Made in Wales, sold worldwide
Plenty of manufacturers are riding out the economic storm by focusing on export markets. Douglas Friedli looks at a sector of the economy whose time seems to have come again.
While large parts of the UK and Welsh economy have stalled over the past year, it seems that good old manufacturing is doing rather well.
Manufacturers have enjoyed 12 straight quarters of output growth. And because the sector is so focused on exports, it is in a great position to ride out a UK recession, if it happens.
But the good news does not always get through. That may be a legacy of industries such as iron, coal and TV manufacturing, which have come and gone. Or maybe manufacturers worry that shouting about success will reduce their lobbying power.
Whatever the reason, negative perceptions have real effects. Corus, which makes steel at Port Talbot, told the Welsh Assembly bright youngsters were being discouraged from working in industry.
Different companies will be affected by the economy in different ways, says CBI Wales director David Rosser: “Initially, manufacturers seemed insulated from economic problems, helped by an exchange rate that favoured exports. But the impact of inflation on the consumer is hurting output and profitability in a range of manufacturing companies.
“The outcome will depend on the confidence of consumers and the performance of the the US and European export markets, and there are signs these may get off lighter than the UK.”
One company hoping to get a slice of the global economy is battery technology developer Atraverda, based in Abertillery in the Gwent Valleys. The company makes a part and powder, which are added to batteries that are smaller, lighter and more reliable than traditional ones. Its Welsh factory makes short test runs of the product to help customers with development. It has just recruited industry veteran Mike Gilchrist from the US as chief executive as it moves towards full production.
Atraverda benefits from being close to universities such as Cardiff and Swansea. Staff can get there easily from south Wales and the Midlands. And compared with some parts of the world, production is pretty straightforward. Chief technology officer Andrew Loyns says: “I was in India last week and we lost power four times in ten days.”
Atraverda is also part of a cluster of local companies in the same sector. “It is great to be within half an hour of potential customers,” says Loyns. “You can address issues very quickly.”
But that cluster is shrinking – when Loyns moved to Abertillery a few years ago, there were three lead acid battery makers nearby, now there are two.
Within the next few years, Gilchrist and his team will have to make a big decision about location. “At some point we will move to full manufacturing,” says Gilchrist. “As the technology develops, hopefully somebody will want to mass produce the batteries. Where we manufacture will depend on who the customer is. Either you go to where your customer is, or you do it centrally somewhere. We have not decided yet.”
For locally grown companies, placing low-value mass production work offshore can make the company competitive and ensure good jobs stay in Wales. Professor Duc Pham of Cardiff University’s Manufacturing Engineering Centre says: “We need to increase jobs, especially in high-value manufacturing. We want high tech, well-paid jobs and people to create intellectual property.”
But he adds: “This is still a future in Wales for big factories provided they are locally owned. I would prefer the big companies to be native. People will always need goods in large quantities.”
Paul Byard, chief executive of the Manufacturing Advisory Service (MAS), has helped hundreds of businesses get fitter so they can stay here. But he says not enough think about what to do after improvements are made: “Companies need to go way beyond lean manufacturing. Lean is traditionally thought of as a way of eliminating waste. Either you use your new capacity and find a way to sell more or you downsize and diversify. In a global market, you can take that increased volume to market.”
And he pours cold water on the idea that the higher labour costs in Western Europe compared with China and India mean production will move east.
“In most cases, labour is just a small proportion of the product costs.”
The environmental lobby is sometimes seen as a threat to manufacturing. But more and more manufacturers in Wales are playing on their green credentials. One is Protomax, a plastic engineering company in Swansea, which has developed technology to make plastic panels from waste material including plastic bags, old milk cartons and old clothes. The panels can be used for hoardings around building sites, partition walls and even bullet-proof doors.
The company has landed a Welsh Assembly Government investment grant towards the design and manufacture of its powder press. Managing director Nick Stillwell says carmakers are interested in using the panels for vehicle trolleys, while hospitals are investigating their use for office pods and cubicles.
The Assembly also backed the move of electric van maker Stevens Vehicles to a factory in Port Talbot. The first of the company’s Zevan vans rolled off the production line this summer, and a car will follow. Director Peter Stevens says: “We chose Wales because of the help and enthusiasm here.”
As far as export markets go, there can be few tougher to crack than space. But the safety clips that attach astronauts to NASA space stations are designed and made by DMM Engineering of Llanberis, in Gwynedd.
Wales is still strong in specialist sectors such as automotive parts. Japanese group Takao opened a £12m press shop at Rassau, Ebbw Vale to supply parts to Honda and Toyota. It made the investment because it wanted to be close to its customers, which that is a growing trend, says Byard at MAS. “Energy costs have risen. This brings its own challenges and many companies are looking to localise supply."
