advanced engineering and materials in bradford · about 50% larger than previous estimates of the...

Advanced Engineering and Materials in Bradford:

Sector Development

Report by: The Lamberhurst Corporation Ltd.

November 2013

© The Lamberhurst Corporation Ltd., November 2013.

This report is provided to the City of Bradford Metropolitan District Council (the Client) and is solely for their use and that of their Approved Partner, The Bradford Chamber of Commerce. It must not be reproduced, referred to, or distributed to any other party without the prior written consent of The Lamberhurst Corporation Ltd. No responsibility will be accepted by The Lamberhurst Corporation Ltd. for any other use.

This report is provided to give information to the Client and their Approved Partner about the Advanced Engineering and Materials industrial sector in the Bradford region. It does not constitute advice. It should not be relied upon for determining actions without the addition of both further information and professional advice.

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Web: www.lamberhurst.com Tel: +44 (0) 20 7861 9968 E-mail: [email protected]

ADVANCED ENGINEERING AND MATERIALS

SECTOR REPORT

Prepared by :

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Advanced Engineering and Materials

Sector Development

Report for the City of Bradford Metropolitan District Council

November 2013

Contents

Executive Summary

Introduction

What is AE&M?

Background

Perceptions of Bradford for Business

Profile of the AE&M Sector

New Products and R&D

Trends in AE&M and their Implications for Bradford

Automation

Globalisation and Exports

High Growth Potential

Organic Growth

Universities

Government Funding Take-up

New Operations

Transport and Access, Availability of Industrial Sites

Retention of Key Companies

Information on the Companies

Organisation of Support

Specific Projects

Value of this Project

Key SWOT findings

Recommendations

Annex 1: Methodology

Annex 2: Profile of Companies Visited

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Executive Summary

Aims of the Project

This project was commissioned by The City of Bradford Metropolitan District Council. Its aims were to assist the growth of the Advanced Engineering and Materials sector in the Bradford region, by learning what the businesses do and how the public sector can help them.

A database of the companies which employ 11 people or more was assembled. Detailed information on the companies was collected, to form the basis for future assistance engagement.

Interviews were held with the senior decision-makers of a sample of the companies (the great majority being held on the premises of the companies) with the emphasis on the companies employing 50 people or more. In most of these cases, specific projects where the Council and other bodies might be able to assist the company were discussed and details were given to the relevant officials.

The project aimed to find ways to improve the assistance services to AE&M and to facilitate future engagement with the companies. A full set of recommendations are included in this report, and the key ones are summarised in this section.

What is AE&M?

There are various ways of defining ‘Advanced Manufacturing’ and ‘Advanced Engineering and Materials’. For this project, we have studied the following industries in the Bradford region:

- Chemicals (including pharmaceuticals)

- Basic metals

- Fabricated metal products

- Electronics and electrical

- Machinery

- Automotive

- Businesses spanning these groups

This covers most of the businesses which would usually be understood to be included in AE&M.

We have included businesses which are engaged primarily in production activities.

Key findings

• The sector is recovering very well from recession, probably faster than manufacturing in other regions of the UK.

• The importance of AE&M to Bradford was already acknowledged, but this study showed that it is considerably larger than had been believed. We estimate the employment in the sector to be about 50% larger than previous estimates of the Bradford advanced manufacturing sector.

• Bradford has a higher proportion of its workforce in the AE&M sector than other regions in the area around Leeds, is one of the most active AE&M regions in the UK and would be an excellent location for new AE&M businesses.

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• Bradford has a large resource of people with AE&M skills and sufficient to allow for significant

AE&M growth.

• There is chronic under-investment in plant and equipment by the Bradford AE&M companies.

• There is also chronic under-investment in R&D and in new products by the Bradford AE&M companies.

• There are almost no significant new businesses in the Bradford AE&M sector in recent years.

• There has been only a low level of engagement by the assistance bodies and the Council with the companies.

• The companies are largely unaware of the assistance programmes available to them.

• The AE&M sector is likely to attract substantial central government support, thanks to the recent announcements about the ‘Eight Great Technologies’ (EGT) programme.

The final finding above may be a way to channel substantial support to Bradford AE&M companies. It is not yet clear how much funding Westminster will allocate to the EGT, but the announcements are strong and we think that Bradford is very well placed to develop itself as one of the UK centres for AE&M growth. See www.gov.uk/government/publications/eight-great-technologies-infographics

Key Recommendations

Sector-specific recommendations

• R&D promotion: A programme to support partnerships between the AE&M companies and local academic institutions should be set up. Central government support should be sought for this under the ‘Eight Great Technologies’ umbrella. Establishing a specialist Advanced Manufacturing R&D centre should also be explored, of the AMRC or HSSMI type (Advanced Manufacturing Research Centre; High Speed Sustainable Manufacturing Institute).

• Industrial automation and industrial robots: A programme to encourage the development of automation methods, including but not confined to industrial robotics, should be set up. Central government support should also be sought for this under the EGT umbrella.

• Capital grant and funding programmes: Assistance under existing programmes such as the RGF (Regional Growth Fund) should be raised, not in total amount but in percentage of the cost of the project being funded, such as from 10% to 20% or more.

General recommendations

• Engagement programme: An active programme of engagement with Bradford companies should be set up.

• ‘One-stop shop’: The interaction between the companies and the Council should have a ‘single point of entry’.

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Introduction

This work was commissioned by the City of Bradford Metropolitan District Council and it has been carried out by The Lamberhurst Corporation Ltd. It builds on earlier work and in particular the report by Mazars LLP published in December 2012 entitled ‘Advanced Manufacturing in Bradford’. That work adopted an overview approach, and in our work we have therefore taken a different approach so that the results can be compared. Our approach has concentrated on face-to-face interviews with the leaders of AE&M companies and obtaining detailed information on the companies’ activities, plans and opinions, from which we have built up an overall assessment.

While our project studied the AE&M sector in Bradford, we believe that the similarities between the Bradford sector and those of neighbouring council areas are strong enough that our conclusions and recommendations have a more general applicability in the Leeds City Region.

The aims of the project were multiple:

- to describe the structure of the sector and recent changes in it

- to assess the prospects of the sector

- to identify weaknesses and strengths of the sector

- to recommend how the weaknesses may best be addressed

- to evaluate the effectiveness of public sector assistance to the sector

- to recommend improvements to that assistance system

- to identify specific development opportunities within the sector

In the course of our work, we received a large amount of information which is commercially confidential. To protect this, we have divided our reporting into two parts. This document is the first part; the second part is not for public release. The overall conclusions and recommendations are given in this first part, which only includes aggregated information, but is based on the detailed information received from the organisations we have spoken to.

What is AE&M?

‘Advanced Engineering and Materials’ does not have a generally-agreed coverage. Nor does ‘Advanced Manufacturing’, although in the AM case there is an OECD interpretation. Definitions based on productivity, rate of introduction of new products or new equipment, and many others, have been proposed for both AE&M and AM. The popular understanding is that some sectors of manufacturing are more technologically-advanced than others and are the ones more likely to grow rapidly. The difficulties with that are shown by the existence of state-of-the-art robotic factories which produce traditional products, and of recently-invented materials made by largely-manual processes. Neither AM nor AE&M are good predictors of which companies will have high growth. In practice, AM and AE&M are simply ways to subdivide the manufacturing industry.

For the current project, it was decided to use one of the normal interpretations of AE&M, which covers the following sectors:

- Pharmaceuticals - Office, Accounting and Computing Machinery - Radio, Television and Communications Equipment - Medical, Precision and Optical Instruments - Aircraft and Spacecraft - Chemicals

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- Machinery and Equipment - Electrical Machinery Apparatus - Motor Vehicles and Trailers - Railroad and Other Transport Equipment In addition, it was decided to include the following which is a major manufacturing sector in Bradford:

- Basic Metals. In another region, this could have been misleading, but in Bradford there are no steelworks or large metals refiners, whereas there are several significant downstream metals processors, which may be considered to fall most appropriately into the engineering description. This method, therefore, does not render the statistics incompatible with other studies of the AE&M sector.

These were the activities included, but the classification of these activities into sub-sectors of AE&M was made somewhat differently for statistical purposes. The groupings used were:

- Chemicals (including pharmaceuticals) - Basic metals - Fabricated metal products - Electronics and electrical - Machinery - Automotive - Businesses spanning these groups Further details of the methods are given in Appendix 1.

Background

Since the earlier work, there have been some developments in central government policy towards advanced manufacturing and AE&M:

Central government assistance for AE&M

The AE&M sector has gained a new importance recently as a target for UK government assistance. ‘Eight Great Technologies’ were highlighted by the Chancellor in 2012 and this theme has been taken up subsequently, notably in the very recent publication (October 2013) of policy documents about these technologies. The eight are to be primary targets of government policy. Most of the eight are fields in which the AE&M sector will play a central role. It is likely that significant additional funding will be made available to businesses in AE&M to assist with the spread of these technologies, so our research has gained an additional importance. The assistance organisations in the Bradford area will be the channels through which this funding will pass to the Bradford companies and the organisations need a good knowledge of the local AE&M activities and potential for developing the technologies to the production stage. The same applies to assistance bodies, and to AE&M businesses, in Yorkshire in general.

