Manufacturing in the UK

There is an article in today's FT written by Rolls Royce Chief Executive Sir John Rose. In it he explains that 'Britain needs an industrial route map' and that 'a broadly based economy that includes high-value manufacturing is likely to be more resilient than a narrowly based one'. His article includes:

• Warren buffet has drawn attention to he risk that the economy's structure may make it vulnerable to any US led recession.
• Strongly branded, export orientated manufacturing companies with a focus on technology and productivity can succeed in world markets
• That a UK economy that has a 'route map' for high value manufacturing will be better able to weather the ups and downs of the global economy.

Having an element of high value manufacturing in the UK is of course a commendable asset. The UK's manufacturing sector does contribute a significant and impressive amount to the country's economy, summed up brilliantly here by Ian Pearson of the Department for Innovation, Universities and Skills:

'I don't need to tell anyone in this room that Manufacturing is the lifeblood of our economy, providing around 3 million good quality jobs and comprising over half of all exports.

The UK is the world's 6th largest manufacturer and the manufacturing industries combined (including construction, oil and gas) make up more than a quarter (27%) of our entire GDP.'

However, A 'route map' to increase the level of manufacturing in the UK economy to over a third seems to me to make it more vulnerable to the modern global economy than less. Where do we expect most of our manufacturing orders to come from? The West or the East? What is consumer spending like at the moment for UK goods? What is the exchange rate of the pound in comparison to the Dollar? What is the availability of capital for large firms to procure high value goods?

Wages in the UK are considerably higher than those in the developing world. The minimum wage is currently £5.52 an hour. The average wage for 'High value manufacturing' staff in the UK would surely be higher still. Although I couldn't obtain accurate figures for high value manufacturing wages in general in China, here is a link to substantial data that points to rising but still significantly lower manufacturing wage rates. However, is the quality of manufacturing in the developing world not available? Not if you ask Sir John Himself surely; as Rolls Royce themselves have out-sourced some of their manufacturing to Singapore as he himself tells the BBC . I don't think any part of the manufacture of an exceptional Rolls Royce engine is not 'high value'

'we must develop a framework or 'route map' to set priorities for both public and private sector investment' Does this mean that the Government needs to subsidise Research and Development, sow the seeds of innovation in Technology parks and subsidise Foreign Companies looking to establish manufacturing in the UK?

Exchange rates are not currently beneficial to UK exports. With the Chinese Government controlling their exchange rate and the weakness of the Dollar we are not best placed to be chasing export led growth. Sir John laments the service based industry that provides '1m well paid jobs, large corporation tax revenues and a positive balance of payments of about £20bn' compared to manufacturing's 'loss of 1m jobs over the past 10 years'. There was a good reason for these job losses. We are not well placed to be manufacturing focused in the world economy.

In conclusion Sir john says that 'My conclusion is a positive one. Provided that we do not engage in the usual protracted political debate, we have a real opportunity to develop a national consensus on the way ahead for the UK economy that is capable of having a generational impact.' What on earth? He wants to change the focus of the whole UK economy without protracted political debate? John, mate, stick to making planes and stop writing in the exceptional and award winning FT. Tom Friedman wrote a book called the World is Flat. In it he describes a pilot project by McDonalds in the USA where the guy who talks to the customers at a drive through is actaully in a call centre sending the orders to the kitchen via the internet. The call centre could be anywhere, but the point is that is a flat global economy Land, Labour and Capital rates are not only all important but extremely portable. Companies will use the best and cheapest wherever it may be to improve its profit and loss everywhere possible. Yes we do need technical people graduating in the sciences, Technology parks and R&D incentives etc, just there is no reason why UK companies can't be listed here, pay tax here, employ management and skilled staff here and get the manufacturing done elsewhere. What hope have we for manufacturing to be raised to 30% of GDP or even higher here? Should we focus on something that Sir John himself admits is in rapid decline or try to further improve what we do very well already and focus on our service industry and an intellectually based comparative advantage.

The author is of average intellect and has little to no experience in manual labour let alone manufacturing.

You can't only believe in the markets when they are going up!

