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“People want to use British products”: appliance entrepreneur Nick Grey on the value of Made in Britain

The CEO of appliance manufacturer Gtech, Nick Grey, explains why his next vacuum cleaner will be manufactured in Worcester. 

“I didn’t really get on well at school,” recalls Nick Grey. “I didn’t like it, and it didn’t like me very much”. Work, however, was a different matter. In his first job in the design lab at vacuum cleaner company Vax, Grey found that “design was something I found really easy. It came quite naturally.” From a lab technician Grey became a design engineer and eventually, in his early 30s, the company’s head of engineering and design. He left Vax in 2001 with enough savings to last him a year or so, a home office in a village outside Worcester, and an idea for a new company. Less than 15 years later he had sold tens of millions of products in countries around the world, and last year the company, which remains 90 per cent owned by Grey and his family, turned over £91m.

For those with an eye on British manufacturing, then, it was encouraging to hear that this burgeoning company (Gtech was named the fastest-growing company in the Midlands in 2016, and the 11th fastest-growing in the UK) plans to make its next vacuum cleaner in Britain.

“It’ll create 100 jobs,” says Grey. “About half of them will relate directly to manufacturing and half will be related positions, such as admin and customer service.”

Why manufacture in the UK? “People want to use British products. They are always very complementary about Gtech and what we do, but the one thing people say is, ‘why don’t you manufacture here?’ So we designed a product specifically for British manufacture.”

Grey says this is not simply a case of moving a product line from China back to Britain; the economics of manufacturing in the two countries are different, and this changes how products are designed. “You can’t build things that are hugely labour-intensive in the UK – it just isn’t competitive. But if you make it relatively straightforward to put together, and find some savings elsewhere, it should work.”

“I think there’s a lot of pride that we can manufacture our own stuff, still. When you manufacture a product anywhere, it’s usually made from raw materials or parts that are brought in. But being able to manufacture here, being able to say we can compete, you can build a product in Worcester and it can compete with products built anywhere – I think there’s a lot of pride in that.”

The environmental benefits, too, are a selling point. Shipping already releases a billion tonnes of CO2 into the atmosphere each year – more than three times the UK’s total emissions – and this could rise to 17 per cent of total world emissions by 2050. Many consumers already avoid food from the other side of the world; product manufacturers may soon need to consider this as a force in buying decisions.

For Grey these efficiencies are what bring UK manufacturing “within touching distance of the price of manufacturing offshore.” “We’ll save a lot of shipping costs, we’ll save storage costs, and we’ll save picking and packing costs.” When the new vacuum gets to the end of the production line in Worcester, he says it will go “straight onto the courier’s van to go out to consumers. That helps make up for the higher cost of manufacturing here.”

The sum that has to be balanced for a company to be able to manufacture in the UK rather than China is weighted heavily towards the east. While Chinese workers’ wages have risen dramatically in recent years, the average wage in manufacturing remains around £2.60 to the UK’s £8.20. In factories in Sri Lanka and Bangladesh, where many of the clothes worn in the UK are made, workers are typically paid £2-£4 a day. Factory space is also much cheaper and more readily available abroad. In the UK, says Grey, “there’s a shortage of space. Manufacturing needs a lot of space, and the rent and the rates are very expensive here. It can actually be difficult to find factory space even if you’ve got the money.” When Gtech left its old office – a collection of buildings on a farm – in 2016, Grey says that “on the local property pages, there were two properties of the right size within the limits of Worcester. The whole choice was two properties. One of them was very old and run down, and the other was the one we moved into.”

Grey says that factories in China also benefit from a government that actively promotes manufacturing. “The investment in China is readily available. For any factory that wants to export goods, they can borrow money, open premises, buy machinery, and the government is very, very supportive. Here, you basically have to have a lot of money.”

This situation is not new. Grey describes manufacturing in the Far East as “very mature” in terms of the quality of manufacturing, and the availability of skilled workers is “like for like”. “We’re able to attract a very strong workforce here too,” he adds, but the higher value placed on a UK citizen’s time means products must be designed accordingly. “You need something that’s fairly streamlined in its design and assembly.”

That said, Grey acknowledges that the UK government does offer some “very good” incentives for businesses. He highlights research and development tax relief – a considerable deduction from corporation tax that can be claimed whether R&D is successful or not – as a policy that strongly incentivises innovative companies such as Gtech.

This is good for the UK because “most of the value of a new, innovative product is in the intellectual property,” he says, pointing out that manufacturing in the UK doesn’t actually bring in as much value as designing in the UK. “That’s the really important bit. Britain has this incredible resource of design talent, from Spitfires to radar to F1 cars – the very top of design is usually British influenced. So to make the most of that is the main thing for government. Research, development and design, that’s what we’re good at.”

In the US, Donald Trump’s promise during his election campaign to “get Apple to start making their computers and their iPhones on our land, not in China,” shows a failure to understand the realities of globalised business and manufacturing. According to Grey, “anything that’s compact, labour-intensive and easy to ship, you’re better off making in the Far East. If it’s quite bulky and big, or if it’s not labour-intensive, you’ve got a chance, you can manufacture that locally.”

“I would encourage British manufacturing,” he says, “just not of everything.”

The decision to manufacture in the UK could also represent a Brexit insurance policy for Gtech. Following the referendum, the cost of materials – which are for Gtech negotiated in US dollars – rose steeply as the pound lost value. “It certainly wiped some off our bottom line,” says Grey, agreeing that reshoring “does underpin that a little bit.” That said, Grey points out that EU law has made “selling goods within the EU more complicated than selling them outside, “so Brexit “doesn’t make any difference to us, to be honest.”

The new Gtech model, when it begins production later this year, will not be the only vacuum cleaner made in the UK (Numatic has made its well-known Henry vacuum in Somerset for more than 35 years) but it will be an important test of British manufacturing’s appeal to consumers in the modern economy. If it is successful, other companies may find both efficiency and security following Gtech’s lead.

Will Dunn is the New Statesman's Special Projects Editor. 

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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.

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.