Despite some decline in recent years manufacturers are proving resilient and adaptable
Three months ago some 300 Scottish manufacturing company bosses gathered at the Dunblane Hydro for a major conference. Delegates crowded into a variety of workshops to hear how fellow companies from a hugely varied background from making haggis-flavoured crisps to environmentally friendly buses are adapting to a fast changing world.
There was a perceptible air of optimism among the attendees I spoke to who were keen to talk about how much of manufacturing is still very much alive and well in Scotland.
The days of Scotland being a centre of heavy industry are long gone but manufacturing is still a key part of the economy. It is home to more than 8000 manufacturing companies employing around 172,000 people, accounting for nearly 40 per cent of Scotland's exports.
As well as a number of comparatively large companies such as shipbuilder BAE Systems and bus maker Alexander Dennis there are hundreds of smaller players in the eld.
Peter Hughes, chief executive of Scottish Engineering, says there is a very signi cant change going on in his sector of manufacturing. "In the late nineties into 2000 the big dominating sector in engineering and manufacturing in Scotland was electronics," he says. "It peaked in 2000 when the electronics sector exported s11.5bn of manufactured exports. In the current year that will be s4bn so we have lost two thirds of our manufactured exports from the electronics sector. If you look, however, at the underlying situation in engineering and manufacturing and exclude electronics there has actually been an underlying growth so that is quite encouraging."
One of the big growth areas is in food and drink manufacturing, with whisky exports at record levels and a growing number of producers either looking to international markets for the rst time or expanding overseas.
Nick Shields is director of Scottish Enterprise's Scottish Manufacturing Advisory Service (SMAS) subsidiary which was set up in November 2005 to help support Scotland's manufacturers become more competitive through leaner and more e cient ways of working, and which organised the conference. He says what you tend to see now are companies that are more knowledge and export orientated and higher margin. " at core rump remains and going forward there are manufacturing companies investing in Scotland again like Samsung Heavy Industries. ese are di erent types of jobs to what went before. ey are higher added value and are coming here for our capabilities."
Korean-headquartered Samsung is to base its rst European o shore wind project in Fife in an inward venture worth up to s100m. It is one of a number of major announcements of renewables industry investments in Scotland in recent months including the proposed creation of 800 jobs in Leith by Spanish turbine manufacturer Gamesa.
Enterprise, Energy and Tourism Minister Fergus Ewing, who also spoke at the conference, said he detected an extremely positive feeling about manufacturing. "I am privileged because I spend most of my time meeting businesses throughout the land and everywhere I go I see companies succeeding in manufacturing across a whole range of sectors. I see a growth in manufacturing, especially in high quality growth manufacturing, in a whole range of sectors - oil and gas, chemicals. life sciences, food and drink, engineering, computer games. So there is a very diverse base of manufacturing."
"There is certainly, in the Scottish Government, a recognition of the key contribution it makes and we are very keen to expand further the general support, advice and assistance that can be given, especially to encourage more companies to export."
It is not just the new industries where there is progress. Ian McLeod, who is production director of 140-year-old Borders textile company Hawick Knitwear, says he believes there is a bit of a resurgence in the industry. " ere appears to be a bit more demand for UK and Scottish made products," he says.
Hawick Knitwear, which was bought in a management buyout led by Benny Hartop in November 2010, employs just less than 250 people and the majority are involved in the manufacturing processes. Its main factory is in Hawick with a satellite in Galashiels and it exports to all over Europe and the USA.
"Our bread and butter is 100 per cent lambs' wool sweaters and 100 per cent cashmere," he says. "We have recently established Hawick Knitwear as a brand and I would say probably about 15 per cent of what we make will be for our own brand. The rest is for private label."
McLeod believes the Scottish textile industry has two major factors in its advantage. One is that although the unit price might be cheaper coming from China or another low cost country it is countered by the increasing cost of transporting goods across the world. e second factor is that some customers want to have a UK-made product and some retailers also like the Made in Scotland label.