The eight are:

- Big data and energy-efficient computing

- Satellites and commercial applications of space

- Robotics and autonomous systems

- Synthetic biology

- Regenerative medicine

- Agri-science

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- Advanced materials and nano-technology

- Energy and its storage

Some of these fall entirely within the AE&M sector, and the published details of the ones that do not include some technologies that do. See www.gov.uk/government/publications/eight-great-technologies-infographics

This is a major opportunity both for the AE&M businesses and for the academic institutions in the region. In addition, it offers an opportunity to resolve one of the major shortcomings we identify in our report – the lack of R&D and of new product development, and the lack of active cooperation between industry and research organisations.

We also note that the policy focus is relatively non-controversial in political terms, and likely to gain cross-party support. This suggests that, whichever party or parties form the next government, the new funding streams are likely to continue. Setting up new AE&M initiatives and local projects in Bradford, and Yorkshire in general, can be done with reasonable confidence; the expectation is that central government support will continue well into the medium-term.

Perceptions of Bradford for Business

We asked the business leaders we met what they thought of Bradford as a location for their business and as a business location in general. We describe separately later the views of companies about relocating their own factories. Here we refer to general perceptions of Bradford.

The perception of Bradford as a location for business has been somewhat positive. We have received negative comments on such matters as road access and the Westfield issue in the city centre, but our impression is that these are not strong negatives and are more than counterbalanced by the reasonably-good availability of skilled employees, the good local supply of industrial services, and the good availability of industrial sites.

How is Bradford perceived by business leaders from elsewhere? Is it considered a good location for a manufacturing business? This matters, for example, for inward investment. We carried out a small, and unscientific, survey, just to get a very rough idea. We spoke to twenty senior business people we knew and who are based in south-east England. None had any perception at all, by which we mean they did not feel able to comment on whether Bradford was a good location or not. Indeed, for most, their awareness of Bradford extended only to knowing approximately where it is. We had expected some comments about traditional industries, for example. We think that, had we asked about other cities of similar size, they would at least have had some very basic knowledge, such as of major companies located there or industries that are strong in that area. Perhaps this lack of awareness of Bradford is not a major problem, as none of the people concerned were considering a new factory in the north of England, but it does tentatively suggest that Bradford has too low a profile in the UK economy.

Promoting ‘Bradford for Business’

As we will describe later in this report, Bradford has considerable merits as a manufacturing location and could actively promote these. ‘Business-friendly Bradford’ perhaps, or some such strap-line? Bradford has a larger and more diverse manufacturing sector than most other regions and it should be possible to publicise this. If such a promotional activity were to be started, it would be wise to do so after commencing the programme of active engagement with the companies which we recommend below – whatever motto is adopted, it must promote a reality, not an aspiration.

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Profile of the AE&M Sector

A great merit of the Bradford AE&M sector, in our view, is that there are no dominant companies – no company has a substantial share of either employment or output. While it might be good PR to be able to cite a company with several thousand employees, in microeconomic terms more and smaller is better and this is the picture in Bradford. The key reason is that competition is more vigorous, with no companies able to use their dominance at the expense of suppliers, but in addition the overall economic growth of the sector is less vulnerable to individual company closures. Furthermore, opportunities for local people to change employer are more numerous, making for a more competitive employment market and also distributing skills acquired in one company to other companies.

The largest AE&M companies in the region each have less than 1,000 employees in the Council area (in previous work Hallmark Cards plc, with 1,800 staff, has been cited as the largest employer, but we do not consider it to be correctly classified as an AE&M company). There are some 33 AE&M companies in the Bradford region that employ over 100 local people each.

Another merit is that these companies, and the numerous smaller companies, are spread across almost all the sub-sectors of AE&M. There is almost no sub-sector in which Bradford is significantly lacking. Of course, as in any local economy, there are some sub-sectors which are under-represented and some which are over-represented, but this is less so in Bradford than in most locations. The Electronics and Electrical sub-sectors are relatively sparse. The largest business in these is Pace plc, producer of set-top boxes, which has its HQ in Saltaire, and has worldwide sales of $2.4 billion and 2,000 staff worldwide; in the Bradford area, they have some 400 employees, although a significant part of these are administrative for the group rather than manufacturing. Chemicals, in contrast is over-represented, and the largest business is the BASF factory at Low Moor, which currently has 700 staff. McBride (household chemicals), Nufarm (agrochems) and Jacuzzi (spa baths) are other major players in chemicals and downstream products in the Bradford area.

In AE&M in Bradford and indeed in most regions, the largest sub-sector by both employment and number of businesses is Machinery & Equipment. Bradford region is the home of Cinetic-Landis, producers of grinding machines for automotive factories, but the largest employer is the relatively-unknown Acorn Mobility Services who produce stairlifts. Kone (escalators), George Barker (chiller cabinets), and CarnaudMetalBox (can-making equipment), are the next largest.

The automotive industry in Bradford does not have any substantial vehicle assembly plants, but in aggregate turnover and employment it is well represented by components producers, of which the largest (and arguably the largest AE&M employer in Bradford) is Denso-Marston (radiators). BorgWarner (turbo systems) is also one of the largest AE&M employers.

Within Machinery and Equipment, the largest ‘sub-sub-sector’ in terms of number of companies is Fabricated Metal Products, which is another activity which is relatively over-represented. Cirteq (metal clips) and Teconnex (clamping systems) are the biggest, but there is a large number of smaller companies as is the case in this sub-sector in other regions because the products can often be made in small batches. The somewhat abusive ‘metal-bashing’ name for this sub-sector only describes a small part of the complex operations that such companies carry out in the 21st century and which are done largely on automatic machines many of which can run unsupervised. There is considerable production in Bradford of other types of partly-metal products, but we have (somewhat arbitrarily) allocated some of these in the Machinery category – George Barker, mentioned above, for example, could be included here.

Basic metals are also present; there is no major production of metals from ore or scrap, but there are downstream activities - notably the Barrett group (steel processing), which has its centre in Bradford.

There is one sub-sector which is almost entirely absent: non-automotive transport, such as aircraft, railroad equipment and ships, the latter for obvious reasons, but it is somewhat surprising that there is no aerospace industry nor any railway equipment manufacturing to speak of. We do not know of any

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region of the UK where every sub-sector of AE&M is present and we do not consider the absence of this sub-sector to be disadvantageous to the Bradford economy.

As mentioned above, there are 33 businesses in the AE&M sector in the BMDC area which employ 100 people or more. We visited 1/3 of these as part of the visit programme of our project. Brief anonymised details of these and the other companies visited are given in Annex 2. Fuller details are given in the master database we have compiled.

Overall, Bradford has an unusually diverse AE&M sector, one which is healthily-spread across a wide range of products with little overlap between companies and one which is not dangerously dominated by a handful of businesses.

What do the larger companies do?

These are the companies with at least 50 employees in the Bradford region:

No. of employees

Chemicals Basic Metals

Fabricated Metal Products

Electronics & Electrical

Machinery Automotive Cross-category

Total

50-99 8 1 9 2 7 5 6 38

100-249 6 4 1 3 4 19

250+ 4 2 2 5 2 1 16

Total 18 5 12 7 16 7 7 73

Notes: - based on postcodes, so for example excludes LS29 (one company in the size range), and includes some non-BMDC areas such as BD19, so total differs from total for the BMDC area quoted earlier. - ‘Cross-category’ means the business has significant activities in more than one of the sub-categories.

The main lesson from this table is that all the sectors are well-represented in Bradford, not only amongst all sizes of company but also among the larger companies.

Business types

The diverse nature of the sector is also shown by the range of types of corporate entity. There is a spread of subsidiaries of multi-nationals (e.g. BASF), UK and international groups with their HQ in Bradford (e.g. Barrett), medium-sized one-location companies, etc. We found one medium-sized manufacturing business which is an LLP, and one which is owned by a trust set up for the benefit of the employees.

The ownership of the great numerical majority of the businesses is local, although of course the majority of the largest businesses are owned by groups with HQs outside the region. The spread of types of company and of types of ownership is approximately normal for the manufacturing sector in general.

Size of the AE&M Sector

We have estimated the size of the AE&M sector in the Bradford Council region. This is important for many public policy reasons, and it appears to us that there are considerably more employees in this sector than previous estimates give.

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We have built up our estimate using individual company information. (The method used is described in the separate Part 2 report.) We consider that in the AE&M sector in the Bradford council region an overall total of 15,500 jobs is the most plausible figure.

