Keys to British manufacturing success

 

A video of the SPARK event by Lincolnshire Chamber of Commerce using extract from my talk as voice-over.

This is what I had to say:

Had you been among the five million visitors to the Great Exhibition of 1851 in London’s Hyde Park you would have been impressed by the vast glass structure that housed the exhibition. More so,  you would have been in little doubt that you belonged to a great manufacturing nation. We had been first off the block in the Industrial Revolution and were still going strong.

For the last three years, I have been exploring the catalogue of the exhibition, at which my great grandfather exhibited. I have sought to trace the origin and destination of many of the exhibitors many of whose names are still familiar. This drew me in to a far more extensive search to discover the history of British manufacturing. As a result of this process, I wrote a book, How Britain Shaped the Manufacturing World which was published last year. I am now working on the sequel, Whatever Happened to British manufacturing. I have also  identified some common factors and themes that led to success and failure. This evening I want to focus on the successes to see what they have to teach us moving forward.

So, to the beginning, we may have been a small island but our ships carried our adventurers around the globe. It was from this spirit of adventure that the stuff which kick started our industrial revolution came: cotton. There is much that was bad about the whole business of cotton, but I will stick with the positive, for it has much to teach us.

We are great inventors.

Men and women who spent their days spinning and weaving would dream up better ways of doing what they were doing. It is this dreaming, this process of trial and error that holds so much of the key. Names like Arkwright, Hargreaves and Crompton. Machinery emerged and the mills in which to place it; mills then powered by water.

What if? What if is another key – what if there was an alternative source of power to that of fast flowing water. 

For centuries the British had been using wood or charcoal as a source of energy, but in the sixteenth century the demand of the navy for wood for ships meant that we had to look elsewhere. That canny lot in the north east already knew the answer: sea coal, as opposed to charcoal. In time, mines were dug to get at yet more coal but something was needed to pump out water and foul air. 

Enter the steam engine, first the atmospheric engine by Newcomen and then the engine capable of rotation by Watt.

Here we have some more keys. The steam engine found its way in to the fields of Lincolnshire with firms like Clayton & Stuttleworth with threshing machines. Richard Hornsby of Grantham was convinced that the steam engine could do yet more and soon Hornsby became the world’s number one. I guess Joseph Ruston may have disagreed and I will come back to that. 

Chemicals also offer some vital further keys. The bringing together of much of the British chemical industry into ICI in the twenties could have been a disaster. The premise for the mergers was quickly disproved with the export market for fertiliser collapsing in the face of  local competition. In spite of this, the board of ICI did two things: they continued a commitment to pure research and engaged in propaganda.

The later we would know call marketing. The former is instructive. ICI scientists explored ideas and came up with discoveries for which uses had to be found, as indeed they were in the form of polythene and Perspex. There is the lovely story of an ICI director asking one of his chemists what he was going to invent next? Such was the gap between boards of directors and those who do the work. Nevertheless a commitment to pure research is, I’m certain, a key.

We are great developers.

Here I come to Joseph Ruston who holds a further vital key. It is all very well inventing, but what about developing and selling? There is a lovely story about Ruston going to Russia to sell pumps to drain the fields ready for planting. Whilst there, he heard that oil had been discovered and needed pumping, so off he went and developed his pumps for oil extraction.

Ruston was also acutely aware that big construction projects used mass manual labour; surely there was a way to mechanise. He developed it in the form of the steam powered mechanical digger (the steam navvy) and then sold it to the company seeking to dig the Manchester ship canal. This leads to another lovely story. The project was bedevilled by appalling weather and the diggers sunk deep into the mud. Ruston’s men cleaned them up and soon had them all working again. In Lincoln public library there are two books of meetings of the Institution of Mechanical Engineers which speak of Lincoln engineers. That of 1885 includes Ruston’s presentation on the steam navvy which was used in the building of the Manchester ship canal.

Our steam railway locomotives were the best in the world: just think of the Flying Scotsman and the Mallard. Was there nothing that steam couldn’t do? Charles Parson’s steam turbine was perhaps the ultimate powering ships and generating electricity.