However, McLeod says raw material price increases have made things more challenging every year. "Lambs' wool prices have almost doubled in the past seven years. Obviously energy costs have contributed to that as well. So it makes it more difficult in terms of selling to private label brands. They have their end margin that they want to make so you are continually being squeezed by them."
He believes one of the reasons the company is still around is that it has invested in technology. "We produce around 7000 sweaters on average a week - and over the years we have invested in technology wherever possible to engineer costs out of the product but still give a quality product."
The company has been helped by SMAS with some free diagnostic workshops. "We are probably one of the bigger companies in the Borders so a lot of the things they can help us on we have already embraced. We have a change culture within the business and we have quite a lot of key performance indicators. at enables us to be continually challenging what we do and looking for continuous improvement. I think by getting the guys in from SMAS what this helps us do is remain focused on key performance indicators and continually challenging them."
One of the challenges the industry faces is to bring in new blood. "Previously what has happened is because of downsizing there has been an availability of skilled labour," says McLeod. "But that has been pretty much absorbed into the industry. Pretty much every company is competing for the same pool of labour. So there has been collaboration between the industry's managing directors to try and get a training initiative o the ground."
Hawick and other companies are working with Skills Development Scotland, Scottish Enterprise and other agencies to create the framework for a modern apprenticeship scheme. Companies are appointing their own trainers and assessors for on the job training.
McLeod believes because of the downsizing of the industry it has been perceived as unattractive to new entrants. Now, with the help of Creative Skillset and the other agencies, it is engaging with schools and trying to bring young people in on work experience programmes.
Douglas Whyte, who is managing director of Aberdeen based Hydro Group which designs and manufactures subsea cable systems and connector systems and bre optics, is also launching an apprenticeship scheme at his company. "We are going to take on between ve and six apprentices every year," he says.
Whyte, who founded the company with his late partner 30 years ago, employs around 80 people in the group which has s7m turnover. His customers are mostly in the defence and oil and gas industries with a smaller number in renewables, nuclear and aerospace.
"We are a manufacturer. We take in raw materials and add value at every level to supply into these markets. Most of our customers are blue chip. Defence did a bit of narrowing last year and the year before mainly because of their nancial commitments elsewhere. But that has now returned and is now turning round and moving ahead."
The company has a lot of US competition but Whyte says it is unique in the fact it designs and manufactures cabling systems as well as connector systems. "A lot of companies, particularly in defence, want a single supply where you are ultimately responsible for the system. at is what we do. We sell systems as opposed to singular products."
Whyte believes strongly that there needs to be a change in attitude from schools and other educational institutions towards manufacturing. " ere is a myth that manufacturing is all about dirt, grime and grease and that attitude has to change," he says. " at is why kids don't want to be involved in manufacturing."
However, he does concede the industry needs to do more to get the message across to young people.
Manufacturing in Scotland tends to be associated with Glasgow and the central belt and more recently Aberdeen. But how about the heart of the Cairngorms?
Aviemore is the location for a factory run by Aberdeen-based hose, connectors and ttings manufacturer Hydrasun. The company employs 45 people in its factory which makes precision parts. Originally set up by the former Moray, Badenoch and Strathspey Enterprise as a diversification from the tourism industry, Hydrasun became its biggest customer and bought half of it, then all of it and then expanded it.
When Bob McAlpine, chief operating officer of Hydrasun, joined the company in 2002 after a management buy-in he admitted his team thought "why Aviemore?" "But it makes perfect sense," he says. "We have a very low labour turnover and very strong loyalty - and good links to places like Inverness College so the youngsters come in and start o as workshop assistants then if they have aspirations they go through their modern apprenticeship and pick up the tools and start operating CNC [computer numerical control] machines making some high spec products for the oil and gas industry. ey make about 8000 parts a week. It is a very good part of our supply chain and gives us very strong exibility."
