Gwent’s manufacturing sector is the heartbeat of the region’s economy, but what does 2019 hold for these companies? We joined Adrian Coles, NatWest Cymru relationship director for corporate and commercial coverage, to discuss the key issues with some of its manufacturing customers in Gwent...

What have been the highs and lows for your business in 2018?

Julian Shine, managing director of Shine Catering Systems in Newport, one of the UK’s leading commercial kitchen manufacturers employing 60 people at its headquarters at the Stephenson Street Industrial Estate.

“Throughout the last few years we were aware of a financial instability growing in certain sectors of the construction industry and have been focussed on aligning ourselves with the strongest. Throughout 2018 we have seen that strategy realised with no exposure to that typically uninsurable debt, and preferred contractor status developed with many of the strongest due to our industry leading performance levels. On the flip side we are seeing ourselves moving away from markets that are becoming driven by the lowest possible cost and that quality and whole life cost have become of secondary or tertiary importance.”

Nick Battersby, managing director of Reid Lifting in Chepstow. With a turnover of nearly £6.5m, the company is a market leading designer and manufacturer of specialist gantries and lifting systems, employing 50 staff at its Newhouse Farm Industrial Estate head office.

“The highs have certainly been projects with BT Openreach and Rolls Royce. Both are great as examples of Blue Chip organisations engaging with us as a company with all the quality credentials and profile we have to provide bespoke solutions for their lifting challenges. The Rolls Royce one is particularly interesting as we are helping with custom lifting and handling equipment to enable rapid deployment of an repair and overhaul facility to key hubs around the world for maintenance of the Trent 1000 engine, which operates on the Dreamliner aircraft.

“As for the lows, we’ve been frustrated at the continued lack of clarity of the implications of the Brexit process, the stalling of the UK economy as a result, and it being on the agenda for overseas customers.”

Tim Price, managing director of Advanced Furniture in Ebbw Vale. Based at the Rassau Industrial Estate, the company employs around 90 people. With a turnover of £8m it is a leading manufacturer of commercial furniture.

“For us the highs have been developing new products and investing in new machinery to help improve our processes. Since our move in early 2017 to our new 100,000sqft factory on the Rassau Industrial Estate, we have continued to invest in the latest machinery to enable us to manufacture as efficiently as possible. This along with exiting new products, including a new office furniture design range, has been the highlights of 2018.

“Lows are the general state of the UK education and contract market that has seen a reduction in spending in last few years. Since 2016 we have seen the UK market, particularly the school refurbishment market, struggle as budgets have become increasingly tight and priorities have changed. Another difficultly has been the supply and cost of raw materials primarily caused by the weak pound.”

Adrian Coles, NatWest

“Overall Gwent’s manufacturing sector is performing and in a stable, strong position. What I find really encouraging is the steps many of our customers are taking to innovate to deliver growth. This enhances their productivity and fundamentally is an important step to achieving greater success. These businesses are developing new products, better materials and enhanced ways of working and it’s this level of innovation that will push their businesses forward. Those with a leadership mind-set who are willing to collaborate and are alive to investment and support will succeed the most.”

What are your concerns and hopes for your business with Brexit?

Julian Shine, Shine Catering Systems

“My concerns are for market growth in general as nobody would want to move back towards recession. As a business we will be subjected to the same economic forces as all of our competition, so by being the most agile and responsive company to the unforeseen we can make the potential disruption an advantage for us.”

Nick Battersby, Reid Lifting

“The hope is for a deal that retains relatively frictionless trade with EU and for no change on the science and educational links we have with the EU as I believe they are key long term drivers to success of UK plc.”

Tim Price, Advanced Furniture

“Our main concerns surrounding Brexit are the uncertainties it creates with demand, currency fluctuations and supply. This has made it more difficult to plan ahead. As a business we have a Brexit strategy which is based around best practise. We have looked to hold slightly larger stocks as some uncertainties on supply happen. We have also looked at sourcing products from more than one source with many products sourced or manufactured in the UK.”

Adrian Coles, NatWest

“As a sector Gwent’s manufacturing exporters are likely to be winning because of the value of the pound, but there’s a reverse impact for those who import. If the cost of steel, for example, goes up then a business will find it difficult to pass on the cost to their customer so they have to absorb it themselves. Crucially, uncertainty is resulting in a hesitation for some businesses on investment. There will be opportunities though and the manufacturing sector is one of the best at being able to adapt to meet the challenges it faces. This is one of its key strengths and as a bank we’ll be working to support them. From our perspective that means more than just providing avenues for funding. My job is about working with businesses to help develop the ideas, strategies and pathways that will deliver success. We want to see Gwent’s manufacturing sector prosper and are working to make sure that it does.”

How would you describe the Gwent manufacturing sector?

Julian Shine, Shine Catering Systems

“I think that the Gwent area is an attractive place to manufacture. There is a skilled workforce with a heritage of manufacturing and heavy industry that translates to a pride in the job, product or service. We are a consumer driven economy and seeing south east Wales topping the league tables for house price growth, I hope it is a change we can sustain, as ultimately it is the consumer that creates the demand for manufacturing.”

Nick Battersby, Reid Lifting

“There are beacons of success that are bucking the trend in a generally declining sector, which is encouraging for the future, particularly under the current climate.”

Tim Price, Advance Furniture

“Gwent as an area has a good tradition of manufacturing; the key in my opinion is that companies need to invest in newer more automated equipment and training for people. In Ebbw Vale the opening of the new aA65 duel carriageway has been great allowing us quick routes to market and it will be great when the last stage of this road is complete in 2019.”

Adrian Coles, NatWest

“Gwent is an industrial region with a strong manufacturing sector that is performing confidently. I feel however that is has huge potential to achieve even more, but that means embracing innovations such as Industry 4.0. This centres on how innovations such as automation can really drive productivity in manufacturing businesses. And the key fact is that you don’t have to be a large-scale employer to take advantage of them; Industry 4.0 is relevant to SMEs too. We’re supporting businesses so they are able to access the benefits of advancements like automation through our partnerships with organisations like Cardiff University.”

How will the sector perform in Gwent in 2019?

Julian Shine, Shine Catering Systems

“If only I knew! One thing that would really help would be the commitment to a route out of Wales for our products and services. An additional bus or Metro route to Cardiff is driven by a big village mentality where local public and private sector services dominate. Most in manufacturing operate on a national and international scale and this is what brings money into our economy from outside, not the stirring or redistribution of local focus. Being repeatedly choked by the M4 is no joke.”

Nick Battersby, Reid Lifting

“I believe there will be continued prevarication on investment due to Brexit and as a result the sector will be generally flat. If there is an early deal and the markets feel it is a positive one there may be an additional bounce due to the deferred investments pending decisions and clarity.”

Tim Price, Advanced Furniture

“With Brexit the outlook for 2019 is still a little unclear. Our feeling is it will be similar to 2018 but we are hopeful that it might be the start of a general improvement and austerity starts coming to an end.”

Adrian Coles, NatWest

“There’s no steering away from the fact that 2019 is an uncertain proposition because of the difficulties of Brexit, but that doesn’t mean that the next 12 months cannot be built upon a platform of stability and growth. I feel positive because Gwent’s manufacturing sector is a progressive one with businesses who are agile and therefore adaptive. And the funding is there to support them. We currently support more than 5,000 businesses in Gwent and earlier this autumn we announced a £3bn fund to support SMEs through the Brexit transition. This funding will give them the ability to plan, prepare, and be ready to take advantage of the opportunities that do come in 2019.”