We were first with steam but not so with internal combustion, although Richard Hornsby may disagree – the story goes that he was producing Akroyd Stuart diesels with a small d eight or so years before Diesel himself. 

In 1908, Hornsby produced a 70 hp. vehicle that ran on chain tracks, and it was demonstrated at the Royal Review showing how well it could cross soft muddy ground; the Prince of Wales was said to have been impressed. Sadly Lincolnshire farmers were not and Hornsby sold his patent to the Holt Company in the USA. This company later adopted the name Caterpillar. The track technology was of course used by William Tritton and Fosters in the tank.

But what of the motor car? The French and Germans were first, because of the red flag, but we did well in the slip stream. Lanchester was the first to conceive a car that was not simply a horseless carriage – he saw through convention to arrive at something new.

The motor car holds other keys to British success. Lucas were forever exploring ways to make the car better. Interestingly they were perfectly happy to take a licence of other people’s inventions and use their skill at manufacturing to make it with greater economy and efficiency. Rolls-Royce were perhaps the perfect combination of engineering excellence and effective marketing. 

Pilkington and Rowntree offer a further key. In the twenties and thirties they looked at their businesses and saw they needed a further skill: that of administration, something to glue the business together. Rowntree, suffering from the success of Cadbury, also embraced both market research and the integration of production and marketing. Interestingly, another food manufacturer, United Biscuits, put their success down to industrial relations or as their biographer put it, human relations.

Our tool makers offer yet another key. Leicester’s Jones & Shipman saw merit in engaging with their major customers in training. British manufacturing had grown largely without an academic core; men learnt on the job. So, formal training entered the field as did academia. Lucas persuaded the University of Birmingham to accept their money to endow a chair of manufacturing. The academics were horrified but slowly were won round. We can boast with great pride our own university and the UTC and their commitment to engineering and manufacturing. 

Three later Lincoln developments offer further keys to success.

The gas turbine. I had the privilege to meet Kelvin Bray of Ruston Gas Turbines who began working with Bob Fielden  under the watchful eye of Frank Whittle developing the jet engine for industrial uses. The use found was to power the exploration and extraction. Bray believed that success would follow and convinced Arnold Weinstock of GEC to back him. The result was that Ruston turbines were used by 80% of the world wide oil industry. Characteristically Kelvin’s parting words to me were ‘ now we’ll need to find a way of fuelling turbines with hydrogen’. Bray’s keys to success were belief and a commitment to continuous improvement. Turbines were never  given numbers to indicate their power, for the power was forever increasing.

The second is Micrometric. This company which is celebrating its fortieth anniversary carries our high precision cutting and welding for a large range of industrial customers, offering consistent excellent quality. It represents one of many thousand excellent British engineering companies which make up the supply chain and are the very heart of British engineering.

The third one is semi-conductors where Lincoln through AEI were definitely among the first. Their key to success is their ability to survive through thick and thin based on a commitment to excellence. They are now of course, Dynex. Interestingly a former finance director of the AEI Lincoln operation told me of a business plan submitted to Weinstock for the mass production of semiconductors. This time Weinstock chose not to support. His rival, Plessey, took a different view but without the financial muscle of GEC. 

This draws me into the keys to lack of success. We were not well served by government nor the city of London, both of whom obsessed with the short term. But as I say, that is another story.

So we are inventors and developers. Of vital importance, we welcomed those from other countries to develop their ideas under our patent laws and with our skilled workforce.

William Siemens and Henry Bessemer developed processes for making steel. Brunel built some of our finest railways and bridges. 

Italians, Marconi and Ferranti gave birth to our electrical industry. It is surely an irony that the Italian Leonardo which now owns much of our defence electronics industry is at pains to trace their ancestry back to none other than Marconi and Ferranti. Later in the story we owe a debt to two further immigrants Michael Sobel father-in-law of Arnold Weinstock and Jules Thorn. More recently still, iconic brands of Rolls-Royce, Bentley and Jaguar are thriving under German and in the case of Jaguar Indian ownership. It would be churlish not to mention our own Siemens, descended from William Siemens brother,  who have invested not only in what was Rustons, but also in Parsons, telecoms, railway train assembly and wind turbines. Siemens Energy are leaders in the path to net zero.