Indeed an increasing number of Aberdeen manufacturers have been looking to set up operations outside the city because unemployment is so low it cannot get enough skilled people. "Unemployment in Aberdeen is less than one per cent and has been for many years so if you are going to recruit in Aberdeen it is going to be someone from another employer," says McAlpine. " at is why a lot of the oil and gas majors have moved down to places like Belshill. We have a facility in Cambuslang where we are recruiting engineers from the central belt. It also acquired a company in Fife which services one of its biggest customers, FMC."
McAlpine believes there is great scope for further expansion by Aberdeen companies across Scotland. Hydrasun, which employs around 570 people, has customers all over the world including Total, Shell, BP and then all the service companies underneath them.
Like Whyte, McAlpine believes manufacturing needs to be promoted as a good industry to work in, particularly amongst the schools and colleges. "I think for too long we have been the poor cousins to the nancial services sector which, although it was always smaller, has a much higher pro le. A balanced economy is what we need. A strong manufacturing and a strong services industry are essential for the health of Scotland."
He also believes SMAS is a fantastic organisation. "Its people are motivated by their customers rather than by their own balance sheets."
Since its formation SMAS has helped Scottish manufacturing companies deliver s78m in productivity bene ts. Between 2005 and 2011 it carried out 1698 free, one-day manufacturing reviews and completed 617 continuous improvement projects, providing 5300 days of consultancy support.
Hughes was one of the people who played a major role in the creation of SMAS and its success has surpassed his expectations. "It has been very good," he says. " e feedback I have had from my member companies is excellent. e practitioners they have hired have been very good, very practical and very helpful. And what con rms that is they have had a turnover of practitioners because a number have ended up going into the companies they went in to help. e companies liked them so much they said come and join us please!"
Hughes, who is retiring as chief executive of Scottish Engineering in December a er 14 years in the job, is passionate about the importance of encouraging youngsters to consider a career in manufacturing. Since 1999 he estimates he has given motivational talks to over 70,000 schoolchildren in Scotland.
He recently found himself at the centre of controversy when he was reported as saying we must stop doing Mickey Mouse quali cations at Mickey Mouse institutions otherwise you get a Mickey Mouse job and Mickey Mouse people. "I said if students don't realise they are learning for a reason and they just study something because they quite fancy it that is wrong. All I was saying was if you pick a particular range of subjects there are consequences and you have to accept those consequences. Don't come back to me moaning in ve years' time you have got the wrong degree or you can't get a job because you didn't do your homework to nd out what jobs are required."
Hughes argues that one of the consequences is Scottish manufacturing and engineering now has a serious skills shortage despite the fact there is high unemployment. "They cannot get welders for love nor money. They could employ 500 welders tomorrow if they could find them. I had a managing director in the other day. He has got orders that he cannot take because he hasn't got the manpower to put on machines."
Hughes acknowledges that businesses have been getting it wrong for ten years as well. "If you go back a number of years ago we started cutting back modern apprentices and training technicians and stuff like that because things were tight and we couldn't afford this, that and the other without realising we couldn't afford not to do it," he says.
"The other thing that crept up on us - and it shouldn't have because we could see it coming - is that we have an ageing workforce. Manufacturing and engineering across the whole of the UK - not just Scotland - has an average age in excess of 50. Now in the next ten years or so a large chunk of the workforce is going to be looking to retire - if they can afford to that is - and we don't have enough coming out at the young end and the middle to take up the slack."
Another of Hughes' big concerns is the problems in the Eurozone and the possible impact that could have on Scottish engineering manufacturers. His organisation's last survey reported a marginal rise in exports and an eighth straight quarterly increase in Scottish engineering companies' overall staffing levels. But around 50 per cent of what is exported from Scotland goes to the Eurozone.
"There is still a dark shadow over the Eurozone. Nobody really believes the Greeks have the willpower or belief to sort out their economy, especially against a fair bit of civil unrest. The underlying concern is what happens in Spain and Italy because bailing out Greece is one thing but you can't bail out Spain and Italy.
