Vince Cable

Bristol Business News

A manufacturing summit, hosted by Business Secretary Vince Cable and Business Minister Mark Prisk, is to be held at Bristol and Bath Science Park on February 23.

It will bring together Government and key industry leaders to discuss and debate progress, upcoming challenges and the next steps required to put manufacturing at the heart of the government’s growth programme.

The summit will include a series of interactive break out sessions chaired by Department for Business, Innovation and Skills (BIS) ministers that will share and explore steps the Government is taking to identify short and long term growth opportunities for manufacturing. Sessions include:

• Promoting manufacturing
• Commercialisation of technology
• Apprenticeships
• University Technology Colleges: opportunities for manufacturers
• Access to Finance
• Exports

Business Secretary Vince Cable said: “Manufacturing has a pivotal role to play in rebalancing the economy, as a confident and healthy manufacturing sector is at the heart of the future growth for UK PLC. Building on this country’s strengths, we are working with businesses to support and grow the UK’s manufacturing capabilities, encourage innovation, develop supply chains, promote exports, business investment and improve skills.

“Our manufacturing summit creates the perfect platform for us to further strengthen our relationship with industry, and, more importantly, hear what its leaders have to say.”

The summit will build on the success of last year’s event held at the BIS Conference Centre in London and follows recent news that the sector expanded at its fastest pace since March 2011.

Business Minister Mark Prisk said: “Worth approximately £130bn a year and employing 2.5m people, the manufacturing sector makes a significant contribution to the UK’s economy. This is why we are hosting the manufacturing summit for a second year running to not only celebrate the importance of the sector, but also share and discuss the action Government is taking now to support businesses – from the £2.4bn Regional Growth Fund and new Manufacturing Advisory Service to tackling outdated perceptions of the sector with our Make it in Great Britain campaign.”

Bonnie Dean, chief executive of the Bristol & Bath Science Park, said: “We are delighted that BIS has chosen to hold its second Manufacturing Summit at the Science Park. On the Park and in the immediate vicinity are some of the most advanced and research-led manufacturing companies in the world. The conference is an excellent opportunity to exchange information and to explore new ideas.”

To find out more about the steps the Government is taking to support manufacturing, visit www.bis.gov.uk

Jim Brown from BDO

Bristol Business News

Government initiatives to promote innovation and exports to emerging markets coupled with growth sectors like the automotive industry provide real opportunities for West manufacturers, according to accountants and business advisors BDO’s Bristol office.

While recognising that uncertainty in key economies and markets and the lack of access to capital will make 2012 a challenging year for the majority of manufacturers, partner Jim Brown is optimistic.

“After 30 years of decline there is now widespread consensus that a strong and vibrant manufacturing sector is fundamental to the UK economy,” he said.

“The task of rebuilding the manufacturing sector will not be easy and we must accept that it may take years. However, a renewed focus on manufacturing is vital for growth.”

He called on the Government to develop a clearer and more explicit medium to long-term framework and strategy for the sector.

While 2011 was a relatively good year for manufacturing, the latest UK and global Purchasing Managers’ Indices (PMI) show a significant deterioration in confidence.

But Jim Brown sees opportunities this year based on:

Innovation and government initiatives

In 2011, the Government announced a number of initiatives to spur innovation in the UK. These included the reform of the research and development (R&D) tax credit system, an increase in tax relief from £200 to £225 for each £100 of R&D activity, the new ‘patent box’ scheme reducing the rate of corporation tax on income derived from patents to 10%, and a £125m fund to encourage growth in established UK advanced manufacturing supply sectors such as aerospace, automotive and chemicals.

“The key to unlocking the full potential of UK innovation in 2012 lies with helping manufacturers to understand and access the raft of initiatives,” he said “In the shorter-term, we would urge companies to increase their awareness of new Government innovation initiatives and to use the various support schemes available to them.”

Exports to compensate for low demand in home market

The UK provides a relatively small market for manufacturers, meaning exporting is becoming ever more important. In 2012, Europe and the US will continue to be foundation markets, but West companies looking for significant new market opportunities should focus on the rapidly emerging giants (China, India and Brazil) in addition to looking towards the fast developing new emerging markets such as the CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa).

Automotive renaissance to fuel manufacturing sector

The motor industry is predicted to register an 11% rise overall in output in 2011 and expects modest growth of 4% in 2012. Despite wider economic gloom, the focus on quality products is expected to contribute to a continued bounce back, making it a core foundation sector

As the UK automotive industry supports a large and mostly UK-based supply chain, this continuing good news should help underpin many UK manufacturing order books through 2012. Jaguar Land Rover, Aston Martin and Lotus expect their export success in 2011 to continue through the year. In addition, Nissan UK plans to build on its export success with the start of production on the LEAF electric car from 2013 onwards.

