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British manufacturing winners

FEATURE: The UK is still the world's sixth-largest manufacturer and home to some of the most innovative companies on the planet.
December 2, 2010

No airplane has been built in the UK since the last Concorde was delivered to British Airways in 1980. Even that has been consigned to history, and now sits in retirement beside its birthplace, the vast Brabazon hangar in Filton near Bristol. Yet the Filton site is still a hive of manufacturing activity. No complete aircraft leave the factories, but many of their most valuable components do. Rolls Royce still makes some of its military jet engines here, while the engineering group GKN makes trailing edges – the crucial part of an airplane wing that holds the flaps and fuel.

I recently visited GKN at Filton and a couple of other factories in the UK to understand this apparent shift in industrial focus. There has been much public lamenting of Britain’s lost engineering strength since the banking crisis, encouraged by politicians who have made much of the need to rebalance the economy away from financial services towards high-tech manufacturing. That may have appealed to a population reared on Victorian costume dramas, but it skates over the evidence of places like Filton: that British companies may not make finished cars or trains or aeroplanes any more, but they do now have world-class expertise in crucial niche markets.

True, gone are the days of vertical integration, when companies like Airbus – which sold its Filton trailing-edge plant to GKN last year – felt they needed to do everything from making the smallest components to selling finished airplanes. Going too are the days of the industrial conglomerate, when manufacturers like Williams and Hanson tried to make as many unrelated products as possible.

Yet British industry is more focused, global and profitable than ever. That's because patchy performance made the sprawling conglomerates of the 1980s and 1990s realise that “expertise drives higher returns” says Michael Blogg at brokerage Arbuthnot. They eventually embarked on the long and painful process of consolidation – defining and redefining priorities, selling satellite businesses and investing the proceeds in the more lucrative product lines.

Many groups have shut their UK factories and built cheaper ones close to their new customers in the process. But there are still a few manufacturing sites in the UK, mainly turning out high-tech, safety-critical equipment that is sold to risk-averse customers at high prices. Aerospace is a market that ticks all these boxes. That's why Filton, which made its first plane a century ago this year, is still buzzing with working factories.