"The other concern is that there are two economies which dramatically affect not just Scottish exports and Scottish business but the whole world and those are China and the United States. There are those in the background who are suggesting that seven to ten per cent growth in China can't be sustained in the longer term and there is a bit of a bubble that is going to burst. There is also the suggestion the recovery in the US is perhaps not as rosy as we thought a month ago or two months ago. These things are outwith our control and there is not much we can do about it."
On a more positive note, Hughes says there is a significant growing demand in Brazil with three Scots companies currently setting up operations there and one or two others having a look.
One thing Hughes is very concerned about is the impact of the uncertainty created by the independence referendum on manufacturing businesses but, more seriously, what the impact will be if Scotland does go it alone. Hughes predicts there will be no future orders from the Ministry of Defence for new ships from the Clyde. "If you have shipyards in England and an independent Scotland you don't give your ministry ships to another country. It just does not happen. Goodbye Clyde right away as far as that is concerned.
"We tend to think of ministry jobs as only the Clyde and Rosyth. There is more to it than that. Ministry jobs are involved in companies like Selex Galileo, Thales, Raytheon, and several others scattered around the country. If you take Faslane away on its own you immediately affect anything between 8000 and 12,000 jobs depending on whether you are talking about direct employment or indirect employment around the Helensburgh area."
An area where Hughes does see improvement is in terms of manufacturers partnering with universities. He cites the example of Glenrothes-based Macdonald Engineering who have linked up with the University of Strathclyde on a knowledge transfer partnership to develop stainless steel hot water cylinders. "They saw an opportunity in the market for stainless steel boilers but they didn't have any expertise to go with it so they linked up with the University of Strathclyde. They are now into introducing stainless steel boilers and it has opened up a brand new market for them.
"I have been encouraging more and more companies to get involved with things like knowledge transfer partnerships and I have a lot of success stories I can tell you about where companies suddenly realise a university can help them solve a problem.
"Similarly, universities are understanding that companies are their customers at the end of the day, that their end products - the students - are going to find jobs in these companies and it is not a case of getting your hands dirty in industry it is a case of linking with industry and getting actively involved."
Profile: Scottish Manufacturing Advisory Service
Profile: SMAS Expert help and advice Nick Shields, who took over as director of the Scottish Manufacturing Advisory Service a year ago, loves his job. When he was plant manager of Polaroid's factory in Dumbarton making two million cameras a year what he particularly liked was change management and continuous improvement. "The SMAS job has given me the opportunity to do that every day of the week in different companies and engage with them. I get a kick out of that."
The Scottish Government-funded service's proposition is a free diagnostic review for any manufacturing company and then a subsidised project beyond that if they are an SME. If they are not they are charged at market rate. "If a company is an SME they get a 50 per cent discount on the rate we charge," explains Shields. "It is s600 a day, which is what we would perceive to be bottom of the market rate, so it would be s300 a day for an SME. If the typical outcome of a project is s100,000 of savings for maybe a ten day intervention - say s3000 - it is not a bad return on investment.
"The organisation was stepped up in size three years ago and we are now in what we call steady state delivery."
Smas has 30 full and part-time practitioners working all over Scotland and covering all manufacturing sectors. "We have a big team and there are 8000 companies out there and we want to try and do something with them all. We cover anyone who makes anything.
"The great thing about what we do is that it is not snake oil - the proposition of continuous improvement and Lean and Six Sigma is very well understood. A lot of these companies just don't have the resource to do it. They always thought it sounded like a great idea. My proposition to them is you get one of my guys in two days a month, 50 per cent subsidised - you get 90 per cent of the benefit for ten per cent of the costs.
"You can have a full-time guy but you would probably struggle to fully engage him because you are such a small company so why don't you just use one of our guys? "We have quite a lot of the ex-Motorola and Freescale guys and when you let organisations like that go there will be people in the market place. There is still a good, rich history and legacy of the larger businesses that were here and we can tap into that and use that to hopefully help the indigenous smaller businesses."