We have much to be proud of not least here in Lincolnshire. Great inventors, ingenious developers and places keen to offer a welcome to those who wish to do business here. But come on government and city financiers, recognise this incredible talent pool and back it. 

Government intervention for manufacturing

 There are growing cries from manufacturers for government support. These are not new. Here I try to map out the pattern of support given in the period since WW2 and the impact that it had. 

Following the end of the war, government restricted imports and encouraged all parts of industry in an export drive. This was assisted in 1949 by a much needed reduction in the dollar exchange rate from 4.03 to 2.80.

In the fifties and early sixties under a Conservative government, the idea of tripartite working between the state, industry and trades unions was being accepted. The Conservatives had come under pressure to modernise industry, given the growing awareness that other countries were doing just that, and with tangible success. The Department of Scientific and Industrial Research, set up during the Great War, had reported, for example, that machine tools were ‘a key strategic sector for the modernisation and expansion of British industry’. Such exhortations fell on deaf and fiercely independent ears. The main interventions were those to counter restrictive practices in the form of the Restrictive Practices Court and an encouragement of investment in Research and Development.

The National Economic Development Council was formed in 1962. This followed the policy in the 1950s of encouragement by government to fragmented industries to come together in larger, hopefully more viable units. There was also encouragement for large, successful companies to set up new operations in areas scared by unemployment. Rootes made their Hillman Imp at Linwood outside Glasgow, and Dunlop was urged to keep open their India Tyres plant at Inchinnan despite damaging union militancy. Some of the many shadow factories built for war production were repurposed for peacetime production.

In the mid-sixties, in spite of the massive push for exports, British manufacturing was seen to be languishing in comparison with that of other countries. It was not doing badly, it was just that they were doing better. It needed encouragement. In 1965 the Queen’s Award for Industry was instituted. Four years later, the MacRobert Trust instituted their Award for Engineering.

The new Labour government under Harold Wilson had its response ready in the ‘white heat of technology’. It set up the Department for Economic Affairs led by George Brown which authored the National Plan supported by the National Economic Development Office (NEDO) and subsidiary bodies focusing on industries and geographical areas – the Little Neddys. Alongside the DEA, was the new Ministry of Technology and its minister Anthony Wedgewood Benn, soon to be Tony Benn, supporting technical committees including the National Engineering Laboratory, the National Physical Laboratory and the National Computer Centre. There was then the Industrial Reorganisation Corporation led by Sir Frank Kearton who came to it from his post at the head of textile giant, Courtaulds; he had previously worked at ICI including in its atomic bomb programme. It was about creating national champions. It supported the creation of ICL as the British answer to IBM and primed the explosive growth of GEC. The expansion of Courtaulds into spinning and weaving by acquisition of a great many independent mills was perhaps not an IRC intervention, but it was closely aligned given Kearton’s involvement in both. The motor industry was in desperate need of rationalisation, although the IRC was perhaps grasping at straws in supporting the creation of  British Leyland in 1968 and providing shipbuilding support between 1967 and 1972 (Harland & Wolff, Upper Clyde Shipbuilders and Cammell Laird). The Selective Employment Tax introduced in 1966 sought to discourage certain types of employment, essentially trying to make manufacturing employment more attractive.

The strains in the overall economy, all really stemming from the emptying of the national coffers to fight two world wars, led to a currency crisis for the new chancellor of the exchequer, Jim Callaghan, and hence to the 1967 devaluation of sterling from 2.80 to 2.40. 

In 1967, fourteen privatised steel producers were brought together to form the nationalised British Steel Corporation under the chairmanship, first of merchant banker, Lord Melchett, grandson of the founder of ICI, and then engineer Monty Finniston who, somewhat later and famously reported on the profession of engineering for Prime Minister Margaret Thatcher. The abrasive American industrialist, Ian MacGregor, took the helm in 1980 before moving to the Coal Board to face the miners’ strike in 1984.