On this basis (and provided we trust the other figures from earlier estimates of manufacturing employment and AM employment) then Bradford is the largest AE&M council area in the Leeds City Region, having more such jobs than even Leeds has. Also (on these assumptions), Bradford has 60% of its manufacturing jobs in the AE&M sector, more than any of the other councils.

The statistics are subject to many uncertainties, but we think that Bradford can reasonably claim primacy in AE&M in the Leeds City Region. It can also claim a high position in national rankings for its AE&M sector and to be one of the key regions of the UK for AE&M:

The Bradford AE&M sector compared with other regions

The figure of 617,500 employees in advanced engineering in England was given by BRES in 2011. Bradford had just below 1% of the population of England and so on that basis its share of AE employment would have been 6,000. There has been no significant change in AE employment numbers nationally since 2011, and our current estimate of 15,500 in Bradford is more than 2.5 times the national average (AE numbers are almost identical to AE&M numbers).

We have been conservative in our methods of calculating employment in the sector, for example not counting various companies that could be included (e.g. Hallmark mentioned above). Had we adopted the inclusive methods that various authorities appear to be doing, the Bradford figures would rise considerably further, adding to the national prominence of Bradford as an advanced manufacturing hot-zone.

For comparison, Greater Manchester’s AM sector was calculated (by New Economy) to have 38,000 employees in 2013, who claimed Greater Manchester as one of the national centres of AM. Yet Greater Manchester has more than five times the population of Bradford (c. 2.7M compared with c.520,000), so its AM employment rate is far lower than Bradford’s.

Changes in the Last 5 Years

The post-2008 recession affected manufacturing as heavily in Bradford as elsewhere. Typically, manufacturing is affected more quickly than other sectors during recessions, and although the 2008+ recession has not been a textbook example the loss of manufacturing jobs did occur as quickly as in previous recessions. There is however a strong rebound effect in manufacturing towards the end of recessions and we have seen this in Bradford. Typically, manufacturing order intake starts to rise quickly, before other industries recover, and the companies respond by restarting capital investment. We confidently expected to see this, but we have seen it more strongly than even we anticipated. Almost all the companies studied in detail have begun investing in new plant and equipment. Those companies which have shorter lead-times on their production have already seen rapidly rising sales as well as rapidly rising orders. Almost all the companies we interviewed expect turnover to recover to, and in most cases above, the pre-recession levels.

We also asked the companies about increases in employment, both recent and future. In the majority of cases, the companies will return to staff levels that they had pre-recession, but few will considerably exceed them. What has happened is that they have committed to capital investments, which will enable them to produce more efficiently (higher labour-productivity, giving greater output than pre-recession but with pre-recession staffing levels). We comment elsewhere in this report on our concerns about ‘chronic under-investment’ by the Bradford companies, which we think should be a main target of public sector assistance programmes; what we have just referred to is a move in the right

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direction, but it needs to continue to enable the companies to become efficient competitors in the globalised market.

The AE&M companies in the Bradford area have almost all survived the recession. The list of businesses in existence is nearly identical to what it was pre-2008. So phrased, it sounds entirely good news, but what it also means is that there have been almost no new businesses set up. Over a five-year period, new starts should have occurred - even during recession conditions - but have not done so. We comment elsewhere in this report on this problem.

Prospects

We did not ask the companies for detailed sales projections, but we did ask them to give indications, and it is clear that most of the companies will expand, are optimistic about their ongoing prospects, and that several are already expanding rapidly. The picture is less impressive in employment, but nonetheless good. Employment levels are rising and we think will recover to about the pre-recession level over the next two years.

In any recession, manufacturing suffers particularly high falls in output compared with other parts of the economy. These, however, are not permanent reductions, and the end-recession period typically sees rapid growth back towards the earlier levels. Our overall judgement, from a mix of qualitative and quantitative information, is that the production output of the Bradford AE&M sector is already at or close to the pre-recession level and will rise above this during 2014. We consider that the recovery in Bradford manufacturing is probably stronger than the general manufacturing recovery in the UK

That is apparently highly satisfactory, but that will mean the sector in 2014 will be about what it was in early 2008. Six years growth opportunity lost. As we will explain below, we are concerned that the Bradford sector, although having weathered the problem years, has not taken the opportunity to modernise itself and we are concerned about its long-term prospects.

Location of the businesses

The AE&M businesses are geographically widely spread across the region. This table gives the

location of their main site by BD postcode:

Postcode Chemicals Basic Metals

Fabricated Metal

Products


Machinery Automotive Cross-

category Total

BD1 3 1 1 2 7

BD2 3 1 2 2 1 1 10

BD3 3 5 2 3 13

BD4 5 3 12 1 4 4 3 32

BD5 2 1 2 2 1 8

BD6 1 1 2

BD7 3 3 6

BD8 1 3 3 1 1 9

BD9 1 1

BD10 1 2 1 4

BD11 3 3

BD12 4 3 2 4 1 14

BD13 1 1 2 4

BD14 2 1 3

BD15 1 1

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BD16 2 1 3

BD17 1 3 2 3 1 1 11

BD18 1 2 2 2 2 2 11

BD19 1 1 9 3 2 2 18

BD20 2 1 2 7 4 16

BD21 1 3 13 3 6 3 29

BD22 2 2

BD23 3 3 1 1 8

Total 34 12 64 24 44 15 22 215

Notes: - Some of these postcodes are not part of the BMDC area, notably BD19 and BD23. LS29 is partly in BMDC and not included above. - ‘Cross-category’ means the business has significant activities in more than one of the sub-categories.

There is, surprisingly, no postcode area which does not have a single AE&M business. The major locations are BD21 (Keighley) and BD4, the latter presumably because of its proximity to the motorway network, which probably also accounts for the popularity of BD19 (Cleckheaton) and BD12. This near-motorway zone is the one with the largest number of businesses, but the most distant zone from the national motorway systems has the second-largest number of businesses: BD21/20. The motorway zone and Keighley zone may be called the AE&M ‘hot-spots’ of Bradford region. Overall, however, we consider the Bradford region has a more widely-distributed AE&M sector than do most regions of England.

Partnering and clusters

There is, then, relatively little geographical clustering of companies. We also found almost no company to be in adjoining premises to another AE&M company. These observations indicate low synergies and our research found only limited similarities of activities between companies. We found no cases where companies were each other’s largest customers or largest suppliers.

The only major exception to the lack of geographical clustering is in the chemicals sub-sector. There is some commonality of product in the production of polyacrylamides (used as, for example, flocculating agents in many industries, but notably water). BASF and Kemira are major players in this market. Even in the chemicals sub-sector, it is only among a handful of companies that we can speak of any clustering (whether we take this to mean geography or product range). Indeed, as the preceding table shows, chemicals businesses are widely distributed, and are present in 15 of the 23 postcode areas.

We do not see major opportunities for the companies to take advantage of partnering and clustering, nor do we see great scope for inter-trading, mutual supply, etc. This is because the companies have such a disparate range of activities. Of course, the medium to large companies trade with the very small companies in the sector, such as those providing workshop services, but as we focused our work on the 50+ employee businesses, we do not have enough information to evaluate the opportunities between these companies and the 0-49 employee businesses.

We asked companies about local sourcing of various products. Our impression is that they have explored the opportunities in detail, as one would expect. Several companies, for example, are significant buyers of precision castings which they source from outside the region. We do not consider that they could locally source the types that they require. For precision machining, on the other hand, it is easier in any region to find local companies which can carry out the required type of work, and our impression is that this is being done locally.

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Skills and Skills Shortages

Are there skills shortages in the Bradford region? When we initially put this question to the companies, we mainly received the expected answer of yes, but that seems to have been a response based on public perceptions rather than on specific evidence. We proceeded to ask about their success rates in engaging new employees. In almost all cases, the companies that have attempted to take on new employees have been able to do so, to take on the numbers needed and to do so without a significant level of difficulty. Of course, a company which wants to find someone who is experienced on a very particular kind of machine will usually not be able to. That is not in our view a skills shortage, rather it is unreasonable optimism – it would not be possible in any region – and such exact skills need to be obtained by on-the-job training within the company itself.

What we found is that there is a substantial pool of available general skills – there are milling machine operators and programmers, to give a representative example. This availability is unsurprising after several years of job losses, but it continues to be the case even after recent recovery in employment in the sector. In contrast, in London for example, such manufacturing skills were quite hard to find even during the depth of recession. Our overall assessment is that the purported skills shortages are more down to press publicity than to the reality of the market.

The key point is that modern production machinery is usually highly specific to its task – it is rare to find a machine that a new employee can operate with no additional training. So training needs are substantial, but carrying them out off-site is only a very limited solution.

New Products and R&D

We enquired about new product development and about levels of R&D in general. These are surprisingly low and a significant proportion even of the larger companies have no activity at all in these areas. Relatively few of the companies have a good pipeline of new products coming on stream or in development. This would be short-run terminal in markets of rapid technical change, but, even in the relatively-traditional markets that most of the companies are in, NPD-active competitors will eventually win.

