The three great British companies

For much of the 20th century GKN took the fashion of vertical integration to the extreme, operating steel works as well as making finished products like screws and, later, car parts. But from the early 1980s through to 2001 it gradually sold off its various low-tech industrial interests to strengthen its core expertise in car and truck under-bellies, while also moving into aerospace. The Filton acquisition propelled GKN into the aerospace industry’s premier league – though it also coincided with a savage downturn in car production that forced GKN into a horrific £423m rights issue last June.

The factory is a vast barn-like space filled with large components – most steel but some composite – lifting apparatus and machines as big as a bedroom. The trailing edges have to be built to within tenths of a millimetre of the specified lengths for Airbus, GKN's only real client at Filton. Lasers are needed to position the various subcomponents on the two assembly lines, one each for the port and starboard wings (picture). This is about as high-tech as heavy manufacturing gets.

Few workers are in sight. Fiona Hooper, communications manager for the factory, says the staff numbers are similar to a decade ago, but automation has made each employee much more productive. "A decade ago there were lots of smaller machines making smaller parts – one man and a machine," she recalls. The current assembly lines date from a £26m refurbishment undertaken in 2003, shortly after Airbus discovered the world of corporate strategy and resolved to prioritise large complex kit over low-tech components and "integrated systems" over build-to-print manufacture.

This strategy continues under GKN. At the moment, the group makes trailing edges and ribs for Airbus to assemble into wings at Broughton, near Chester. It wants to climb up the value chain, developing whole wings for Airbus’s final assembly plants in Toulouse, Hamburg and Seville. It has already moved in this direction since the acquisition, having struck a risk-sharing agreement with Airbus on its next plane, the A350. In time, that should strengthen the GKN aircraft-wing brand, elevate barriers to entry and push up margins – just the kind of steps all the UK-listed engineers are trying to take in their respective niche fields. But as for so many UK conglomerates it remains a work in progress.

Rotork: the niche engineer everyone wants to be

My next port of call was Bath, home to FTSE 250 engineer Rotork. As the market leader in actuators – devices for opening and shutting industrial valves – Rotork embodies the kind of niche expertise that every engineer now covets. Why they covet it is clear from the company's financial results – it breezed through last year's recession with 6 per cent profit growth at constant currencies and a 26 per cent operating margin. Needless to say, it trades on an eye-watering earnings multiple to match, which changes the balance of risks for the investor.

Rotork's secret may be that it never fell into the trap of over-diversification – unlike GKN and its older, bigger peers. It started in the 1950s making actuators, and despite early forays by the ever-inventive founder Jeremy Fry into flat-bottomed boats and vacuum cleaners (Fry was James Dyson's first employer), it never veered far from its original core. Since the early 1990s it has made nothing but actuators and accessories like actuator gear boxes. That has given it the time and stability to build up an unassailable global market position that allows it to charge a premium.

Rotork made its first actuators in the stable block of Mr Fry's grand Bath home, Widcombe Manor, and it still makes them in Bath, albeit now in dedicated factory adjoining a very modest head office. Like almost all Rotork sites, it’s an assembly plant rather than a factory. The components are delivered into one side and the finished actuator is shipped off to places as far as Korea from the other. I am initially surprised by the apparent simplicity of the intervening assembly process – it looks like anyone used to Ikea could do it. But then I see the circuit board and the densely-noted instructions map beside it, which looks much trickier.

Being an assembler, not a manufacturer, is one reason Rotork is so profitable. I wonder if it also magnifies the risk of intellectual property theft, but chief executive Peter France says that sourcing parts from multiple suppliers and the odd legal case is enough protection. Crucially, actuators tend to be used in places like oil wells, chemical plants and nuclear power stations, where safety is paramount, so clients won't typically compromise on a copy.

Mr France says the Bath factory doesn't look very different from when he arrived at the firm in 1989. It operates at a much higher capacity and the assembly line has been reorganised for greater efficiency, but the basic process is the same. The changes have happened elsewhere: new product lines have been set up for new applications in new assembly plants in Asia.

Rotork wants to be the world's leading actuator expert, and in total market share terms it already is. Jeremy Fry's innovations in the 1950s gave it a headstart in electronic actuators – the kind of product it still makes in Bath – that it has never lost. But electricity isn't always available or strong enough, and in those cases, hydraulic or pneumatic power is used. Rotork acquired an Italian company in 1999 to get a foothold in this separate market, which presented "challenging management issues", says Mr France euphemistically. "It was an Italian acquisition – need I say more?"

A decade later and Rotork's Fluid Power division has grown into the world's second biggest fluid-based actuator supplier, after Emerson in the US. But margins are much lower, at around 12 per cent in the first half. "It's a lower-margin business," says Mr France, who used to be head of the division, but he guesses they could reach 20 per cent when the division’s market position is more secure. "It's been our fastest growing business because we've been taking market share, but it's also more cyclical because we're not so well diversified."

Mr France's strategy is to extend its leadership into the geographies and product lines where it is weaker – fluid-based actuators in particular. Even Rotork is still a work in progress, it seems.

Trifast: the recovery play

Trifast had a horrid recession, but the screws started loosening earlier. Sales at the nuts and bolts supplier peaked at £132m in 2007, although the fastener industry was still flying in 2008. The founding shareholders and other investors were so fed up by early 2009 that they ousted the management team and invited back two retired ex-chief executives to salvage the wreckage.

Malcolm Diamond, now executive chairman, led the company through its glory years in the 1990s, when it supplied specialist screws and the like to the booming electronics industry. He was succeeded in 2002 by Jim Barker, now chief executive, who spear-headed Trifast’s efforts to diversify its industry exposure after the dotcom crash.

Mr Diamond shows me around Trifast's Uckfield headquarters. A former salesman, he is almost ostentatiously personable and greets his staff by name with a jovial "happy Friday". He says morale was rock-bottom when he arrived, and after a number of high-level departures Trifast was no longer a "sales-led company". He immediately reinstated a global sales team and set the objective of securing 30 ongoing contracts with multi-national consumer-goods companies like Hitachi and Philips. He says Trifast now has "encouraging relations" with 15 of them.

The group buys in much more stock than it manufactures, adding value mainly through logistics – a low-margin, high-volume business. It has recovery potential: Mr Diamond says the group’s purchasing discipline had become very lax under the previous management, while the expensive UK warehousing facilities are no longer necessary. Improvements are still working their way through to the bottom line.

But the bulk of Trifast’s long-term growth will come from Asia. Because Asian client tend to avoid intermediaries and buy local, Trifast has had manufacturing facilities there ever since the multi-nationals moved offshore in the 1990s. That means margins are fatter.

It retains a small legacy plant in Uckfield that makes a certain niche product for the national market. Full of old-fashioned machines in neat rows, Mr Diamond says it looks exactly as it did 20 years ago, only with fewer people. "The fasteners used in the UK aren’t the same as the ones used elsewhere. All the investment is in Asia, but we haven't shut the UK factory because there's still demand for its products," he explains.