New National Manufacturing Advisory Service (MAS)

The launch of the new, nationally-operated Manufacturing Advisory Service (MAS) for all manufacturing businesses across England could help to generate £1.5bn in economic growth, 23,000 jobs and safeguard a further 50,000 jobs.

Simon Howes, managing director of SWMAS Ltd, one of four organisations that will deliver the new programme, said: “The new MAS will provide small and medium-sized businesses in the West with the funding and support they need to unlock their growth potential and improve productivity and competitiveness in 2012. We hope that this could lead them to export more, explore new markets and invest in the latest technologies.”

On the negative side, BDO expects little positive recruitment through 2012 and anticipates that manufacturers in certain sectors may be forced to shed labour to balance the books. There was a sustained fall in the balance of West firms taking on new workers throughout 2011, from a high of 42% in the first quarter to 35% in Q2 and 14% in Q3. There was however a slight rise to 25% in Q4.

Other expectations for the UK manufacturing sector

BDO LLP also expects continued economic turmoil in international markets and lack of capital to negatively impact growth. The huge pressures on sovereign debt, bank debt and bank balance sheets will continue to make access to growth capital very difficult, particularly for SMEs. On a more positive note, commodity prices are finally showing some signs of balance or reduction, which should ease margin pressures.

In November manufacturers reported lower costs of certain commodities.

Finally, a focus on sustainability as a business tool to redesign manufacturing processes to become more resource and energy efficient will be important for manufacturers in the coming year.

Bristol Business News

Imperial Tobacco has welcomed the Competition Appeal Tribunal’s decision to quash a £112.3m fine imposed by the Office of Fair Trading (OFT) on the Bristol-based tobacco giant for allegedly restricting competition.

The appeal was filed by Imperial, Co-op, Morrisons, Asda, Safeway and Shell. The OFT fined Imperial, the maker of Lambert & Butler cigarettes and Golden Virginia rolling tobacco, and nine retailers including Asda and Morrisons, in April 2010.

The OFT began an investigation in 2003 relating to certain promotional arrangements between the company and multiple retailers. It always denied such arrangements had the purpose or the effect of restricting  competition but in April 2010 the OFT imposed the fine and two months later the company appealed the decision to the tribunal.

In a statement after yesterday’s decision, a spokesman for Imperial Tobacco said: “We take compliance with competition law very seriously and have always rejected the OFT’s suggestion that we acted anti-competitively or in any way contrary to the interests of consumers.

“The hearing by the Competition Appeal Tribunal was the first time since the OFT’s investigation began more than eight years ago that we were able to have its allegations independently reviewed. Under this independent scrutiny it became clear that the case the OFT was seeking to establish had no basis in fact, law or economics.

“We have consistently believed that this ought to have been apparent to the OFT a long time before now and that we should not have been forced into incurring considerable legal costs and management time defending ourselves in these circumstances.”

The company added that the OFT’s case collapsed part way through the hearing and it would now be applying to recover its legal costs. Imperial’s shares rose just over 1% or 25p to 2,376p.

Airbus is to create 200 jobs at Filton due to demand for its new A350 airliner, it confirmed yesterday.

The plane, which will use lightweight composite wings designed and part-built in Bristol, was due to come into service in 2013 but has been delayed to the first half of 2014.

Airbus has more than 550 orders from airlines for the A350 – which can carry 340 passengers.

The announcement came as Business Secretary Vince Cable was visiting Airbus this morning to talk about a conditional offer of funding from the government’s £1.4bn Regional Growth Fund which was announced last month.

Airbus head of engineering at Filton Neil Scott told Bristol Business News the engineers being recruited will work on the next generation of the A350, on further refining the A380 superjumbo – world’s latest passenger plane – and on helping creating the A320neo, which will use Filton-designed fuel-saving wing tips.

He also opened the multimillion-pound National Composites Centre in Bristol, which claims it will speed up new products going from the laboratory to the shop-floor.

Mr Cable told Insider Media: “The South West is becoming a real hub for composites and aerospace manufacturing, and is exactly the sort of place where targeted government support through schemes like the Regional Growth fund, can have a real benefit.

“By helping companies large and small unlock their potential for growth, we can make sure that we rebalance the economy and emerge with a stronger and more diverse industrial base.”