Acquisition is another effective route to bringing in new products, but there were almost no cases of companies buying another to acquire new technology. Again, this is surprising, particularly because companies can be bought very cheaply in adverse economic conditions.

Perhaps most disappointing is that there are almost no substantial companies that have been founded during the last decade. We expected to find some that sprung recently from new IP, but we did not. This is probably the most serious problem in the AE&M sector in Bradford.

Partnering with academia

Most of the companies interviewed have little or no partnering with academic research. There are various impressive exceptions, but overall the amount of cooperative R&D is relatively low. This is manifest in the lack of KTPs (Knowledge Transfer Partnerships), of new companies which are JVs between institutions and existing companies, etc.

Several of the companies, however, volunteered the comment that they would like to develop links with the universities. This is an area where public sector grants can be usefully increased and extended. Public-sector assistance in this has lower total cost than outright capital grants, so, although we will argue below that grants to increase capital expenditure are important, we consider that the highest ROI on public funds will come from promotion of links between research organisations in the field of new products and R&D in general.

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R&D

The lack of NPD and of R&D in general can be described as ‘chronic under-investment’. We believe this chronic under-investment is a characteristic of the Bradford AE&M sector, being apparent not only in NPD/R&D but also, as we describe below, in key production operations such as automation.

So, how should assistance to the sector be focused to assist with promoting R&D? We think that the available resources should target both investment in R&D and capital equipment. Assistance to new product development and R&D in general should be increased. Funding joint projects with the higher education institutions, for example. This has the advantage that it uses less public funds than assistance for investments in production plant.

We also think the region would benefit from having specialist Advanced Manufacturing institutes/R&D centres. The large size of the Bradford AE&M sector would strongly justify building such centres in the region, in preference to many other potential locations in the UK. We have in mind the type of centre that Sheffield has in its AMRC (Advanced Manufacturing Research Centre) or the new HSSMI (High Speed Sustainable Manufacturing Institute) in east London. We think that several of the major Bradford AE&M companies would strongly support this and probably be willing to be partners in the project. There are various ways the project could be funded, for example Catapult programmes, ERDF funding and whatever funds are set up to promote the Eight Great Technologies. Such a centre or centres would also help in attracting inward AE&M investment to Bradford.

Trends in AE&M and their implications for Bradford

Advanced materials

The name of this sector includes ‘Materials’ and it is meant to include new types of material that have emerged from the research labs. This not only includes exotic new materials but also apparently-mundane materials which have undergone major technical improvements. Materials science is changing all the raw materials of industry at an accelerating pace. 21st century materials are purer, more homogenous, more reliable, stronger, more durable, etc., etc. During our visits, we expected to see evidence both of improved existing materials and the use of altogether new materials, and we did find the former, but very little evidence of the use of the latter.

It is too early in the R&D cycle to expect mass industrial use of, for example, the new carbon materials, notably graphene and carbon nanotubes, but we did expect extensive use of composites, for example. One reason for the absence is that many of the Bradford AE&M companies are producing low-cost products and most new materials first enter industry in expensive critical applications. So new superalloys, for example, are likely to first be taken up by, say, aero-engine producers; as the volume of sales rises, their cost gradually drops to levels where they can be used in more mass-produced items and finally they go into basic industrial products.

Government targets in advanced materials

Amongst the ‘Eight Great Technologies’, particular targets for assistance are likely to be new semiconductor materials, especially gallium nitride which is already in use in mass production of LEDs; plastic electronics; and materials built up from individual atoms (and so able to have completely different properties than conventional materials). We did not find any evidence of these in the region, although as noted above it is quite early in most of these technologies so their entry into regular production is not widespread in the world economy.

Another target of government attention is Additive Layer Manufacturing (3D printing), which is the technology that has attracted the most public attention. We did see demonstration 3D printer machines, but no production machines. We suspect, however, that this technology will be slow to develop in actual industrial applications, in spite of the public awareness of it. At present, the technology has far fewer valid uses in industry than the publicity it has gained.

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In the medium-term, we suspect that the new carbon materials will be the ones with the widest range of applications, because of their very high improvements on existing materials in key properties such as strength, and because the base cost of the raw material is low. Such predictions are however, little more than speculation – guessing which technologies will win is extremely difficult. Where, for example, is the worldwide economic transformation that high-temperature superconductors were expected to give?

In spite of the difficulty of knowing which will prove economically valuable, the priority which Westminster is giving to these EGT materials means that significant funds will be available for exploiting them and so it is reasonable for assistance programmes to be based around them.

There is one technology in the EGT programme which we consider worth special attention in the Bradford region and this is robotics. The programme may turn out to be focused on autonomous robots, but it seems also to have a strong interest in industrial robotic machinery. This latter is an area where we consider Bradford companies could benefit greatly. We saw many examples of production equipment where robotic systems would greatly accelerate output and also considerably improve product quality in terms of consistency and dimensional accuracy. We suggest this be a focus of the forthcoming assistance programmes, with both capital grants and funding of development costs.

Automation

Many of the companies are mass-producing low-value items, and this should be strong justification for automation in the factories. During our visits, we saw many cases where the processes could be automated. Of course, the plant engineers are well aware of these opportunities to become more efficient, and so too are the directors. So why are the labour-saving investments not being made? This is not a recession issue – the factories could have made these investments pre-2008 and chose not to. Probably the main reason is the profitability of the companies – they do not generate enough annual profits to finance heavy investments in process equipment once dividends and reserves are allowed for. That is the way many boards would view the matter. The difficulty with it is that the company will gradually become uncompetitive against those that opt for modernisation as the priority.

We also saw an unexpectedly high proportion of very old machinery. Usually, of course, the newer machines are the ones that are more fully used, whose capacity is fully-utilised. So the replacement of the old machines is not the priority and when there are limited funds for capital expenditure they tend to remain in place indefinitely.

Machine tools are constantly being improved by their manufacturers, and the new models are faster, more reliable, produce components which have tighter tolerances (dimensional accuracy), and often have increased ranges of products they can make. Again, the companies know this, but the lack of internally-generated investment funds makes them reluctant to replace their kit. Most of the companies we asked referred to ten-year replacement cycles, which is probably too long given the rate at which machine tools are now improving. Also, those companies did not seem to have fully implemented their own stated policy.

Industrial robotics is an established industry, and indeed there are a few businesses in Bradford which produce robotic machinery for production plant. We saw much less use of industrial robotics than we anticipated. It is the same phenomenon as for automation in general and for machine tools.

Are the companies making a mistake or are they right to keep capex down? We think that the result of their policies will be a slow erosion of their market position. To increase the proportion of their earnings spent on modernisation requires them to invest not on the basis of current profits but on the basis of future earnings, but that is after all what an investment should be based on. To persuade companies to behave in this way is a difficult task, but capital grants, and low-cost loans, can help to achieve it.

In the type of relatively static markets that most of the Bradford manufacturers inhabit, investment decisions can be delicately balanced. We mean that the calculations of future earnings, cash-flows,

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etc., can be made with some confidence – the future is not as uncertain as in new inventions. So a modest contribution from public funds can turn a no-investment decision into a go-ahead. That might seem to be an argument in favour of very low subsidy rates. It is not. Current programmes available to the larger companies, such as the RGF, can give 20% of investment costs. The specific instances we have heard about from the companies have been largely at 10%. We think that 10% rates are too low even for the static, relatively-calculable, markets concerned and are unlikely to be effective in altering decisions. If so, such grants are in effect a free gift to the companies’ shareholders with no return to the community. At 20%, in contrast, we think that the subsidy stands a real chance of converting no-action to actual investment. Raising the subsidy percentages will necessarily reduce the number of companies that receive assistance, but it is better to do that than for the subsidy to have no effect on the companies’ decisions.

These problems are not down to lack of external funds – the popular idea that the banks refuse, post-2008, to make loans available, is not valid for companies of any significant size. The issue is one of the willingness of the companies themselves to invest.

The recent investments we have seen the companies making, as they react to the recovery, are only a modest step towards curing this problem, which requires continuous investment on that scale and more. A company which is investing heavily at present seems impressive, but if its last significant capex was pre-recession all its plant has been aging for five years.

Overall, we think the issue is serious enough to be described as ‘chronic under-investment’. It justifies active public sector assistance on a significant scale.

Globalisation and exports

The sector is a significant exporter, but less so than we expected. Most of the sector’s products can nowadays be economically shipped to anywhere in the world, so the companies can in principle compete anywhere. This could have translated into burgeoning export activity, but has not done so. Yet, most of the products we saw during our visits could in our opinion be exported.

