The rise in output has been driven by a pick-up in capital goods production and intermediate goods and energy, says a report in the Financial Times, suggesting that companies in the UK and abroad are investing more in equipment.

The news comes coincides with calls for the new government to appoint a minister for manufacturing to ensure the sector’s long term future and ensure the sector’s heartlands can play a full role in future economic prosperity. The call came from James Newman, head of the Sheffield-based Company of Cutlers which represents, South Yorkshire-based manufacturers.

He says the sector needs ‘incentives’, such as capital allowances, to enable companies hit by the recession to make investments in machinery and staff.

Of course, manufacturing continues to play a key role in the Yorkshire economy as a whole, both in terms of output and employment. In fact government figures show that there are nearly twice as many people employed in manufacturing in West Yorkshire as there are in South Yorkshire and that as a city Leeds is the UK’s second largest centre for manufacturing outside London.

• Manufacturers reported 33% growth in export sales and 11% growth in export orders, the largest reported improvements in over two years
• Matched by a 27% increase in sales in the domestic market (the third consecutive quarter of improvement) and a 8% increase in orders (second consecutive quarter of improvement)
• 43% report an increase in profit expectation, most positive figure in over two and a half years
• 44% have increased their workforce and 20% are recruiting

The findings are consistent with the results of the CBI’s latest quarterly Industrial Trends Survey which shows an export-led rise in manufacturing production for the first time in two years: 31% said output rose during the last quarter of 2009, the first time since January 2008, boosted by relative weakness in Sterling and improving global demand.

Engineering Employer’s Federation has also forecast export-led growth of up to 3.4% in manufacturing during 2011, although performance will be uneven across individual sectors. Mechanical equipment, metal products and metals will see strong quarter on quarter growth throughout the year, while transport and automotive will see fall in output as scrappage schemes run out and as a result of cuts in public spending

It also bursts the bubble of some popular misconceptions. The loss of manufacturing jobs is a global phenomenon and it has been particularly severe in the UK where the last 30 years have seen the loss of some 4 million manufacturing jobs. But this has been matched by massive gains in productivity to the extent that in 2006 the UK was still the sixth largest manufacturer in the world and the real value of manufacturing output continues to grow.

It’s a case therefore of relative, rather than absolute, decline and growth has been maintained in the face of incessant and fierce price competition from emerging economies. The survival of UK manufacturing is a success story and the sector has a depth of experience from which others could learn.

However, the image and definition of manufacturing desperately needs updating: many ‘manufacturers’ today are integrated solutions providers providing complex bundles of specialised goods and services. Key opportunities in the future exist in the development and exploitation of new technologies, intellectual property and complex product / service combinations that cannot be easily replicated or commoditised.

For this to happen there’s an urgent need for closer collaboration between government, academia and business. Government needs to develop a tax regime, including incentives such as tax credits, that encourages investment in R&D, capital expenditure and energy efficiency.

Overtime, labour cost differentials will diminish and sources of competitive advantage will shift towards unique knowledge and skills. Much closer collaboration is therefore needed between industry and UK universities to more fully exploit their research capacity and intellectual property.

Some of the other key points form the report include:

• Low value of sterling offers a temporary cushion against the worst effects of the recession but cannot provide a source of long-term competitive advantage and the report authors note that despite the relative weakness of the pound, the balance of trade with the Euro zone has worsened.
• UK manufacturing faces a serious deficit in technical skills and continued los of skills, rather than competition, could eventually make UK manufacturing unsustainable: jobs and skilled employees lost in a recession do not tend to come back as the economy recovers.
• Training needs to improve. foreign industrial investors are often dismayed at the levels of training needed by UK employees
• at the same time there is a desperate need to improve the image of manufacturing is vital: young people will not train for careers in manufacturing and engineering if they think there’s no future in them.
• There’s a desperate need for investment in both R&D – spend as a percentage of GDP is lower in the UK (1.8%) than in other countries such as Germany (2.5%), Japan (3.3%), the US (2.6%) and Sweden (3.8%).
• And there’s a need for much greater support for entrepreneurship: only 4% of investment goes into venture capital in the UK compared to 33% in the US.

Following the temporary closures of UK car plants, he described how the business went from shipping 140,000 components a day to just over 60,000 and how the assets, valued at over £4million when he was brought in to lead the management buy out (hence the term ‘BIMBO’) were priced at just over £400K only a few months later.

Parker also described how the business emerged chastened from the eye of the perfect storm: “Few of us had ever experienced a recession that came on so swiftly, so suddenly and with so few signs of impact on another sector first.”

Lessons learned? First rule: stop burning cash! Critical skill sets were ring-fenced but Birkby’s had no choice other than to cut 250 jobs and it is only now beginning to build its workforce up again. Taking control of communications – with customers, employees and pensions trustees – was also critical, along with a set of audited accounts when bidding for new business both within the automotive industry and outside.

With the Honda Jazz now in production, a new press paid for with support from Yorkshire Forward and new business within the railway industry, the Liversedge company is now looking to a future beyond survival.

But in the corporate environment reward is tied to position in the hierarchy with little incentive to take risk and change the way things get done. No surprise therefore that large companies tend to grow by mergers and acquisition: “Entrepreneurs create business instead of buying it,” he said, observing that two thirds of new jobs are created by SMEs, not by big business.

So how do you encourage entrepreneurship – “the pursuit of opportunity beyond the resources you currently control” – in a company that employs the best part of 3,000 people, has dairies and depots across the UK and controls 25% of the British fresh milk market? The key to building a culture of enterprise, according to Vonsild is to create an opportunities network within the organisation and give people ownership and responsibility for implementing ideas.

In a big organisation, he reckons most effort usually goes into developing new products, whereas proportionally greater value can be created by innovation in business processes, production processes and delivery. As someone remarked later in the day, 70% of the value of a Rolls Royce engine comes after it has left the factory.

Under the banner ‘Looking to the Future in Manufacturing’, an invaluable day of learning is promised.

You will be able to:

1. Pick up practical tips and advice from local companies and respected business leaders

2. Network with over 200 members of the local manufacturing community

3. Take away ideas about how to capitalise on potential opportunities for your business

4. Find out about the grant subsidised support available from MAS to help your company   achieve its goals

To find out more, click here.

This is not so much due to our skills in recording the continued progress of the city as a centre of manufacturing excellence, but more to the rich and innovative variation of companies and their products.

In a recent tour of a selection of these firms, the Financial Times’ UK business editor was literally ‘gob-smacked’ and kindly accorded us a half page of words and pictures on the subject.

Our website showcases many of these companies and with the digital revolution continuing to gain pace, launching a blog to celebrate the achievements of manufacturing in Leeds is another great way of spreading the word.

I’ll be doing my best to keep you up to date with ‘all things manufacturing’ in the city, helped by other members of the team including my trusty PR consultant, Duncan Greenwood, who is often out and about visiting sites so that he can make journalists aware of the great work that is going on in the region.

The other purpose of the blog is to stimulate the flow of news and views and start a dialogue. So please, let us have your comments on topics we’re blogging about and also tell us about any other manufacturing stories you come across or issues you would like to raise.

We look forward to hearing from you.