The 1970s began with the re-election of the Conservatives under Prime Minister Edward Heath determined to roll back the influence of the state in the economy; the market was to rule. Fate had other ideas, for not long after the election that icon of British manufacturing was in trouble with the spiralling cost of the RB211 engine being developed for Lockhead. The approach taken by the Secretary of State for Trade and Industry, former industrialist John Davies, was to bring it into state ownership saving 80,000 jobs and a vital part of the British defence industry. The experience of the Rolls-Royce rescue led to an acknowledgment that there was a place for government intervention and this found expression in the Industry Act 1972.

The Heath government saw the culmination of a project very close to Edward Heath’s heart, the joining of the Common Market. He saw that British manufacturing needed a big home market and membership offered just that. It is also opened up the British market to manufacturers from the other member states, something that led to decline of motor industry. The failure to join the Common Market earlier had handed advantage to the German and French motor industries giving them a larger market but also exposing them to the benefits of competition. The timing of Britain’s entry was simply too late for our industry to catch up. We had suffered for too long from the lack of exposure to competition. There were benefits in EEC membership with reduced price of imports and increased market for specialist manufacturing and products. The Labour government, which succeeded Heath, put the question of continuing membership of the EEC to a referendum which saw the electorate voting strongly in favour of remaining. A contemporary CBI survey was overwhelmingly in favour of remaining. 

Harold Wilson’s Chancellor, Dennis Healey, taking over the Treasury from Heath’s Anthony Barber described it as ‘like the Augean stables’. In order to balance the nation’s books, income tax was increased to a maximum of 98%; Marr quotes Healey as  blaming the nation’s poor performance on bad management, poor training and low investment. 

The bug-bear of the 1970s was inflation. The Labour government under Wilson and then James Callaghan, once again tried to tackle industrial relations and incomes policy with the Social Contract or Compact. Cash limits were set on public expenditure and attempts were made to contain wage increases to 6%. Industrial unrest spread, union membership increased spreading into the public sector. Observers are critical of James Callaghan for not standing up to union leaders. When eventually he did with an attempt to keep wage increases below 5% he was met by a wave of strikes which became known as the winter of discontent. Key was the claim by 57,000 Ford workers for  30% increase, in the event settled at 17%.. 

Many suggest that a large part of the decline in manufacturing output in the seventies should be placed at the feet of North Sea Oil. Sterling had weakened following the 1973 oil crisis, culminating in the intervention of the IMF in 1976. Then, quite quickly, the currency strengthened as home produced oil cut imports and made the UK look comparatively strong. A strong currency made exports more expensive and imports more attractive. There followed a shift away from manufacturing for export to importing manufactured goods for domestic consumption. Looking at specific examples, the motor industry was undoubtedly one, with British Leyland shrinking with consequent job losses throughout the supply chain. ICI lost 1/3 of its workforce. At GEC the discipline imposed by Arnold Weinstock resulted in many plant closures and job losses. Elsewhere there were job losses in the ship yards and in the aircraft manufacturers.

From the point of view of labour, the period 1970 to 1979 can be categorised as one of radical growth in membership and strikes for the trades union movement. In terms of membership, this rose to 13 million and covered more than half of those eligible. It strengthened in the public sector and in coal reached 100%. In terms of legislation, the Industrial Relations Act of 1971 was hotly disputed and eventually repealed by the new Labour government in 1974. The issue would not go away and Labour made further attempts between 1974 and 1979, including the creation of ACAS which has survived to this day. Strikes were particularly prevalent in the 1970s as unions struggled to maintain their members’ income in times of roaring inflation. In the winter of discontent in 1979 some 29 million days were lost through strikes, many in manufacturing. 

Government intervention in industry once again came to the fore with the creation of National Enterprise Board (NEB ) 1975, taking on the state holding in Rolls-Royce, British Leyland, Alfred Herbert and Ferranti.  British Aerospace was created in 1977 in effect nationalising aircraft production; the nationalisation of shipbuilding followed.