This is a marketing issue; the companies are mainly long-established, have loyal customer bases, and do not aggressively seek out new markets. The costs of worldwide marketing, however, have dropped even faster than shipping costs. Communications too are now so easy that expensive travel is much less necessary.

The majority of the companies we visited were large enough to employ, for example, at least one person dedicated to developing export markets. The annual salary plus operational cost, of so doing, is of the order of £50k to £100k, so this is a feasible outlay for, say, a £5M+ T/O business. One company we visited, which is of that size and sells 95% of its output to the UK market, has recently assigned one of its sales staff to a largely export role, to explore opportunities with UKTI help.

Exporting, and developing new markets in general, is an investment; an investment in management time, more than in changes to products, but for most products opening a new market is a medium-term activity and so requires capital. The problem is thus similar to the investment issues of plant modernisation.

A few of the companies have low-cost manufacturing facilities in, for example, the Far East. That is not to say that the model of having the main production units in the low-wage nations and the R&D and the low-volume, high-technical complexity production in the UK has been achieved to any significant extent. It may be thought that transferring production units to other countries is a detriment to the local economy, but very often the result is a stronger business and one which grows its home centre and does so by expanding higher-value local jobs, such as designers, engineers, etc.

Given that exporting levels are low, should this be a focus of assistance programmes in the Bradford area? There is already reasonable provision to help smaller companies learn to export. We also do

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not think there is great value in additional regional assistance programmes aimed at helping the larger companies, who already have access to nationwide programmes, UKTI, etc. Under-exporting is a shortcoming but we consider the means to alleviate it are already in place and it is up to the companies to exploit them. This, then, is an issue of programme marketing which we discuss below.

High-growth potential

This is a popular concept in the public-sector assistance field. It is however, misunderstood. Identifying winners is impossible: it is not realistic to identify which of a group of new businesses will be the ones that will achieve high growth rates. If it were possible, the stock market would do it before anyone else could. The hard fact is that spotting the new companies which will win, the future high-growth businesses, cannot be done. There is now some acknowledgement in the literature of this uncomfortable fact, but it needs reiterating.

What, however, can be done is projecting from previous growth. If a business has run for several years at 20% growth, say, then it is reasonable to project that 20% growth rate to continue for a further period, although the confidence of the prediction declines with increasing length of the further period.

Almost all new businesses fail and they do so quite quickly. That is another uncomfortable fact. It is the reason why banks prefer not to lend to new small businesses. They prefer to lend to companies which have had at least a period of success. The banks are not failing the economy by acting in this way; they are basing their decisions on hard reality. Public sector funding for new-start companies, instead of seeing itself as a replacement for a failing banking sector, should be based on these hard realities. Seed capital programmes, for example, would obtain much higher ROIs if they took account of whether the business plan has been at least partly-proven by actual orders.

This may seem to be an approach that prevents new companies ever being launched, but it does not have to do so. The key point is that the failure rates are very high, but the very few eventual successes can be very large. New companies are like new inventions – almost all will fail, a very few will succeed, but those which will succeed cannot be foreseen. The moral is that the high-growth company assistance to new businesses should be run like R&D programmes are run by pharmaceutical companies. They start with numerous apparently-good projects, give small amounts of support at each stage, growing in amount as the track-record of success extends, and progressively abandoning almost every candidate, as its deficiencies become apparent, as not worth supporting further, but ramping up the funding for the tiny handful who survive the tests. This cold-blooded realism is, however, not what currently happens in public support programmes for new start businesses.

Organic growth

As we have noted already, there is substantial organic growth under way, and much of this has taken place after the previous research (‘Advanced Manufacturing in Bradford’) was carried out in 2012. At present, this remains a rebound-from-recession effect, meaning the output is returning to pre-recession levels. The picture is, however, more positive than that; rebound effects occur without substantial capital investment as the companies can use their existing under-utilised capacity to restore previous output levels, whereas the picture in Bradford is of significant capex. This will allow organic growth to continue and exceed pre-recession levels. We expect overall manufacturing output in the region to achieve pre-recession levels during 2014 and to continue to grow thereafter. We have long-term concerns about competitiveness, as described elsewhere in this report, but the short-term picture is good.

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Universities

Our project focused on the companies themselves rather than on the research bodies, but we enquired from the businesses about relationships between them and research bodies, such as universities.

The local universities have a strong reputation in the automotive engineering sector. There is, for example, a new MSc course set up at Huddersfield University in cooperation with the large Bradford employer BorgWarner.

There are enough substantial companies in each of the sub-sectors, that such post-graduate courses could be developed in each sub-sector. Several companies volunteered that they would like to cooperate with the academic institutions and their willingness to do so would probably remove the main obstacles to such courses being established, provided a small amount of public funds could be mobilised.

Government funding take-up

Assistance programmes, in the UK and elsewhere, are usually either heavily over-subscribed or heavily under-subscribed.

There is a laudable wish in assistance programmes to minimise the overhead and maximise the percentage of the budget that goes to the clients. Laudable does not mean practical – under-subscribed programmes are often those where the budget for administration, and particularly that for marketing, is too low.

This issue is addressed under ‘Marketing’ below.

New operations

There are almost no significant new businesses in this sector. This is a serious cause of concern, probably the strongest indicator of a progressive long-term decline in the sector. Even during a recession, some new factories can be expected. Our research looked at companies employing over 10 staff, but this figure is low enough to pick up almost all factories bigger than small workshops. Over a five-year period, one would expect at least 20% to be new builds, and amongst an existing population of over 200 companies, that implies at least 40. It has not happened. It did not happen even before the recession.

What has happened is some expansion of existing facilities, so we are not suggesting there is no development, but there is almost no entry of companies making completely new products. We expected to find companies that had been created during the last five, or at least the last ten years, springing from new IP, but they are absent from the region.

That there is an inward investment issue will not be a revelation to local readers of this report, but the extent of the problem may well be. To characterise the problem as purely an inward investment one can be misleading, however; instead, it shows a low level of IP generation in the area. New inventions are usually converted into production activity within the area where they are developed. The solution is less one of finding external businesses that may be willing to come to Bradford, although that is also useful, than of increasing the R&D activity in the region.

Inward Investment

Some efforts to attract external businesses to the area can and should be made, although the primary focus should be on raising the local R&D activity. On inward investments, we think that Bradford has considerable advantages; there is plenty of available land that could be developed, no shortage of available workforce, nor any clear skills shortages, the region is well-located in terms of closeness to

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other industrial areas and with good transport/communications links, and probably most importantly, it has a more substantial manufacturing sector than most regions and one which is more well-rounded (covers more sub-sectors) than most regions. These, however, will not in themselves persuade an external corporation to invest. Companies invest in regions they are already familiar with and in particular where they already have at least some operations. So inward investment efforts should be aimed at the groups which already have subsidiaries, even small ones, in the Bradford region.

We have been asked how best to attract new AEM businesses to Bradford. It is easy to set up inward investment programmes and try to attract major international companies to invest in the region, but we reiterate the cold fact that it is very rare for a major company to set up in a completely new region to them. They invest in places where they already have a foothold – where they have a smaller but significant factory. Very occasionally, companies do set up a major operation in an unfamiliar location, and these get massive publicity, but such events are so uncommon that attempts to achieve them are a very poor use of public funds. Much more effective is to cultivate the companies that are already present. It is also much lower cost to do so.

Transport and access, availability of industrial sites

We asked about access problems, transport issues and how suitable the business’ existing location was for these. The answers, although the expected ones, do affect policy. The majority of companies in the northern zone, outside the city itself, considered the poor road access to the north to be a major problem for them, and several said they would prefer to be in one of the southern industrial parks. Manufacturing companies are intensive users of road movements, and the time for an HGV to get from the motorway system to Shipley or Keighley is a cost burden. We do not think, however, that it is a very major added cost; an extra 45 minutes on a journey to a port a hundred miles away, say, does not add significantly to the total cost of a product. The companies that said they would be interested in relocating to the sites near the motorways were weighing up the overall advantage, and the transport issues were one part of it – other and more weighty factors were their current premises being too small or too old.

In any case, the cost of building major new roads in the north is probably prohibitive. What however is clear is that there are major companies in the north who would like to relocate to the south and who judge that the considerable costs of moving are worth bearing, or would be with some assistance.

There are also companies in Bradford city itself who are interested in relocating, notably companies in the Leeds Road region. This is not about transport issues, but more about security and the poor state of their existing sites.

All of these businesses wish to remain in the Bradford region. Their interest is to move to new and usually larger premises, and given that they want to move they would opt for sites near the motorways.

We saw a considerably higher proportion of old, dilapidated premises than we expected. This suggests that there are not sufficient modern industrial sites with capacity for medium-sized companies. Our observations on this are not intended to be definitive and would need more detailed enquiries, but the numbers are sufficient to be strongly suggestive.