Bristol Business News

Bid rumours are once again swirling around Bristol-based Imperial Tobacco – this time suggesting it could be in line for a break-up approach.

Shares in the group, the region’s biggest company by turnover, edged forward 9p to 2,170p yesterday in the wake of speculation that it could be the target of an approach worth 3,500p a share.

City insiders say companies from the US and China may be considering a possible move with a view to splitting up Imperial and selling the parts – at a profit – to other tobacco firms.

However, most dealers appear to have poured cold water on the rumours, pointing out such a deal could face considerable competition problems.

Imperial – the world’s fourth-biggest tobacco company  with brands including Lambert& Butler, John Player Special, West, Golden Virginia and Rizla – was the subject of similar speculation earlier this year when Goldman Sachs said the sector could see a rush of consolidation, picking out Imperial as the most likely target.

Larger rivals British American Tobacco and Philip Morris were named as obvious predators – but nothing came of the rumours.

There were also suggestions last year that Imperial, which is building a new headquarters in South Bristol – the part of the city where it has its roots – was in talks to merge with America’s third-largest tobacco business, Lorillard.

Such a deal would have valued both companies a combined value of nearly £29bn.

South West manufacturers have achieved healthy growth figures despite the increasingly fragile nature of the wider economic recovery.

The upbeat picture emerges from a major survey by EEF, the manufacturers’ organisation, and accountants BDO. It shows 45% of the region’s manufacturing firms taking part in the survey reporting higher output and 41% saying they achieved higher total new orders over the past three months.

However, as the economic outlook has become more uncertain, some parts of the region’s manufacturing sector are forecasting tougher times ahead, particularly with the global economic slowdown hitting export markets.

Some manufacturers, including metals and electronics businesses, received weaker orders over the past three months with concerns about the corresponding impact on output over the next three months.

The balance between caution and optimism also appears to have shifted for small companies, with less visibility around future orders keeping confidence in check for the next quarter.

EEF regional director Paul Knight, said: “Manufacturers have bucked other recent negative indicators, holding out hope that the recovery has not yet run out of steam.

“However, conditions have moved on from the broad-based recovery of the past 18 months to a more mixed picture – for example, the percentage of south west companies reporting growing order books in the past three months fell from 61% to 41%.

“The growing challenges in the global economic environment, in particular, are casting a shadow over expectations and seem to be giving some companies pause for thought when it comes to investing and recruiting.

“But there is cautious optimism that growth will continue through the rest of the year.”

Jim Brown, manufacturing partner for BDO in Bristol, added: “Despite the economic storm clouds looming in the Eurozone, the US and the UK, this was a strong survey for the manufacturing sector, showing positive balances in terms of orders and outputs in the last quarter and expected in the next.

“However, it is interesting to note the stark differences in expectations between small and large companies, with smaller companies seeming considerably less secure about the future.

“The economic turmoil in some industrialised economies is a cause for concern among all manufacturers. In particular, companies will be worried about how their order books will look in the coming months, as well as their prospects of recovering debt on sales already made.

“But whereas a large company may be in a better position to offset losses, to a smaller company the loss of an important customer can be a business critical event. In addition, smaller companies may feel less confident about the future due to the relatively short-term nature of their order profiles, giving them less visibility over future orders.

“We have seen how SMEs in Germany – the Mittelstand – have been the catalyst for German economic growth. We should not forget how important SMEs are for a strong economy – and we should ensure our smaller manufacturing companies are given the support they require to thrive and continue to be an active part of this sector.”

According to the survey’s South West results:

• Output and total new order balances were +17% and +3% respectively. Metals and electronics order balances weakened significantly compared with the previous quarter. However, motor vehicles and other transport reported positive export balances and mechanical equipment continued to hold up
• Investment intentions remain positive at +7% although this is likely to be more concentrated in the larger companies, suggesting problems remain in accessing finance or a lack of confidence amongst smaller companies
• Employment prospects remained positive at +14%, the sixth consecutive quarter in which companies have increased their recruitment intentions
• There is continued pressure on companies from higher input costs, especially energy and raw materials, with margins on UK and export balances the most negative since the first quarter of 2010
• Looking forward, the outlook for output and orders is on a par with the previous quarter. The main difference is weaker employment intentions, suggesting the uncertain economic outlook is forcing firms to review plans to take on more employees
• EEF’s latest forecasts for manufacturing growth for 2011 and 2012 are 2.8% and 2.2% – ahead of projected growth for the UK economy of 1.1% and 2%.