A 2013 paper produced by two LSE academics, Professor Stephen Broadberry and Dr Tim Leunig, The impact of Government policies on UK manufacturing since 1945 , offers a perspective with both the benefit of hindsight but also a political steer given that it was produced for the Government Office for Science. It suggests that government intervention had very little positive impact. I infer from their paper that the decline in manufacturing was inevitable. Britain had set out its stall after the war as a manufacturing nation, although in the staple industries comparative advantage was being lost to low wage economies. The move was inextricably towards capital intensive industries where the technical content was high, so pharmaceuticals and electronics. These did nothing for unemployment but did add to GDP. One exception to the ineffectiveness of government intervention was perhaps the encouragement of inward investment where the evidence does point to the creation of jobs. In terms of other action, 'Buy British' campaigns were thought ineffective, but government procurement was vital not least to the Defence and Pharmaceutical sectors.

Mrs Thatcher was elected on 4 May 1979 oddly not with an overt mandate to challenge the power of the unions and to allow market forces relatively free reign. She wanted a return to Victorian values, the economics of the prudent family. In time and with the experience of government she began to see the obstacles to this vision. 

She saw strike action as a key factor in the British decline and she was determined to challenge it. This she did through successive pieces of legislation: seven different Acts between 1980 and 1993. Union membership fell to 7 million in 1995. Inflation was still running high with wage demands to match.

She saw the need to roll back the role of the state. After a decade of nationalisation and ineffective government intervention, she wanted the market to play a key role: state ownership was consigned to the past. Each of the various privatisations had different implications for manufacturing. For British Leyland, it was really just the end of the line for this, some might say, unlucky company. As with many bonfires there were Phoenix to rise from the ashes. Jaguar and Land Rover both re-discovered themselves, but both eventually fell into foreign ownership.  The privatisation of British Shipbuilders 1983 –1986 was another bonfire from which little would rise except in the area of defence. The same was true with aircraft manufacturers, with the notable exceptions of Rolls-Royce whose time had nearly come with the highly successful Trent engine, and British Aerospace and the British part of Airbus.

The privatisation of electricity generation and distribution robbed the traditional suppliers such as GEC and NEI of their safeguard in the ‘Buy British’ policy. The same went for telecoms.  Manufacture was being replaced by imports, continuing but on a much larger scale that which had begun the seventies. The Thatcher government steered away from intervention preferring the market to rule the day. The Westland affair and the efforts of Michael Heseltine to save the British helicopter industry stood out as an exception. Nevertheless, the welcome given to inward investment was evident, for example in the motor industry where Nissan set up in Sunderland, Toyota south of Derby and Honda in Swindon. 

Privatisation continued with the railways. Here work had been done to prepare the manufacturing and repair sides of British Railways, nevertheless the removal of any serious encouragement to Buy British had a major impact.  For example, the German Siemens were preferred over the Derby based but Canadian Bombardier, which had bought British Rail Engineering, for new trains for Thameslink and South West Trains. Bombardier was subsequently bought by the largely French Alstom. The third major manufacturer of trains for the British rail companies is Hitachi.

The tone set by the Thatcher government was continued by her successor, John Major. With minor exceptions this was the case also with the Labour governments under Blair and Brown. For example Trade and Industry Secretary Peter Mandelson became involved in attempts to save the former ICI chemical plant at Wilton which later fell into foreign ownership. 

The economy would be fed by the High Street itself fuelled by large increases in personal borrowing. Financial Services would become the powerhouse, with the fruits of its success ‘trickling down’ to benefit everyone. The bursting of the dotcom bubble would see the end of GEC. German and American car companies would buy the jewels in the crown of British motor manufacturing; Jaguar Land Rover later becoming owned by the Indian Tata alongside their chemical and steel interests.

 The first two decades of the twenty first century have witnessed the loss to foreign ownership of key British companies including much of Britain’s building products sector, with only occasional and specific interventions, Sheffield Forgemasters being one and this for national security purposes.

Recent interventions have been fiscal with Freeports and enhanced capital allowances. There is also some evidence of inducements to foreign companies at least to remain in the UK.