We visited factories in the following postcodes during the visit phase of this project:

Postcode BD3 BD 4 BD 6 BD 7 BD 10

BD 11

BD 12

BD 16

BD 17

BD 18

BD 20

BD 21

BD 22

No. of visits

3 5 2 1 1 1 2 1 2 1 3 4 1

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This gave good coverage of the main industrial areas of the Bradford region, and of the AE&M sector in particular, as will be seen by comparison with the master table of business locations given earlier.

It may be that a programme to assist relocation within the Bradford region could be set up, perhaps in tandem with the development of additional modern premises near the motorways. If new or enlarged industrial parks are to be built, the developers will want to justify their investment by pre-letting some of the units (agreeing contracts before construction of the park begins) and there are probably enough candidates to enable this.

One of the major advantages that Bradford has, it seems to us, is a large amount of available land, and the Council could play a major part in allocating land for industrial site development. This may not be feasible for local plan designation reasons, but we have the impression that there is unutilised or underutilised land which is close to some of the existing industrial zones and so is relatively low-cost to develop in terms of access, utilities, etc. This would expand the stock of modern industrial premises, which we suppose is not large enough else some of the companies interested in relocation would already have done so.

Relocation costs for the companies that we spoke to are high, but could be subsidised and the subsidy recovered through the rent. An assistance programme which included the developers and the Council together could be designed in such a way.

Retention of key companies

We asked the companies about their future plans, and in this we asked if they wanted to move away from the region. Whilst a few had overall negative perceptions of the Bradford region, the key point is that they do not intend to relocate outside the region. Some would like to move within the region, which we discuss in the preceding section, but it is clear that moving altogether away is not an option for them. This is unsurprising as an established business’ key asset is its employees, most of whom would not agree to a long-distance move. Of course, a company near the Bradford region boundary could move a short distance to a neighbouring council’s area, but we did not even find any cases where this was being contemplated. So the retention issue is instead one of preventing outright closure rather than relocation.

Of course, outright closure can be a very confidential matter, but usually the factory management are well aware of the risk and will share this with their employees and so also with public sector officials, to try to achieve savings and efficiency gains and public sector aid.

There is only one major case we are aware of where there is a serious vulnerability. In the case of large factories, the financial numbers are so big that the available grant assistance will not have a major effect on the parent company’s decisions. Assistance in other areas, such as planning, retraining of existing staff, finding alternative employment for redundant workers, etc., are the ones that are practicable for the Council. Multi-skilling training programmes in particular can be very helpful to companies in reducing labour costs and so making them long-term competitive with overseas sites.

Retention, however, is also about persuading a large group’s board to continue to invest in their Bradford site instead of starving it of investment and letting it slowly decline. In such cases, a perception by the group’s board that the Bradford region is well-disposed towards the company can be more important than short-term financial assistance. Meetings between directors from both sides are very useful in this.

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Information on the companies

There is, at present, no central Bradford Council database of information about businesses in the sector. We expected to find a CRM system that included core information on each company and which logged calls and visits and the outcomes. This did not exist. As a result, contacts made with a company by one Council department do not circulate and are not readily available to other officials who could assist.

We have constructed a database of all the companies which employ over 10 people, and this can form the nucleus of such a system. Visit reports should be part of this, and again we have started the process. Company information, such as contact details, changes fairly quickly, so each time there is a visit/call the data should be updated. This is not time-costly.

If a strong programme of visits/calls is to be initiated, as we recommend, then these visits/calls should be scheduled so that the contacts are made on a regular basis and so that requests for follow-up are indeed followed up. The database will show which companies are due to be contacted when. An associated Action List would help. In effect, the programme should be operated according to Project Management principles.

Organisation of support

How should the Council structure its business support activity? There was one theme that emerged very strongly: the difficulties the companies have in ‘navigating’ their way through the complexities of the Council. We heard repeatedly how long it takes a company to find who to speak to, for example. On the same topic, the companies complained there was little communication between Council departments - about one department of the Council not knowing what other departments have done -so, for example, the company has to repeat all the information they have already supplied. We floated the ‘one-stop-shop’ idea, but we also had the suggestion put to us by several companies before we arrived at that stage of our script of questions. The idea is to have a single Council official who is the first point of entry for the company to any discussion they need to have with a Council department. That person would already know the company, probably having already visited it, but in all cases having access to the database of previous contacts with the company, and in particular having information on its significance to the Bradford economy. This would not only benefit the companies, but also be time-saving for the Council. It would also help to avoid mistakes by Council officials, who would be able to obtain reliable information from the nominated ‘contact official’.

We were told of several cases where there had been difficulties for the company because they had a project which straddled two councils. A planning decision which requires two councils to approve it will always be more complex, but we gained the impression that the difficulties were greater than that. It suggests, although we concede we did not explore in detail, that there is not enough consultation and discussion between officials from bordering councils.

We were also told of cases where multi-body approvals were required, notably in the tightly-regulated chemicals industry. These were projects that needed approval from other statutory bodies in addition to planning approvals. According to the companies concerned, a lack of cooperation and a lack of awareness of the regulatory rules, by Council and other officials, caused major delays where the approvals concerned were ones that should have been simple. We did not explore these case histories, so we merely note the companies’ comments here.

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Support agencies

The LEP (Local Enterprise Partnership) is the primary channel for central government assistance programmes. In our meetings, we found that many company projects needed council assistance as well as LEP assistance – typical examples were projects that required planning and other regulatory approvals together with capital expenditure funding. Such cross-assistance-body projects are potential for difficulties, and we heard of a few cases, but in general our impression is that the existing support-agency structure works quite well. This relies on regular contact between the client-facing officers of the assistance bodies, and in most cases this seems to be happening. There is, of course, potential for competition between agencies, for example a new factory that could be located in two different council areas, but such cases are uncommon probably because there are few instances of outright inward investment in new factories that could be built on various sites. It is possible that there is bias towards giving funding to the local region by support agency officers based in that region, but we did not find any cases of this. In any case, some degree of inter-agency competition is desirable on principles of basic economic efficiency.

There are also support bodies that are not based on the council area or the Leeds City Region. The NAMTEC (National Metals Technology Centre) programme, for example, is largely aimed at the AE&M sector and offers assistance to the whole of Yorkshire and Humber. There was almost no awareness of such larger-area programmes among the companies we spoke to, in contrast with local programmes such as Rising Stars, so it would be appropriate for the wide-area programmes to be given a higher profile in the advertising of assistance programmes.

The work by Mazars indicated extremely low levels of contact between the companies and the support agencies. We found considerably higher levels, probably because our sample was heavily weighted towards the medium to large companies. Nonetheless, the contact levels were disappointingly low.

Marketing

We have compared the quality of information on assistance programmes with that available in other regions and our view is that in Bradford it is good; for example, the on-line sources are generally well-presented and the sites easily navigable. The difficulty is that the companies’ directors and managers do not explore these sources. Regrettably, the traditional methods of phone calls and visits remain by far the best method of communicating. Visits, as our own experience also demonstrates, are the most effective.

To maximise the effect of such a programme, given the shortage of staff time, it is better to bias the visits strongly towards the medium and large companies. This is not to suggest that the small businesses be abandoned, but rather we suggest that the time spent be allocated by number of employees involved. We mean by this, that if there are two companies, one of which employs 100 people and one employs 10 people, the time allocation of the Council staff should be very roughly 10 to one between the two companies. Likewise, a £5M capital investment should very roughly receive ten times the attention of a £500K project. This may seem obvious, but it is a discipline that is rarely followed.

This is about marketing. The products (assistance from the public sector) are available, but it is not enough to set up a programme, it has to be actively marketed:

There is a wide range of assistance programmes, but, from what we have seen so far, the take-up rate is not high enough. This is a general problem with public sector programmes all across the UK. Setting up a programme and advertising it is not enough – most of the eligible companies do not investigate the opportunity unless they have face-to-face meetings or at least telephone contact. Pro-active marketing is needed. From our experience of such programmes in other areas, this marketing needs to be tightly-targeted – a scatter-gun approach will find some of the right companies, but the cost of the marketing effort is too high. Having an up-to-date and detailed database is the first step to well-targeted

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marketing, and it should be accompanied by detailed customer relationship information. Using these, the number of calls and meetings can be kept within a reasonable budget.

The Lamberhurst Corporation has been service providers on a wide range of assistance-to-industry programmes, across the UK. We have seen the effects of under-funded marketing of these programmes, and indeed have sometimes been asked by the managing body to help them with marketing after the managing body has failed to achieve good take-up rates when doing the marketing themselves. When funding for a new programme is sought, for example from ERDF or Westminster, a significant sum for marketing the programme needs to be budgeted.

Availability of support

About half of the companies that had experience of applying for assistance said that the availability of financial support was erratic and unpredictable. This refers partly to the programmes which operate on the system of funding rounds with periodic bids, such as RGF, which are necessarily punctuated. It also refers, however, to ongoing programmes where the programme is open for several years, but where the backing funding may not always be available.

