| Manufacturing in the UK has had a bad press of late. If you believe the columnists in the business press, only a fool would try to make things work in the UK in the current economic climate. With labour costs far cheaper in the former Eastern block, and a fraction of even that low figure in China and India, it does not initially look like common sense to consider Britain as a base for a manufacturing business. The strength of the pound – which has been great if you head off to foreign climes – has made British exports very expensive compared to those from most other parts of the world. However, manufacturing still accounts for a sixth of the UK economy, and is responsible for around a quarter of our exports, according to the Department of Trade and Industry (DTI). Although the sector has suffered lately, the Government still sees it as a crucial contributor in the UK economy. The DTI itself says: "The UK cannot compete on low wages, nor should we want to. The future of UK manufacturing depends on raising investment, and applying science and innovation, best practice and skills to create even better products."  | | MANUFACTURING HAS HAD BAD PRESS | While some newspapers might revel in the number of media studies graduates leaving UK universities, they seem to have ignored the increase in the number of chartered engineers the country has witnessed over the past few years. According to the Engineering and Technology Board (ETC) and Engineering Council UK (ECUK), there were 8,018 new qualified staff last year, and increase of 39% on 2004 and the highest in history. According to economists, Britain’s biggest problem is a lack of investment and low productivity. France and Germany might get regularly panned for their unemployment figures, but the average worker in those countries produces 30% more per hour than the UK. Most commentators think this is because employers do not put enough money into two things: training and up-to-date equipment. So the first tip for someone thinking about buying a business in the manufacturing field is that, in most cases, you will have to pump a lot of money into new processes and training if you want to make the business successful. Light assembly market is expanding Property trends are fairly good early indicators of where the market is heading. According to one agent active in the industrial sector: “Metal-bashing is dead. The only substantial requirements for over 10,000 sq ft are for light assembly, and the larger needs are all distribution and warehousing, rather than manufacturing.” However, the agent admits that the lines between the two sectors are blurring. Businesses that might simply seem to be storing or distributing goods can actually be carrying out light assembly too. Increasingly, this is a way to "add value" in a tight market. Importing goods into the country in bits and putting them together using semi-skilled labour is, in some sectors at least, cheaper than bringing them in whole. These broad comments hide a deeper trend: that we are witnessing a flurry of activity at smaller size levels. While metal-bashing might be dead, small workshops or factories dealing with high-specification or high-quality goods are thriving. It’s no coincidence that companies such as Morgan Cars in Worcestershire, are still profit-making businesses, while the 'bulk' auto manufacturers that thrived in the 1970s are mostly history. Almost everyone setting up or buying manufacturing businesses have a great degree of technical experience or training in a 'niche' area. Typically, they are engineers with a great idea or business plan they want to put into practice, one that perhaps has been ignored by their current employers or partners. But while bank managers could be impressed with an engineer's CV or knowledge of a manufacturing process, he or she will still want to see a business plan steeped in the harsh realities of the globalised economy. Like any business, it's essential to make sure you have a market for your product. With China and India undercutting British businesses so much at the moment, manufacturing businesses have to have an even more watertight USP (unique selling proposition) than most. The important question to ask is: Could this be made elsewhere in the world at a cheaper cost? Profit margins even in these businesses can be quite low compared to in many other sectors, making operations very cost-sensitive. Another issue for manufacturing businesses is the price of raw materials. They vary considerably, and what in one year is a profitable business can suddenly become a loss-maker because of a drastic change in supply. Government support Steel, for example, has shot up in price in recent years because China is demanding so much of it for its own massive construction programme. Fortunately, the Government is very keen on supporting manufacturing, particularly the 'high-tech' end of the market, and there are a host of tax credits and grants available to the budding manufacturing entrepreneur. These often encourage factories and workshops to locate in the more deprived areas of the country, particularly the former industrial belts in the North of England, South Wales and Central Scotland. While labour costs are lower in these areas, it can often be difficult to find skilled workers. For particular sectors, such as electronics and pharmaceuticals, they are often concentrated in certain parts of the country. The electronics industry in the Thames Valley, for example, took off because the number of military installations in the area had produced a population with a high level of technical skills – just one reason why the South East now manufactures more than any other UK region. Depending of course on what you are manufacturing, this can be the major factor in deciding where you are located. Given the cost-sensitivity common among such businesses, it’s lucky that property costs are usually low. 'Sheds', as they are known, tend to fetch only £3-£6 per sq ft, a fraction of the rents required for offices, shops or pubs. Manufacturing is a difficult business to be in – often insecure, and blighted by intense international competition. But given the right product and skills, it is still possible to turn a profit. It will require dedication, hard work and long hours – but given that most people setting up manufacturing businesses are passionate about their ideas or objectives, success is perhaps more likely than it might immediately appear.
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