Bristol Business News…

Simon Howes from MAS-SW (Picture: Mark Passmore)

The outlook for the South West’s manufacturing businesses remains encouraging, but more needs to be done to enable many of them to take vital next steps towards achieving their full growth potential.

The latest manufacturing Barometer, which is conducted quarterly by the Manufacturing Advisory Service in the South West (MAS-SW) to provide a snapshot of regional manufacturing trends, presents an encouraging picture for the first quarter of the fiscal year (April to June 2011) as well as the months ahead.

The majority of respondents (55%) reported an increase in sales turnover in the last six months with 57% expecting turnover to increase in the second half of the year.

Almost one in three (29%) respondents plan to recruit over the next six months with a further 62% maintaining their current staffing levels; 42% intend to invest in new machinery or premises this year while over a third (34%) plan to invest in new technology.

Generally, these figures are slightly lower than those reported in the previous quarter (January to March 2011), but overall growth has continued and looks set to continue.

However, MAS-SW’s Barometer also reveals a significant reduction in the number of new customer enquiries, with just 37% of respondents reporting an increase in enquiries compared to 64% in the previous quarter.

MAS-SW believes more work needs to be done to accelerate growth and ensure a greater number of manufacturers are harnessing the opportunities available to them.

“There appears to be some disparity between the confidence expressed by manufacturers in the South West and their predictions for growth, when evaluated against the number of new enquiries they have received,” said Simon Howes, Managing Director at MAS-SW.

“It is interesting to note that the majority of respondents – some 72% – believe their current market can sustain their ambitions for growth and 93% say they have the capacity within their company to increase production to meet demand.

“The Barometer reflects a cautiously optimistic attitude to growth but we believe many manufacturers could – and should – set their sights higher. With the Government spotlight firmly fixed on the manufacturing sector, now is the time to capitalise on new market opportunities with advanced engineering and export being two key areas for growth.”

More than two-thirds (79%) of manufacturers who responded said they had considered exporting their products, but highlighted two main challenges: a lack of marketing know-how (29%) and difficulties in obtaining finance (29%).

Nearly half the respondents (44%) admitted they did not have the in-house resources to enable them to target an overseas market – and 29% said they would need help in adapting their products to meet foreign standards.

By John Fox-Clinch
Bristol-business.net

Imperial Tobacco has failed in its bid to get the Supreme Court to hear an appeal against the ban on cigarette vending machines.

The Bristol-based group, the world’s fourth-largest cigarette company, had hoped the court would overturn the ban, which comes into effect on October 1. The legislation is part of the 2009 Health Act introduced by the Labour Government.

The Court of Appeal last month threw out a legal challenge against the move by Imperial during which it claimed outlawing the machines would encourage the trade in illicit cigarettes. It also said the move would flout European human rights legislation and free trade rules.

But health organisations and anti-tobacco pressure groups say the ban will cut underage smoking and prevent deaths from smoking-related diseases.

Imperial owns around 20,000 vending machines in the UK, mainly in bars, clubs and restaurants, through its Wolverhampton-based subsidiary Sinclair Collis.

In a statement to the London Stock Exchange, Imperial said Sinclair Collis was now focused on meeting its responsibilities under the legislation.

The tobacco industry claims the ban will result in at least 550 job losses.

By John Fox-Clinch
Bristol-business.net 

Imperial Tobacco has assembled a strong Bristol-led team to work on its new corporate headquarters to be built in the south of the city.

BAM Construction, which has its regional office in Stoke Gifford, will build the 83,000 sq ft four-storey, concrete-framed building in Winterstoke Road. Bristol-based Eagle Land will act as project managers, CB Richard Ellis are the employer’s agent and Gardiner & Theobald, which has an office in Bristol, are the cost consultants. The designers include Bristol-based architects AWW.

BAM recently worked on signature buildings for Severn Trent Water, BAE Systems, Network Rail and the Co-Operative Group.

Construction director Nick Goff said: “The market in the South West is extremely competitive and Imperial Tobacco has impressive plans for its new headquarters. Those two factors emphasise the significance of this success to us at BAM.”

The flagship building will boast a zinc-clad façade with extensive glazing and curtain walling. Work on the project has begun with the demolition of existing factory units and construction work will start in earnest in September.

The building will bring together a number of Imperial Tobacco’s departments now spread across different buildings in the city. It also demonstrates the global firm’s commitment to its home city – Imperial has its roots in Bristol’s historic WD and HO Wills tobacco business.

Imperial Tobacco special projects director Ken Hill said the building will be a “modern head office that will support the demands of our growing international business, at one South Bristol location.”