you been here) by eliminating the lowest earning 20% and refocussing our efforts on the highest grossing 20% and watch this business GROW!!!”

When the clapping and cheering had subsided Max set about his business. Gathering together a multifunctional team of career oriented individuals from all levels of the organization (well, engineer level up anyway)

Pursuing a mantra of ‘All Change is Good’ they set about trimming the companies customer database, removing anyone who contributed less than 0.5% of Total Sales.

This carried on  for several months.

The Quaterly results were due to be published when Max announced he was leaving the Company for a better position. Despite much persuassion and the offer of a 30% increase in salary Max left anyway. He did get a nice leaving present of  a Rolex watch presented by the CEO.

The Quaterly results indicated that Sales were down to $140 million (-30%) and Profit was now a loss of $1.2 million.

Naturally, a Consultant was brought in to assess the situation and, after one weeks analysis, She reported that NO ONE CUSTOMER REPRESENTED MORE THAN 0.7% OF SALES.

The companies customer base was so diverse and its product range so varied the Good Old Pareto Rule didn’t apply in this case and Max and the team had successfully exterminated 30% of a perfectly good business.

Unfortunately Reflex Semiconductor never recovered and went bust a year later.

Max went on to get a job in investment banking and invented something called the “Credit Default Swap”….



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United States of ChinAfrica…..

cinafricaRecent data from the IMF supports the view that China and Africa are becoming increasingly entwined as trading partners as China exploits the vast mineral and material wealth of the African continent in return for Capital Investment, machinery and technological know how.

The massive growth and change in China’s economy over the last decade have seen it increase in global power to the point where it begins to overshadow the U.S.A and Europe.

chinafrica2Whilst the U.S and Europe have been mired in recession the Chinese rescue package has ensured that growth in that country continues at a rate of around 10%.

This growth can only be sustained by the continued supply of mineral wealth and mined resources, hence the involvement in Africa.

So, should those of us in the Western democracies be concerned about China’s increasing involvement in this vast continent ?

As China has expanded and exported it’s own particular brand of State Capitalism it shows no signs whatsoever of either promoting or developing democracy.

If Democracy, free speech, tolerance and egalitariasm are to be encouraged as Africa develops as a continent perhaps the U.S.A and Europe need to be more proactive in developing and sustaining their economic development programs in Africa to ensure, by the end of the decade, we aren’t looking at the United States of ChinAfrica.



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Its all Greek to us……..

The riots & violence in Greece are a possible foretaste of what is to come in the U.K as we stand on the brink of  the most important election for over 30 years.

Whoever wins we should not fool ourselves, we are in for a period of huge change with severe public spending restrictions which will affect millions of our citizens.

This is not the fault of any individual or even as a result of the actions of a bunch of investment bankers. Capitalism is cyclical in nature and some of us have seen it all before to one degree or another. Boom and bust is the nature of the game. We have been very fortunate to live through a period of sustained growth with low interest rates over the last 13 years.

However, inevitably, this created a huge bubble in the U.K & U.S housing markets which was built on highly leveraged debt.

It was inevitable that a crash would follow and now is the time to pay.

Let us hope that whoever wins the election apportions the pain equally & as fairly as possible and that we can avoid the tumult which is currently sweeping across Greece.

We certainly do live in interesting times.



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We’re flying tonight…

BAplane2The planes are flying again over Europe as the restrictions imposed due to the Icelandic volcanic ash cloud have been lifted. But are the scenes experienced over the last few days a bleak glimpse into our collective futures ?

It is commonly acknowledged that oil reserves will not last forever but maybe less well known that the period of peak oil production is upon us and in the near future demand will begin to exceed supply. So what are the possible consequences:-

oilgraph1) Oil is like any other commodity and as demand exceeds supply price will increase. This was seen before the financial crash of 2008 when Oil peaked at $147 per barrell. It is current around $82 per barrell.

2) GDP growth is directly dependent on oil supply. China is currently growing at around 10% per annum – this cannot continue.

3) There is no readily available alternative. Biofuels represent a tiny percentage of total fuel volumes and use up valuable land resource which could be used to grow food.

4) We will experience increasing cost of food and other essentials.

5) Air travel will become the preserve of the rich. This can already be seen in the UK with vastly fewer people taking foreign holidays following the financial crash.

6) Our world will shrink; the global village we have experienced since the 1960’s will shrink as travel costs reduce our ability to roam.

7) There will probably be more conflict on a global scale as States compete for scarce resources.

