Brexit, Covid-19 & UK manufacturing
Recent events have caused a lot of strain on manufacturing. With Brexit negotiations and coronavirus disruptions, Amy Wallington looks at how UK AV manufacturers are affected and what advantages they get from onshore manufacturing.
Following a controversial vote in 2016 that divided the nation, the UK officially left the European Union (EU) on 31 January 2020. With negotiations and deals still being made, there is a lot of uncertainty surrounding manufacturing, both in the UK and offshore. Fearing failed supply chains should a no-deal Brexit happen, many European customers have started boycotting the UK manufacturing sector.
Just as we thought Brexit was the only contender, along came an unexpected global pandemic to halt many manufacturing plants across the world. Covid-19 has impacted all industries, with manufacturers across the world having to pause production lines or change what they are producing altogether. Some manufacturers in the UK have managed to continue production but on a much smaller scale with skeleton staff while adhering to new social distancing rules. However, those manufacturers that rely on offshore plants for production or offshore suppliers have been hit harder, with travel restrictions in place stopping components being shipped.
At the beginning of 2020, China was nearing its peak of coronavirus, and with manufacturing plants across China having shut down, the supply chain in other countries was beginning to suffer. Just before the virus started to hit the UK, some UK manufacturers experienced a boost in their business, presumably because of the downfall in China.
Pulse-Eight, a video/audio control and distribution systems manufacturer in the UK, experienced this, as its director of sales Marc Waple explains: “This is a painful and serious situation that affects many lives on all corners of the world which is also likely to have significant consequences to the global economy as a whole, not just our industry. We have, however, seen a significant short-term upturn in our business locally because of the disruption surrounding the coronavirus.
“In the longer-term, it is hard to say whether that upturn will remain, but something that is certain is that by having direct control of our own product manufacturing, it gives us the advantage to react faster and prioritise according to short-term demands and challenges.”
Photo: Amina Technologies
Another UK manufacturer, Rako Controls, thinks that the pandemic has highlighted how many AV products are offshored, as its director, Paul Wafer, says: “The majority of AV products are manufactured offshore. It’s commonplace to see ‘Designed in the USA, Made in China’. The current Covid-19 pandemic has highlighted the fact that so many manufacturers, pressured for reducing product pricing, have stopped manufacturing locally and outsourced it.”
Of course, whether manufacturing occurs onshore or offshore, it’s all going to be impacted by the pandemic, as John Buchanan, Meridian Audio’s CEO agrees: “Unfortunately, the coronavirus pandemic is having a macro economic impact that may negatively affect all businesses, at least in the short-term, regardless of where manufacturing occurs.”
Irrespective of Brexit or the ongoing pandemic we are experiencing, manufacturing in the UK has numerous benefits to businesses. Additionally for some, it is the only option for making a very specific product, and for others, it’s purely in their heritage.
For Richard Newlove, managing director of Amina Technologies, keeping production in-house was the company’s only option as every product made is unique. “When we started the business 20 years ago, our entire ethos was focused on developing and creating unique customised audio reproduction solutions based on what was then a brand-new technology,” he begins.
The company started making speakers that could be disguised to look like something that would blend into its surroundings, such as paintings or pictures.
"By designing and manufacturing in the UK, we ensure that our Intellectual Property is kept here in the UK and avoids 'technology copycats'."
“As a result, every project we undertook was different. Using a set of adaptable building blocks, we created new products every day. To do this, everything had to be done in the UK, which of course lay at the heart of our home market and within easy reach of the wider European market.”
He continues: “While we still undertake some full custom design work today, our invention of the fully plastered over product in 2001, rendering it fully invisible in application, allowed us the luxury of making a more standard product. However, the integrator support and training required, and the continuing development and exploitation of the technology means we believe it is imperative that the majority of our manufacturing is performed in the UK and will likely be so for many years to come.”
Having control over the entire production ensures quality, traceability, and allows companies to quickly respond to changes in the market.
“Manufacturing our audio solutions in the UK means that we have complete control over the process,” says Buchanan. “We can adapt to market demand and have the ability to quickly prototype new products and introduce new features right here in our Cambridgeshire factory.”
Wafer adds that it also allows them to control the parts used: “The main advantage of manufacturing locally is having the ability to keep a tight control over the components used – no substituting with ‘equivalent’ inferior parts – and finished goods testing. As we manufacture the products we have to support, there’s a greater care taken with what comes out of the factory.”
Similar to Amina Technologies, Aquavision keeps production in the UK in order to make products unique to the customer. Alastair Benn, managing director of Aquavision says: “We manufacture in the UK so that we can have total control over the products and ensure they are the best quality available. It’s also good for continuity and backwards compatibility. We can do any changes needed to make the unit bespoke for clients.”
It is important to any company to be able to develop products in a timely fashion for the customer. Particularly in audio, many high-end products are made to order. Having manufacturing capabilities in the UK allows this process to happen quicker, without risking delays from third parties overseas.
Waple points out: “Speed of production and delivery are in our top 10 when it comes to listing benefits of manufacturing in the UK. With so many more of our competitors choosing to utilise group factories and manufacturing plants owned by third parties in the far east, there is often a queue to produce products and therefore shipping times can run into weeks and months for product delivery.”
It also means that teams can work closer together which can prevent technology and innovation being leaked or stolen. “Pulse-Eight also benefits from a technical support team that truly understands our solutions, working closely with the engineering team who designed the products in the first place,” continues Waple. “They are all present in the same building so they can react fast.