A company which is contemplating an investment would like to know that the support will be available at the time when the company decides to make the investment, rather than have to time the investment to suit the support programme. When the support is at relatively low levels of funding, the companies will often opt to make their invest/not-invest decision regardless of the support programme and then apply for funding if it happens to be available at that time. Such funding risks being a waste of public money.

We think that the existing information systems, such as the Bradford 4 Business newsletter, are good at presenting accurate information. They do not over-sell. The problem, as explained above under Marketing, is that the companies do not read these. They need to be supplemented by targeted information in which only details of the programmes that are relevant to the particular company are sent to them, and this needs to be done by officers who are familiar with the company concerned.

Helping the larger companies

There was a view among the medium and large companies that the support programmes are almost entirely for small companies and new starts. This is not a wholly unfair view of the current system. On the other hand, we found the larger companies to be very interested in developing their engagement with the Council, and this cannot be in the hope of substantial funding which they are aware is not available in the millions of pounds that would be necessary to make a difference to, say, a £100M T/O business. These large companies were interested, instead, in issues such as planning, security, R&D cooperation, staff training, etc. Most of these are matters that fall to the Council to assist with rather than the independent assistance agencies.

Our view is that a more active engagement process would be beneficial, particularly towards the larger companies. There is an emphasis nationwide on assistance to SMEs rather than larger businesses, but, given limited council staff resources, focusing on larger companies gives better returns. There has been less interaction between the Council and the larger companies than we had expected to find. Several companies have talked about difficulties in, for example, planning applications, difficulties that we think would not have occurred had there been ongoing relationships between the companies and the Council.

We have also been surprised to find some large companies that are largely unknown to the Council’s officials. Having a database of the companies and their key persons, with some information about company size, will help the Council officials to understand the relative importance of the companies to the Bradford economy and enable relevant updates to be sent to the right person in the company, for example when new assistance programmes are started. The database can be used, as we have

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already noted, to create a central customer relationship system, so the officials can quickly find out about prior contacts with each company. This does not require special CRM software, being rather a unified central record of conversations and meetings.

When should the programme happen?

Hardly any of the companies we visited, not even the largest ones, were very familiar with the range of assistance programmes. There should be an active programme of visits by BMDC and the other support bodies to the companies. Most of the companies would welcome this. The recovery phase of the economic cycle is the critical one for investment, particularly so for manufacturing, and this is therefore a good time for such an active programme of assistance.

Retaining realism

The aim of this project is to help improve the way the Bradford region assists manufacturing. Assistance programmes do help companies, but it is easy to over-estimate the significance of this help. Even with heavy public spending on such programmes, the effects will only be limited.

The success of AE&M in Bradford depends mainly on the companies themselves.

Specific projects

One hope of the Council from this work was that we would identify five specific projects which the Council could assist. We found, however, that the great majority of the companies visited would benefit from assistance. Each of our visit reports includes our suggestions for follow-up by officials. In some cases, the companies are already well-informed and well-connected, but in only one case did we consider that their knowledge was so good that there is no scope for beneficial follow-up. This is striking. It shows that a concerted programme of visits and calls to the AE&M companies should be implemented as soon as possible. The issue here is of company awareness of the assistance that is already available but which they are not tapping.

For additional confidentiality, our specific project suggestions are included in the Visit Reports which are annexed to our Final Report – Part 2, which is for internal use only.

Value of this project

We consider that this project has been very successful.

- The methodology adopted has enabled us to reach a high proportion of the key decision-makers, and to do so with a lower expenditure than is normal for this type of project.

- Thanks to the companies interviewed, we have been able to develop a strong understanding of the sector and we have been able to draw up a full set of recommendations.

- We have identified several key problems in the sector and have proposed ways to alleviate the difficulties.

- We have found a much-larger-than-expected number of companies that the Council can actively assist, and been able to make specific suggestions for assistance.

The methods applied would also work well in other sectors of the Bradford economy – retail and distribution, for example – and we would be happy to discuss carrying out similar projects. That gentle pitch apart, we would like to emphasise that this project will only have had value if it results in a much more active engagement between the Council and the companies, which the companies would welcome. We believe this engagement will considerably strengthen the Bradford economy and will self-fund by achieving business growth and employment.

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Key SWOT findings

Strengths - a large AE&M sector (considerably larger even than previously thought and a major centre for AE&M in England) - good coverage of almost all AE&M sectors - a large pool of available skilled workers - a substantial number of medium-sized businesses - no dominating businesses - recent investment in response to the end of recession - very good recovery from recession and recent rapid growth by many businesses

Weaknesses - no major new businesses in recent years - low long-term investment in AE&M plant and equipment - low investment in R&D and in new products - many existing factory buildings are old and no longer suitable for the companies occupying them - lack of available modern factory buildings, although there is vacant land - lack of awareness of the available public-sector assistance

Opportunities - there is an appetite among the companies to develop strong links with research bodies / academia to develop new products - demand for modern premises by the existing companies can justify new industrial park developments - the recent growth by the companies generates projects that can qualify for assistance programmes - the companies are keen to engage with the Council and to explore assistance programmes - the sector is a target of central government assistance under the EGT policy, and Bradford’s AE&M sector has an excellent case for such funding

Threats In general, the short and medium-term threats are limited and low (for example no substantial closures are imminent) but there is a significant danger of slow but progressive decline due to: - a lack of new businesses - a lack of new products coming on stream - a lack of investment by the existing businesses

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Recommendations

We divide our recommendations into two groups. The first group is recommendations specific to the AE&M sector. The second applies both to AE&M and to other sectors.

Most of the recommendations, although derived from research on the Bradford companies, may also be applicable to the wider Leeds City Region.

Sector-specific recommendations

1) R&D promotion (High priority)

A programme to support partnerships between the AE&M companies and local academic institutions should be set up. The aims should be to encourage collaborative research projects to develop new products and to bring them to market. Assistance from central government should be sought to fund the programme, particularly, but not only, under the ‘Eight Great Technologies’.

The emphasis should be on inventions and products that can be rapidly brought to the market-place, and the programme should not be supporting fundamental research.

Bradford AE&M’s high ranking in national terms, described earlier in this report, could justify the establishment of one or more specialist R&D centres for advanced manufacturing, on the lines of Sheffield’s AMRC or London’s HSSMI, for which Catapult and ERDF assistance might be sought. Such a project would, we expect, be strongly supported by several major Bradford companies. A prestigious centre of R&D would also assist in attracting inward investment.

2) Industrial automation and industrial robots (High priority)

A programme to encourage the development of automation methods, including but not confined to industrial robotics, should be set up. This programme should be about adapting existing technologies to the specific requirements of the local companies, rather than the earlier-stage R&D that would be covered by the R&D promotion programme. Support from central government should also be sought for this, again under the EGT, which specifically includes robotics.

3) Capital grant and funding programmes (Priority)

Assistance under existing programmes such as the RGF should be raised, not in total amount but in percentage of the cost of the project being funded, such as from 10% to 20% or more. The purpose is to make the assistance of sufficiently high value to the company that it can convince them to embark on capital investment that they might otherwise not have done. Automation should be one of the focus areas of such programmes.

General recommendations

4) Engagement programme (High priority)

An active programme of engagement with Bradford companies should be set up. This should involve regular contact by the Council’s Economic Development and Property officers with the businesses. The programme should include both telephone calls and visits to the companies’ premises. The frequency will depend on the wishes of the company, but for the larger companies a quarterly call and bi-annual visit are likely to be appropriate unless there is a current project that needs more frequent contact. In general, the contact should always be the same officer (see ‘One-stop shop’ next).

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The officer can also serve as the initial point of contact for introduction of the company to non-Council assistance bodies.

A central database of company information and contact/visit reports should be built up to assist the officers.

5) ‘One-stop shop’ (Priority)

The interaction between the companies and the Council should have a ‘single point of entry’. This means that a single officer be designated to be that company’s first point of contact with the Council on any matter of significance. That officer will be well-informed about the company, its activities and its importance to the Bradford economy. He or she will either deal with the matter on the company’s behalf or for more technical matters introduce the company to the relevant official. The point-of-contact officer will follow the progress of the matter to ensure it is dealt with in a timely and sufficiently-serious manner.

6) Inward investment

A programme to encourage inward investment should be set up. This should not be primarily aimed at companies that have no existing activity or connection to the Bradford region, but rather at companies that are familiar with the area and preferably have existing branches or subsidiaries in the region. This programme can run in tandem with the engagement programme recommended above.

7) Technical courses at the universities

Assistance should be given to set up new post-graduate technical courses at the universities, to be run as collaborative courses with the companies, and in fields in which those companies have market-leading expertise and in which they can offer factory placements.