This all sounds like bad news but there will be positive outcomes:-

1) Reduced consumption of Oil will reduce the amount of carbon generation and lessen the risk of global warming.

2) The crisis will force us to develop alternate energy strategies.

3) Being less dependent on “the black stuff” will enable us to take independent geo-political decisions less hindered by our current needs.

4) We will be more concious about re-use and less wasteful of resources.

We live in interesting times.



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The act of innovating; introduction of new things or methods.

manuprocessRecent statistics show that manufacturing in the UK is now as low as 11% of GDP and employment in manufacturing has fallen by a massive 9% since Sept 2008.

Staggering figures – so what’s the solution, if in fact one is needed.

As manufacturing jobs are generally well paid compared to the rest of the economy and as each manufacturing role supports a number of others in the supply chain it would seem logical that an increase in the number of manufacturing jobs will lead to a more diversified and robust economy.

So, how do we go about generating more manufacturing jobs. Do we introduce tariffs on Chinese goods ?  Impose extra duties on imports ? – we could do this but in the end we may do more damage to British business than good.

Many companies have survived by outsourcing activities to China, the Far East and elsewhere and whereas some would argue this has cost British jobs the counter argument is, that without outsourcing, these companies would have gone bust and cost even more jobs.

Capitalism is a dynamic competitive environment and, like its biological counterpart, the most able to adapt will survive.

Wherever a company or organization exists, in order to compete, survive and thrive it needs to Innovate.

It needs to develop new products and services and bring them to market.

In the current climate this is even more critical.

Innovation enables the most able to adapt to survive.


In the bleak midwinter……

winter 006

In around 5 months time the people of the U.K will go to the polls to elect the Government for the next parliamentary term.

Over the last 13 years of Labour government manufacturing output has declined dramatically from around 20 % of GDP to around 11% today.

The Economy has become grossly inbalanced in favour of the Financial Services and Property sectors. This has proved disastrous and has contributed to the deepest recession we have seen in a lifetime.

To rebuild a robust economy we need a mixed economy in which manufacturing plays a major and significant part.

It’s easy to be cynical about Political parties but it’s interesting to visit the main parties websites to find out what their policies are towards the Economy and manufacturing in particular.

You may be surprised by what you find.



Dubai gives the world the finger………….

Burj2Dubai has officially unveiled  “The Burj” –  now the worlds tallest building at 828m & visible from over 60 miles away !

It cost a staggering $1.5 Billion to construct over the last 5 years using thousands of migrant workers.

Indeed the building was originally to be called “Burj Dubai” but has now been named “Burj Khalifa” in honour of the ruler of Adu Dhabi who recently bailed out the troubled emirate to the tune of several billion dollars.

Many will see this building as a great feat of engineering, a wonder of the modern world, a tremendous edifice and monument to Capitalism, the latest and greatest in a long line of stupendous architectural magnificences.

Others may see it as the biggest ‘white elephant’ ever built, a monument to excess, an obscene symbol of wealth built by the labour of the poor (mainly Indian & Pakistani labourers paid a few dollars per day) slaves in all but name.

A fitting monument to the “Noughties” decade of excess which imploded in the Worlds greatest recession.

The greatest  example of construction built on sub-prime mortgage the world has ever see.

Dubais magnificent finger rising from the plains and screaming “Up Yours World !”

Whichever way you view it you certainly can’t ignore  it.



Dad, why don’t we make anything anymore…

ManufIts common knowledge in the U.K that manufacturing has declined over several years but the attached graphic illustrates just how serious that decline is compared to other leading nations. The situation after the credit crunch is likely to paint an even grimmer picture.

But why should anyone care ?   Does it reallly matter if we are making things or providing services instead ?

The fact that Japan, Germany, France and most leading nations are emerging from recession before the U.K may give some indication of that importance.

Manufacturing provides highly skilled jobs which are well paid. This leads to more purchasing power for the economy as a whole.

Also, for every job in manufacturing another 10 may be created in support functions and in the supply chain.

But, can we still afford to manufacture in the U.K ?

Anyone who has done a Business Plan for an engineering project should have realised that, when considering modern manufacturing equipment, direct labour cost is virually insignificant. What has a massive effect is the COST OF CAPITAL and therein lies the biggest clue to our problems.

If we want to prosper in the U.K with a fare distribution of wealth and an effective social care structure we need a vibrant, mixed economy of which manufacturing is a major key component.

This can only happen if Goverment has an effective manufacturing strategy with a good supply of reasonably priced Capital investment.

That is the challenge for Government of whatever persuassion.