At present a large number of people are concerned and negative regarding the current global economic outlook. These include Bankers, surveyors, estate agents and economists. The consensus of opinions points to a feared economic slowdown and a housing market slump. Gordon Brown has thus come out defending his economic record and has promised to do something about the situation. (Lets all forget that he was Chancellor in the previous periods and is now Prime Minister…who is Alastair Darling? The current Chancellor's meeting with banks has become a footnote)

Gordon Brown had less of a hand in the good times than he believes or would have you believe and now has little ability to stop the downturn. The ‘narrative fallacy’ as extolled by Nassim Taleb is portrayed in Gordon Brown believing he is responsible for economic growth over the past decade. Looking back it may be possible for him to ‘fit’ his economic policies using a confirmation bias into the recent economic record of the UK. However, when considering the economic conditions of the past decade and the fundamentals he inherited it would have been very strange had the UK not experienced economic growth similar to that seen throughout Europe, North America, the Middle East and Asia. Gordon Brown can surely not claim his decisions to be of equal impact as cheap goods from China etc? Would he have taken the credit for creating an environment that allowed for complicated derivatives to generate profit and liquidity before the credit crunch?

The ‘virtual senate’ of investors and lenders that Chomsky discusses here effects economic policy, and that same ‘virtual senate’ has now more impact on monetary policy than Governments and maybe Central Banks. Monetary policy as eschewed by Milton Friedman et al may work ceteris paribus but when this ‘virtual senate’ do not allow for efficiency in the money markets by adjusting Libor or passing on rate cuts this results in monetary policy not applying in full. Therefore it will not be as effective in stimulating economic growth in a slowdown. In this situation, cuts to the base rate by the Bank of England are ineffective at everything but creating inflation vulnerability; which, is counter to their main objective. The Bank of England Act 1998 states that ‘maintaining price stability’ is the monetary policy committee’s first objective and supporting the Governments policies for growth and employment are subject to controlling inflation. (This differs from the objectives of the Federal Reserve and European Central Bank.)

Lets not forget that momentum is extremely powerful in markets. Confidence in the housing markets has turned and now a great deal of negative momentum is being generated. Once this momentum starts I think stabalising resistance will be at around 10%, 15% or even 20% year on year falls in the housing market. Upwards momentum in inflation could be just as if not more serious than slow economic growth. With global commodity prices what they are stagflation is a real danger.

If monetary policy is ineffective and there is no room in the budget for fiscal policy, (Taking Northern Rock into account the Government has already broken its own golden rules on borrowing let alone putting PFI on to the balance sheet!) Gordon Brown’s only remaining option is to politely ask the 'virtual senate' to help him out! That might be exactly what this is! However, game theory would suggest that the self-interested institutions will be cautious of moving first and therefore as a group will not provide Brown with the magic bullet his ratings so desperately need.

My conclusion is that the business cycle has not yet been completely conquered by modern politics or the economics of Central Bankers and that Black Swan events can create the same swings in momentum that have characterised economic history for generations. This is not a bad thing for those who believe in the markets. A more accurate pricing of risk and the dissolving of poor business practices can be a maturing benefit to the global economy. This is encapsulated in the statement 'You can't only believe in the markets when they are going up'.

Website Launches

As the key point of our blogs is to keep you informed, we thought we should also include some recent site launches in order to let you know what we have been up to. So, here are the last six that we launched in March.

Just Debt Services are a new financial company that specialise in reducing debt for their clients. They required a site that looked great, clearly depicting what it is that they do, and needed it developed very quickly in order to be part of the marketing used for the start of their sales drive. It was launched with a dynamic email campaign that drove new customers to the site and generated a significant number of leads.

Octopus Communications are a highly regarded events management company that required a fresh design upgrade to their site. Having had a website for many years, they were excited to put their new modern image across on a new site, making the most of powerful imagery.

PT2U are a health and fitness company that needed to advertise their services to a new audience. They benefited from a great new site, and a Infozure managed search campaign that pushed new business to their doors.

Gardiner Fencing are experts in fencing, paving and landscaping and required a site that they could show potential customers to show previous work and reveal the professionalism of their service. The site uses two separate galleries displaying both fencing and paving work carried out in the past.