“Additionally, our products go above-and-beyond our competitors with some unique stand-out features – our CEC library being the most well-known. By designing and manufacturing in the UK, we ensure that our Intellectual Property is kept here in the UK and avoids ‘technology copycats’.”
It’s true that offshore production can often save money, and this is arguably one of the biggest reasons so many companies decide to manufacture overseas. Although it allows companies to offer their products at a more competitive price, it also runs the risk that quality and timing could be compromised.
Newlove states: “Manufacturing offshore would give us some direct savings, but it would also give us a great deal less flexibility and potentially increased waste which also has to be input to the overall cost equation. We source our metal components from material and fabrications specialists within a 20-mile radius of the factory and enjoy a tremendously beneficial relationship with all of them. That allows quality issues to be picked up instantaneously while working together to determine component refinements and improve efficiencies.
“We have regularly reviewed sourcing such parts from lower labour cost countries but have never found any economic reason to do so. By the time you take into account freight and sheer volume related costs (including storage and finance) the equation never works, even before we get to the risks associated with quality and inflexibility that it would force upon us.”
Buchanan adds: “We only see advantages, from access to an engaged local workforce, to quality suppliers, and the direct connection from a design on paper to the final product we ship. Maintaining our manufacturing entirely in the UK enables us to be a vertically integrated business with clear and efficient workflows and effective communication amongst our teams. This is true throughout the process, from the initial design idea and engineering development through to the manufacturing of the product in our factory and shipment of finished goods.”
Manufacturing in the UK doesn’t mean it has to limit the business you do overseas. In fact, speaking to various UK manufacturers, the general consensus shows that it is quite the opposite.
Currently, the main limiting factor to overseas business is the global pandemic making it difficult to transport goods to other countries. However, at the very beginning of this crisis, Waple experienced benefits from this. “Manufacturing in the UK does not limit our overseas business, in fact it’s the exact opposite in recent weeks with the global health challenges we’re all facing at the moment with the coronavirus. It seems that many of our competitors simply cannot ship goods as the factories they employ are closed or have long lead-times. We have been largely isolated from those challenges and it’s business as usual at Pulse-Eight.”
Although all of the manufacturers I spoke to agreed that UK manufacturing doesn’t limit their overseas business, Brexit could change this, and some are already recognising this danger.
"Manufacturing our audio solutions in the UK means that we have complete control over the process."
Waple continues: “It’s fair to say that the custom install industry as a whole has suffered as the uncertainty surrounding Brexit and the strength of our economy has made clients think long and hard before committing to luxury items.
“We have seen many of our competitors here locally and abroad having to increase their product prices as they are buying goods manufactured in Asia who are having to buy in dollars. Most of our costs are in British pounds and the recent exchange rate changes against the dollar have actually helped us keep our costs competitive which have allowed us to pass those price reductions on to our loyal customers.”
Benn is hopeful that Brexit will have a positive impact on Aquavision’s business. “At first, the uncertainty did affect customer decisions and delayed some contracts,” he says. “But dependant on what they decide, I am anticipating an increase in business as we will all have clarity on the way forwards.”
Buchanan believes Brexit will help Meridian’s global outreach. “We expect to see more free trade globally,” he suggests. “The US is our single biggest market and therefore I believe there will be opportunities for us to do even more business in the US, and other markets such as Australia and India. What will happen in Europe remains to be seen, but I remain optimistic.”
Wafer is less certain about what will happen and the impact it might have to businesses. He says: “Brexit has been an unfortunate distraction for the UK, creating a lot of uncertainty for the future of trade within the EU. As a company, it hasn’t directly caused any negative impact to business, if anything it has made UK customers look more closely at UK manufacturers. The uncertainty has put a number of larger projects on hold and generally, the UK market has been flattened with the uncertainty of an outcome.”
However, Newlove thinks it could have an effect. “While we will all have to endure a lot more paperwork and not insignificant costs regarding loss of technical harmonisation to export to European countries in the future, we don’t currently see any immediate change. Our one concern is potential for longer term nationalistic tendencies which may make products from other countries less attractive, which would be very sad to see.”
Most AV manufacturing is currently done offshore, but it will be interesting to see if companies begin moving production capabilities to the UK following Brexit negotiations and the aftermath of the pandemic.
Waple suggests: “What the last few months show us is that many AV brands, who were already operating on painfully low margins on their white-label solutions, have been affected and left exposed from external recent events such as exchange rate fluctuations or manufacturing closures in Asia. We believe this will inspire other manufacturers to start considering bringing back manufacturing to the UK and Europe.”
Photo: Meridian Audio
He continues: “I would like to say that more manufacturers are choosing to design and make their own products, and I would like to say that we are developing an industry within our home markets but unfortunately it’s not the case. To remain competitive, many companies are choosing the offshore route and it is ultimately detrimental to the quality of products they are supplying to our clients.”
Buchanan thinks it’s a mixed picture between offshoring and reshoring. “There was a huge drive to offshore manufacturing in the 90s and 2000s, which was about many AV brands seeking economy of scale, lower input costs, and to profitably maintain existing price points, or reaching a wider market at lower price points. I’m personally not aware of any brands that are reshoring the manufacturing of lower cost electronics and loudspeakers back to the UK.”
However, Benn believes customers are more particular over quality and are not buying as many products made in China, boosting the manufacturing business in the UK. He says: “Generally, I think that people are fed up with poor quality equipment from the far east and are happy to pay more money for hand-built products made locally. It is happening in all industries, such as local micro-breweries, artisan bakeries, farm shops etc. People want a quality product, made locally.”