MARKET INSIGHT: AEROTECH & DEFENCE 21
But, it’s obvious that Lewry and Baker’s selection of the Solent (both have always had Southampton homes) is also based on their belief that UK technology is world leading.
“If I want a really good stress engineer or designer; they are generally British,“ says Lewry. “Folland works on the principle of getting things right first time, which reduces our costs long- term. And we provide value-added performance, which clients like. That’s why we employ quality, and are willing to pay for it.“
“We don’t recognise how good we are. Engineering in Britain is not appreciated, not respected like elsewhere in Europe and consequently doesn’t get paid as much. So many of our best people go abroad. You find
top British engineers involved with projects all around the world.“
The undermarketing and lack of support for UK A&D, faced with growing global competition, is something Lewry hopes the new ATI tackles soon.
Bank loans and funding for growth is also a concern. “We wouldn’t have been able to start-up without the support of my Swiss company.“
Tortuous procurement and Tier One invoicing procedures that squeeze the supply chain remain sector bugbears. And now, some companies are extending their payment terms significantly and creating cashflow problems for some suppliers.
“Frankly, I don’t know how start-ups are managing to launch and survive today.“
Surface Technology International (STI): Moving with the times
Specialist contract electronics manufacturer STI has grown significantly since the recession – more than 20% per annum – and achieved a £50 million turnover last year.
Sustained high performance under pressure has underpinned this success, but so has strategic and astute adaptation of its commercial offering in rapidly evolving global markets.
Several factors are driving those global market changes: increasing aspirational consumerism in emerging nations, rising supply chain costs, awareness of corporate carbon footprints and the decline of low-cost manufacturing options.
But one aspect remains consistent – ongoing regard and customer demand for British technical innovation and quality standards, says STI’s international development manager Martin Gower-Smith.
More than half of STI’s work is with Tier One and OEM clients undertaking long-term defence contracts, supporting UK forces in various operational zones. But, with troop repatriation and austerity cutbacks on the horizon, STI reacted strategically in two ways in 2010.
It purchased manufacturing facilities in the Philippines to gain an active presence in the emerging Far East economies, which also boosted its global corporate footprint. Apart from its Hampshire head office and the vibrant Philippines operation (adopting UK quality standards), STI now has business locations in Hong Kong, China, Spain and South Korea. Country-based teams are English-bilingual, know their regional markets well and cooperate internationally to fulfill customers’ detailed requirements, while maximising STI economies of scale.
“Increasingly the big global players want their supply partners to be operating in the world locations that are their new markets,“ explains Gower-Smith.
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – MAY 2013 Martin Gower-Smith
STI’s other strategic move was to de-risk the business by spreading its offering into other sectors. STI operates in the aerospace, defence, security and energy industries and now works across varying sectors from automotive to telecoms, medical to satellite, etc.
Recruitment of skilled local staff is improving says Gower-Smith, as UK universities (he praised Southampton University Electronics Department) now recognise A&D sector needs and are providing suitable technology courses.
Adequate funding, IP protection and a robust business model remain essential requirements today says Gower-Smith, but adds: “The A&D sector thrives on innovation and if you have a fresh process or product that suits market needs, then the opportunities are no more difficult in this sector than any other.“
And the ATI announcement? Gower-Smith points out that similar initiatives have been announced in the past. “Of course, it’s welcomed and should help keep the UK as an aerospace world leader, but in reality the devil is in the detail, which we are waiting to hear.“
Overview by Arbinder Chatwal
Co-interviewer, Chatwal is BDO’s head of manufacturing sector for the Solent region.
Our interviews highlight the challenges facing the global aerospace and defence industry, such as globalisation, financial constraints and complex regulatory environment.
Among the backdrop of these challenges, the instinct for many is to hold onto cash on the balance sheet and curb any growth. But we firmly believe the next generation of market leaders will be those who resist this temptation and embrace what emerging markets have to offer.
The case studies have highlighted the Solent as a region for nurturing top talent that is the envy of the global A&D industry, while recognising the role that universities have to play in ensuring the pipeline is maintained for the future.
STI and Folland Aerotech have further demonstrated that geography alone no longer stands in the way of a company’s aspirations. They have also demonstrated that before businesses embark on an international expansion they need to consider not only regulatory and financial implications but softer cultural behaviours.
BDO’s Southampton office has significant experience in advising advanced engineering and manufacturing business.
Details: Arbinder Chatwal
arbinder.chatwal@
bdo.co.uk
www.businessmag.co.uk
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