Pine Cleaning Services are a large successful cleaning company that required a website that matched the quality of their brand name and gave key information regarding various promotions and offers.

Altitude Talent Agency are an exclusive company that specialise in all aspects of professional career management and recruitment in the entertainment business. Altitude required a site with an impressive design that could draw audiences to them. Infozure are in the process of developing their modeling specific site and will be ready for launch for the end of April.


We will keep you updated on new site launches in the future so you can see what exciting work we are involved in, and it may give you some useful ideas as to new marketing approaches that could work for your company.

Online Emergency Services

I am not naïve to the potential problems of the Internet, and specifically social networks. Our children could be at risk from ‘stalkers’, and in fact everyone is at risk from something or someone to an extent. Large quantities of information are readily available seemingly to anyone.

The problem of security and the freedom of information has always been an issue on the Internet, but do we really need a button that links us straight to the police on every social network? Admittedly I do not have any children, and perhaps my view might change when I do, but as always with government policy, there is an easier way round. Social networks such as Facebook often have ‘security settings’ or ‘privacy features’ that allow you to limit what information Joe Public can get their hands on. However, you need to turn these on, and it should ideally be a feature you have to specifically turn off, protecting the young, and the clueless. Much like the influence that the Data Protection Act had on signing up for marketing materials, this would put the power and safety back in the hands of the user.

To surmise, I think the idea of a ‘panic 999’ button on social networks is absurd. I am not entirely sure how the government could enforce such policies, and they obviously do not realise the potential for pranking or accidental contact. Making additions to the Data Protection Act would probably be enough to ensure a certain level of safety, and the reality is no one is ever completely free from others. Social networks will only grow over time (try prising a 12 year old away from Bebo) and although children often do not think about the consequences of their online information profile, they should not need to. The responsibility should always be with the developer.

Credit Crunch & Property

Mention the words ‘credit crunch’ and people will tell you various things, often which are only partially true, or sometimes gross misunderstandings that are the result of fear mongering. The fact is that the UK is at at a crucial point that does mean money is more expensive to borrow and harder to get, with mortgages increasing at a greater rate than the Bank of England’s base rate, last set on the 6th of March at 5.25%. I am also sure that the term ‘subprime meltdown’ has been thrown around recently, but what is it, and how does it effect us? Subprime loans, sometimes referred to as ‘second chance loans’, allow people who have been rejected for a market rate loan the chance to borrow. Lenders take on the risk of these borrowers and offset the danger by charging high interest rates. The problem is that, not only are an increasingly large number of people defaulting on payments, but that the hedge funds, pension funds and institutions that often buy these mortgage backed securities and loans from the banks are now loosing money as a result, generating more fear and economic problems. The spin-off effect is that money is harder to borrow, mortgages are more expensive, and mixed with the fear of a downturn in house prices, has led to a slow down in residential house purchases in the UK.

The reality is though that house prices have in fact, on average, been on the rise. Short-term indicators have revealed a slight improvement in capital values as a whole, although a fall has been seen in retail and industrial properties. Residential properties, while seeing a slow down of the rise in capital values, have only today been declared as at the verge of a downturn. Of course we are all expecting a drop, and possibly quite a sudden one as demand fails to meet supply. Disparities have become more prominent, with the highest house values still seen in London and the South East, and while investment in property has slowed considerably, the rental market has grown and estate agents need to make the most of this market while purchasing is down.

So, despite evidence to the contrary, homeowners have obviously fearful of a sudden house price crash, or perhaps they are waiting for a crash in which to invest heavily in new properties. There is a large availability of housing on the market and sellers wish to offload properties before the inevitable, which as reported today, has arrived. Either way, the competition for the housing and commercial property market has significantly increased, and estate agents and property companies need to re-evaluate old sales tools and look for new methods of generating leads and advertising properties. Having spent a considerable amount of time researching and developing a property website that can be tailored to any specific needs, Infozure can now offer a fast, usable means to inform customers of new properties quickly and cleanly. Competition for available properties is going to dramatically increase as fear grips homeowners and the number of properties available to buy on the market fall. A rapid response strategy, targeting new customers is vital to maintain sales levels and innovative and cost-effective marketing techniques need to be implemented.