8) Relocation programme

A programme of assistance to companies that wish to move premises within the Bradford region should be developed. This will be particularly aimed at companies that wish to move to sites near the motorways. This programme will need to be a collaboration between the Council and property developers to ensure sufficient modern premises are available. There could be a subsidy to the companies to move to the new sites, with the subsidy being recovered through the rental on long-term leases.

9) Promoting ‘Bradford for Business’

A specialist in PR should be brought in to give advice on ways to promote awareness of Bradford as a good location for business. The AE&M sector could be a key sector to promote, in view of the large size of this sector in Bradford compared to in other regions.

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Annex 1: Methodology

The project has involved a wide range of information-sourcing, but the most time-intensive tasks in this assignment were the construction of the database, contacting the companies, and review/assessment of the information supplied by the companies.

Database construction

The initial task was to construct a trustworthy database. There are various such databases in existence, but they suffer from frequent errors, from missing key information and from being out-of-date. This was the case for the information supplied by the Council, but that is no criticism of the Council, as no better sources are available. Accordingly, we constructed a database by cross-correlating multiple sources. We also used information from the companies themselves to ensure we had accurate contact details. The companies’ websites and sales literature were the major sources of information for categorising the businesses. In particular, we have not used SIC data as this is very often misleading about the actual nature of the company’s business.

We aimed to find almost all the AE&M companies in the Bradford Council area which had at least 11 employees, and we identified a total of 216 such companies. From other such work we have done, we estimate that we have identified at least 80% of the companies, and probably well over 90%, although that assumes a clear agreement on definition of AE&M which in the current project is not present. What constitutes an AE&M company is considered above in the section ‘What is AE&M?’ Also, at least 30% of the companies have substantial distribution activities in addition to manufacturing/R&D. We chose to include companies where we estimated that at least 50% of their activity is manufacturing/R&D.

We have divided them by number of employees, in most cases obtaining this information from their official accounts and from their company websites/literature. The groups are 11-49, 50-99, 100-249, 250+. Employee numbers are of full-time employees where detailed information was available.

In the case of the companies we have spoken to, much more detailed information is given in the individual Visit Reports, which are not part of this document, but are held by the Council.

The database we have constructed was compiled in July 2013, with updated information for the companies that we have subsequently spoken to.

Qualification for entry in the database

We compiled a database of companies in the AE&M sector, in the BD postcode area, which have over ten employees. We identified which companies were primarily manufacturers (rather than, e.g., mainly engaged in the distribution of manufactures produced elsewhere), and the types of product they produce. These were subdivided into the following categories:

- Chemicals (including pharmaceuticals)

- Basic metals

- Fabricated metal products

- Electronics and electrical

- Machinery

- Automotive

- Businesses spanning these groups

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This database may be considered to include most of the substantial engineering-related manufacturing businesses in Bradford. Examples of businesses which manufacture but are not included would be manufacturers of wood furniture, paper producers, oils and gases processors, clothing producers, food manufacturers, etc.

We restricted our subsequent interviews to companies based in, or in one case on the border of, the Bradford Council area, which is slightly smaller than the BD postcode area.

Contacting procedures

We adopted a contacting system we have developed from similar projects. The most important parts of this are to send a letter from a high-ranking officer in a respected body (in this case BMDC) to the most senior person in the target company and to follow this up rapidly with a phone call from the person who will be carrying out the interview. This gives a good chance of speaking directly to the senior person, and of obtaining a meeting, and it minimises the need for multiple calls. We were able to achieve an approximately 40% meeting rate with the leaders of the businesses by using this procedure, which is well above average for this type of assignment. We think that the reason for this high rate is that many of the companies perceived the meeting as an opportunity more to present a project than to assist with research. Only three companies refused to meet or be interviewed; the main difficulty was not one of lack of willingness, but of getting past gate-keepers or of the person concerned simply not being in the office (we applied a call ‘four-times then abandon’ rule).

Previous experience shows that telephone interviews give much less information than face-to-face meetings. We initially tried a mix of both, to evaluate how most efficiently to use the available time, but it was rapidly clear that site visits were the appropriate method. In all cases, the meetings enabled us to collect detailed information, including the answers to the questions list prepared by BDMC and to additional questions that we added which are relevant to the assignment, as well as considerable information about the companies’ activities.

In almost all cases, our meetings were with the most senior person responsible for the site. In the majority of cases, this was the MD or Chairman; in the case for example of multinationals it was usually the Site Director. We consider that the quality of information gained is therefore very high.

We have collated both the visit information and telephonic discussion information, but most of our conclusions are based on the information collected during visits which were greatly more informative.

Our Visit Reports include the information obtained that is specific to the company interviewed, but do not contain general answers to the questions on the questions lists; we have however recorded these and used them to compile our reports. It should be noted that the Visit Reports are based on information supplied by the companies; we have cross-checked a considerable portion of this, but necessarily much is reliant on the person interviewed. We note, however, that there was almost no information collected from the companies that was contradicted by our verification processes.

We informed each company that the information collected would be kept confidential and that the published Reports would not refer to individual cases. The interviewees were, accordingly, quite full and candid in their responses.

The average duration of the site meetings was 1 hour 10 minutes, which is above the norm for such visits and much greater than the norm for telephonic interviews.

It is appropriate here to thank the interviewees for the generous amount of time and information that they gave us. It has enabled us to obtain a detailed picture of the AE&M sector.

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Statistical significance

There are 216 companies in the database we compiled of companies with more than 10 employees. Of these, we selected 73 who each received a letter of introduction and we called the key decision-maker of each one. Of these 73, we visited the factories of 27 (i.e. 37%) in the period August to October. The 73 were selected to give a good coverage across all the sub-sectors and a good cross-section of company size, but with a strong bias towards the larger companies. This deliberate bias was decided in order to maximise the total number of employees in the sample size. Some small companies were however also included.

Of the 216 companies, exactly one third - 72 - have 50 or more employees. We visited 22 (31%) of these, including 8 of the 15 (i.e. 53%) which employ at least 250 staff. Of the 144 smaller companies in the database which employ 11 to 49 staff, we visited only 5, so our results here are merely indicative. In the medium and large company groups, we greatly exceed the percentages necessary for statistical significance. The reason we did this was not only to include as many employees as possible in the sample size but also to maximise, given the time available for the project, the chance of identifying specific major projects that can benefit from public sector assistance.

In addition to the visits, we also had telephone discussions with others of the companies in the database; in most cases these were relatively brief (average 15 minutes compared to an average of 70 minutes for the companies visited), so the results, although they are used in our assessments, are not given in the detailed company reports we have drawn up.

It is in the nature of this type of research that it is not scientific in the full sense of proper controls, elimination of sampling bias, uniformity of question/answer format, etc. However, the response rate was high, both as a percentage of the target groups and to individual questions. We consider that the reliability of the results is high, particularly amongst the medium to large companies which was the primary focus. The turnover and employee numbers of the companies visited are given in the annex and show the distribution of business size among the visited companies.

We are aware of the types of sampling biases inherent in this type of project. For example, some companies may refuse to respond because they are in difficulties, but equally companies in that situation may welcome the opportunity to seek assistance. We think that such effects broadly even out, given that our sample size among the medium to large companies is high.

A significant part of our comments and recommendations are based on impressions of our consultant carrying out the interviews rather than on quantitative data collected during the project – for example, the comments on the incidence of old machines and on the R&D and NPD activities. These therefore, lack the backing of numerical evidence. They are however, made by comparison with large numbers of other visits to manufacturing companies in other regions and so are not purely qualitative.

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Annex 2: Profile of Companies Visited

The following are the locations of the companies visited (not the larger full list of companies

interviewed).

Postcode BD3 BD 4 BD 6 BD 7 BD 10 BD 11 BD 12 BD 16 BD 17 BD 18 BD 20 BD 21 BD 22 No. of visits 3 5 2 1 1 1 2 1 2 1 3 4 1

The following are the sub-sectors of the companies visited.

Sub-sector Chemicals Basic

Metals Fabricated Metal Products


Machinery Automotive Cross-category

No. of visits 7 2 8 2 5 2 1

The following are the numbers of employees and annual turnover of the companies visited. The employee figures are for full-time employees and the turnover figures are for the most recent accounting period (in one major case estimated).

The names of the companies are not given for confidentiality reasons. Fuller information on the companies visited is given in the not-for-publication Part 2 of this report.

Numbers of employees Annual Turnover (£M)

14 0.6

20 1

26 1.2

27 3

33 3

55 4.5

55 5

60 5

65 5.5

65 6.5

65 7

70 9

75 10

83 13.5

84 15

85 15.5

110 18.5

115 21

120 22

250 30

250 65

300 84

365 106

400 130

440 150

450 176 700

500

Total: 4,382 employees Total: £1,407.8 million turnover

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This report is © The Lamberhurst Corporation Ltd, November 2013

Head Office: 17, Ensign House

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Web: www.lamberhurst.com Tel: +44 (0) 20 7861 9968 E-mail: [email protected]

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