Our national broadcaster ran a headline recently that said “UK car manufacturing hits 10-year high in 2015”. Other outlets said similar things and one included some comment about the fact that Jaguar Land Rover was now outperforming Nissan.
The thing that gets my goat is of course these are not UK companies. The major car manufacturers here are now mainly Indian, German, Japanese or American. I even think the French are still building cars in Britain.
So why do we insist on calling this the UK car industry? Is it some sort of perverse means of avoiding the embarrassment that an industry in which the UK was once so dominant we no longer have much of a corporate involvement in, because we didn’t invest in it or give it the sort of political support we should have?
Anyway, it’s gone now.
A large chunk of today’s industry’s profits will be going overseas and, of course, it will be minimising the UK tax it pays because, well, would you like paying tax to a foreign government?
We mustn’t also forget that we have no control or influence over these companies. They’re here because we ignored the industry. Well, not us but the government and the financial sector.
These overseas owners took advantage of our stupidity but they could just as easily up sticks and leave, taking the intellectual property with them. It’s a risk we have to accept.
As you would expect, they’ve also taken advantage of our skills. They are doing what we should have been doing – exploiting our engineering and design talent to build great global companies.
Having said that, there are some smart UK-owned companies in the automotive sector working on a wide range of technologies that will feed into the mainstream manufacturing companies.
A lot of engines, electric vehicle transmission systems and other high tech components and systems are being created, tested and prepped for production in some small and not so small companies across the country.
Some of it is aimed at motorsport of course. That’s something they do well in England. Actually, so does Scotland but there’s been little of the commercial spin-out here compared with our southern neighbour.
By now you’ll all be aware that, if there’s one thing that gets right up my nose it’s “spin” and in particular it’s spinning facts that make situations look so much better than they are.
Spin also often goes hand in hand with that old adage “If you tell a lie big enough and keep repeating it, people will eventually come to believe it”.
It’s like that with the automotive industry but I’m sorry to say it’s exactly the same with the “UK” subsea industry which, if we believed what government and some trade organisations say, is the biggest and best on the entire planet.
It’s just nonsense.
An excellent example of the extent to which the UK has lost the plot in the subsea game is the remotely operated vehicles (ROVs) sector.
Just a few years ago, we could rightly claim to be if not a world leader in this technology then well up there with the best of them as Britain was a big player right across the range of ROV building, from small observation systems to work class vehicles and even trenching devices.
Discussing the sector with an old friend still active in the business, he confirmed my suspicions that there now isn’t a single British-owned ROV builder left. The last to go was Soil Machine Dynamics Ltd (SMD) which was bought recently by a Chinese state-owned company. Yes, a Chinese communist state-owned company!
The other beneficiaries of UK acquisitions seem to be mainly the Americans and Swedes.
Those of you who support the view that “ownership doesn’t matter” are simply wrong because “ownership” is the wrong word. It’s actually more accurate to use “control” because it better describes what the situation actually is.
Control enables a lot of things. For example, there is plenty of evidence around that overseas owners tend to favour their own nations.
A London Business School report stated that 88% of the CEOs of the global top 500 companies and 85% of their management teams are from the country in which the company is headquartered. Who can blame them?
Especially important for the oil & gas industry is that it is HQ that dictates where critical activities including research and development take place. That tends to mean the home country.
I recall that, for example, Technip . . . y’know, that French subsea contractor with a major presence in the North Sea . . .- announced not long ago that it was establishing its primary research and development in Paris.
Everyone moaned but it’s Technip’s management’s prerogative to do its R&D on its home patch because it controls the company.
However, when a company remains under UK ownership and control it can do extremely well especially if its ownership is kept in private hands.
A good example of that would be Sonardyne International, best known as a developer, designer and manufacturer of acoustic navigation systems; also a provider of side-scan sonars, subsea wireless, inertial navigation, acoustic comms and other similar technologies.
Independence still enables it to spend more than $10million annually on R&D. This has undoubtedly helped it maintain its position as a real leader in a global market.
Is there still potential for a similar approach in the ROV world? Well perhaps.
There is a privately-owned Aberdeen company called Aleron Subsea that’s developed an interesting business model based on what is essentially the “re-manufacturing” of ROVs.
Through acquiring “previously owned” vehicles that it rebuilds and updates – particularly its control system, hydraulic power pack, thrusters and so on and so forth, it can provide a much more cost effective package compared to the price of a new system.
This company has also developed a 300bhp deepwater work-class vehicle design for which it already has all the main components built and ready to go for when the market begins to revive.
There is therefore some hope that we can maintain a genuinely indigenous subsea technology industry in sectors where we’re going to need it and which has potential for diversification, such as in maritime renewables.
Selling off UK companies isn’t clever especially as we’re not replacing them or buying many overseas firms to make up for the loss.
It impacts badly on the economy long term by exporting profits, reduces investment income and limits our potential.
Pretending it’s not happening is at best irresponsible and at worst it’s deception on a grand scale. Worse, it often means we don’t get what we need to suit the demands and conditions of our industry.
No control you see.
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