Karan Bilimoria: what British manufacturing can learn from India

The Cobra Beer co-founder and cross-party peer wants the UK government to invest more in domestic manufacturing.

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A grand copy of the Bhagavad Gita rests open on a lectern in the corner of Karan Bilimoria’s Barbican office. Overlooking central London the room, though small, is filled with items from around the world, showcasing the Cobra Beer co-founder and cross-party peer’s well-travelled career, as well as the artwork of his children. He arrives, in true Indian style, half an hour late but the apology he offers is quintessentially British. “I’m so terribly sorry, just been one thing after another you know, very sorry. Can I get you anything?”

Bilimoria was born in Hyderabad to a Zoroastrian Parsi family with a background in the armed forces. His father, Faridoon Noshir Bilimoria, was the General Officer Commanding-in-Chief of the Central Command of the Indian Army, and also served as aide-de-camp to the first Indian president, Rajendra Prasad. His grandfather, Nasservanji Bilimoria, was one of the first Indians to be commissioned as an officer at Sandhurst. Both his mother and grandfather studied at the University of Birmingham, of which he is now chancellor. “I feel as at home in Britain as I do in India,” the former vice-captain of the University of Cambridge’s debating society says, stirring a third spoonful of sugar into his coffee.

Bilimoria, whose other roles include being the founding chairman of the UK India Business Council and president of the UK Council for International Student Affairs (UKCISA), believes that Britain, within the context of its manufacturing industry, “needs to be doing better on the international stage”. Leaning back, he begins: “As a child, I was fascinated by Great Britain. My grandfather would come back from his trips and bring me toys… that ‘made in Great Britain’ trademark was on them. For me it was a sign of manufacturing excellence. We seem to have lost that sense.”

“Britain’s manufacturing industry accounted for around 30 per cent of our total GDP 40 years ago. The main catalyst for the drop is that we opened up as an economy and became over-reliant on services.” Bilimoria points to the “Make in India” initiative launched by Indian Prime Minister Narendra Modi – a long-term policy that aims to increase the proportion of products sold in India and made in India from 16 per cent of GDP to 25 per cent. “We have no such target in Britain.”

How can Britain, an island nation that has, Bilimoria acknowledges, “very few natural resources”, compete with the vast Indian sub-continent? “It’s proportionate, of course. But the idea remains the same.” Manufacturing currently accounts for 10 per cent of the total British GDP. Bilimoria suggests an increase to 15 per cent is a “realistic target” for the government. “If the government wants to have an impact on industry, then it must consider using the tax system effectively. The government must focus on how to exploit the world-class features that this country already has. The University of Cambridge has won almost 100 Nobel Prizes. We punch way above our weight, although we underinvest, compared to America or other countries when it comes to our R&D. We also have a great location.”

Britain’s position in Europe, “both physically and within the European Union”, Bilimoria says, “signposts it as a great gateway for industry”. According to Bilimoria, Britain represents “the ideal launchpad for companies looking to ship their products out to Europe”, but “Brexit casts that into jeopardy”. While Bilimoria is critical of some aspects of the EU – “I think the single currency was a terrible mistake” – ultimately, he was “very disappointed” with the result of Britain’s 2016 referendum. “I’ve never said that the EU was perfect, but I think it will be devastating if the government persists with a hard Brexit.”

He adds: “I think as people take in the effects of what leaving the single market or customs union would entail, neither the public nor parliament will accept. Speaking as a businessman who manufactures in Britain, this relationship we have is fantastic. The idea that leaving the single market and customs union is going to make us more global is nonsense.”

Issues of immigration and economic migration, Bilimoria says, have been “chronically misunderstood”, and “a failure to design the right policies” would be “catastrophic for British manufacturing when you consider the skills gap”. In the Lords, Bilimoria spearheaded legislation for a two-year graduate VISA for international students. “I had cross-party support in 2008. If they’re paying tax over here, that’s good for our economy and our industrial workforce.” He calls the coalition government’s decision to introduce caveats to the policy such as a minimum salary “politically illiterate”, and insists that “immigrants are an asset to the manufacturing industry”.

Bilimoria’s stance on Brexit, however forthright, seems unlikely to persuade the incumbent. If the government does pursue a hard Brexit, then, what must the manufacturing industry do? “I still don’t think it will happen, but OK. If we go after a hard Brexit, then the manufacturing industry must brace itself. We will have to revise our VISA system. Ironically, then, we might even need to be more open with our immigration and who we let in, from outside of the EU.”

Is it disingenuous to suggest that a country with world-class universities will necessarily require more international students? “I think people are underestimating exactly how much of the manufacturing industry currently benefits from the EU. You can’t just replace those workers overnight.”

Bilimoria would also recommend revisiting the rate of corporation tax to encourage more companies to manufacture in Britain. “In a hard Brexit, we would have to consider lowering it. The main thing that we need to do is encourage more investment and that’s when things like capital allowances become more serious. Look at Molson Coors [Cobra Beer’s American partner] and the state of the art bottling plant that we’ve got – that cost £80m. You’ve got to incentivise this with tax breaks.”

Bilimoria has been chancellor of the University of Birmingham since 2014. “Industrial strategy for any government must revolve round more collaboration with academia. At Birmingham, we have been very proud to win a Queen’s Award for engineering. We specialise in railway engineering and have been named a centre of excellence. We now head up a network of universities that offer similar courses. We’ve forged industrial partnerships with companies such as Crossrail and Siemens, so we are able to tailor our courses to what industry needs. That is what manufacturing needs more of.”

While transport infrastructure is important to Bilimoria, it is in food and drink manufacturing where his most personal interests lie. The first shipment of Cobra was imported to Britain from the Bangalore-based Mysore Brewery in 1990, but large consumer demand – “mainly from Indian restaurants” – and issues with supply from India prompted Bilimoria to move production to Britain by the middle of the decade.

Cobra’s rise wasn’t straightforward. In 2008, and in need of fresh investment, the company agreed to multinational drinks firm Diageo buying a minority stake, but the deal was called off. A bank loan, secured just days before Lehmann Brothers went bust, presented a “lucky escape” for the company. But the loan didn’t see Cobra entirely out of the woods. On 29 May 2009 Cobra went into administration, but achieved salvation on the same day when it was rescued through the formation of a partnership between Bilimoria and Molson Coors, which has a brewery in Burton-on-Trent.

Automation, Bilimoria says, “played a big role” in Cobra’s renaissance. “Automation isn’t something to be afraid of. It’s something to be aware of. Of course it has got to our factory floor. It’s not about getting rid of people – we use robots because they are faster and more efficient, so you can move people elsewhere in the business. That’s the reality of technology.” Since the formation of the joint venture with Molson Coors, growth has averaged between seven and ten per year-on-year, and in 2013 the company turned over just shy of £60m with a pre-tax profit of £7.7m.

Cobra’s journey back to Britain pleases Bilimoria. He says: “It’s an Indo-British product. Britain has allowed Cobra to thrive.” Brexit, he reiterates, would make “stories like ours less likely”. Bilimoria adds: “Being based in Britain, we have had efficient access to the continent in terms of importing and exporting, and a far-reaching skills base. The brewer I founded Cobra with [Dr Cariappa] has a PhD in biochemistry from Prague University. Whether it is car manufacturing or making beer, it doesn’t matter. Ensuring overlap between universities and industry, and between countries, is vital.”

Rohan Banerjee is a Special Projects Writer at the New Statesman. He co-hosts the No Country For Brown Men podcast.