nergy businesses such as Norway's Aker Solutions and U.S. firm FMC Technologies are landing more jobs on Scottish shores, as well as in London. Food companies such as Kraft are growing from Ballymena to York. Car companies Jaguar Land Rover, Lear and Rolls-Royce Motor Cars (a unit of BMW) are growing and steel is rolling. And London continues to attract business facility activity even as prices go through its prestigious rooflines. No wonder the United Kingdom just placed 10th in global competitiveness, according to the World Economic Forum, with top-three rankings in the sub-categories of university-industry R&D collaboration and quality of scientific research institutions.
Yet a recent study shows tax rates and policies nipping at the heels of the nation's business climate. And worry about talent development has such firms as Rolls-Royce and BP voicing the possibility of evaluating other locations for engineering and R&D centers. Seeking clarity, we spoke to Prof. David M. Upton, chair of operations management at Oxford University's Saïd Business School and a longtime advocate for manufacturing. And we invited the perspective of one of the most sought-after industrial leaders in the U.K., if not all of Europe: Sir James Dyson, inventor of the Dyson vacuum cleaner and outspoken champion for the role of design, engineering and manufacturing in a nation's economy — who himself has threatened to take R&D abroad in recent weeks.
"It was frustrated rhetoric!" Dyson says by email of the threats. "We're simply not producing enough engineers. We're doubling the number of engineers we have in our Wiltshire labs. We're nearly there. Thirty percent of our work force is made up of engineers. However, its difficult recruiting the kind of talent we need, particularly for our motors department. We end up taking on a lot of overseas students because they're the ones taking the courses."
According to published reports the company hired 200 new engineers last year and plans to double the number of engineers at its base in Malmesbury to 700.
At the request of Prime Minister David Cameron's government, Dyson issued a call to arms entitled "Ingenious Britain: Making the U.K. the leading high tech exporter in Europe" in spring 2010. Among its recommendations was for the government to pay more heed to the resources of U.K. Trade and Investment and the nation's global network of embassies and consulates. It also offered tax, procurement and other policy guidance, as well as calling for a rediscovery of the nation's strong academic institutions.
Asked what positive developments he's seen since, Dyson says, "There has been progress. I recommended a 200-percent R&D tax credit to provide incentives for businesses to take risks and develop exportable, patentable technology. The Chancellor increased the R&D tax credit to 225 percent in the 2012 budget. This allows Britain to stay competitive and allow our high-tech startups and entrepreneurs more freedom."
Sometimes the allure of cultivating start-ups and entrepreneurs can detract from supporting equally innovative research occurring at large primary industry employers. Dyson says it's also a question of too narrow a focus on service and software sectors.
"Manufacturing loses out, unless of course something goes wrong and it gets the headlines," he says. "Industry is seen in a very old-fashioned light when really it's very high-tech and exciting. Most of the world's biggest companies are manufacturers. A service economy wouldn't last long without them."
Dyson's statement echoes a letter to the Financial Times from Oxford's David Upton and his former Harvard colleague Prof. Gary Pisano last fall, reminding readers that "The effectiveness of activities such as engineering consulting or biotech development are highly dependent on having people actually manufacturing the associated products locally." Innovation often occurs on the manufacturing floor, they asserted, and losing the intrinsic connections wrought by sheer proximity may mean losing a whole lot more. "China's leverage of local manufacturing into design and development may hint at the future path," they wrote.
"Manufacturing is really a knowledge industry," says Upton in an interview. "We're up against competitors in the Far East who recognize it and are investing in building that knowledge. I go around a lot of factories in China, and most of the invention is the process of making something. That's technology at work — having a cool idea for a gadget isn't necessarily technology, but often technology is in the manufacturing of things.
"There was and still is in some places this outdated view that we can just outsource everything and we don't need to do it anymore," he continues. "But we realize now that we're teaching our competitors how to do it."
Indeed, the U.K. and U.S. face similar issues where visas for foreign students and workers are concerned, with many voicing dismay at cutting off these talent pipelines for companies.
"It's bizarre," says Dyson. "The U.S. and U.K. take on international students, train them up and then send them packing. Then they take what they've learned home with them and we lose out to our competitors. We've had challenges with visa quotas at Dyson in some of our more specialist engineering departments. It wouldn't be so much of a problem if more people were studying some these courses, but they're not. We have to change that."
Upton observes that one aspect of the issue is that corporate leaders see such offshoring as a reversible decision: "At the moment, economic circumstances are such that we'll send it to China or Thailand," he says. "But the reality is it's irreversible — once you send it away, you end up not being able to do it anymore."
Even champions of homespun ingenuity have had to take the road abroad, and not just because of the talent pipeline.
"In 2002 we had to make the difficult decision to move our manufacturing to Malaysia," says Dyson, "partly because we couldn't get permission to extend our factory, but also because our suppliers were based in the Far East. A lack of supply infrastructure makes assembling things like consumer electronics difficult in the U.K. It was controversial decision but the right one. We employ more people in the U.K. than before. We have more engineers developing new technology. The U.K. still has manufacturing expertise — but the days of making everything have gone. "
Among the higher learning models Dyson pointed to in his report to the government was the network of 27 Rolls Royce University Technology Centers worldwide, the majority of them in the U.K., as well as such consortia as the U.K. Manufacturing Technology Centre in Coventry. That city's inward investment team recently helped attract TATA technologies'U.K. headquarters from Luton to Coventry University Technology Park. Another bright star is the University of Strathclyde in Scotland, which early this year saw the opening of its Advanced Forming Research Centre (AFRC), a collaborative venture between the University, Scottish Enterprise, the Scottish Government and firms including Rolls-Royce, Boeing, Mettis Aeropace, TIMET, Aubert & Duval and Barnes Aerospace.
"We've have partnered with universities like Cambridge University and Bath on research studies," says Dyson. "Cambridge generates a phenomenal amount of new ideas and technology through its cluster. I'd like to see more adopt this model. Germany is very good at it — which gives it a very strong technology base. Companies have a role too. Our Foundation is helping to fund new incubator pods for designers and inventors to develop their ideas at the Royal College of Art in London."
"Universities have a key role to play in making sure we don't end up as hollowed out countries, with no manufacturing base and the remainder of industry being completely mobile," says Upton.
Dyson is adamant that support be just as strong for design pursuits as it is for science and math. That view is echoed by Martin Roche, a longtime business and government advisor.
"The U.K.'s challenge is to rebalance its economy that grew far too dependent on financial services," he says. "Personally I think the government is being wholly unimaginative about stimulating business and very short sighted in making English university fees the most expensive in Europe and removing 80 percent of funding for the humanities. This in a country that's in the world top two for music, theatre, cinema, visual arts, product design, advertising, marketing and TV. Our creative industries are not only very successful but also give us a staggeringly differentiating area of competitive advantage."
Roche points to more favorable approaches by Scottish and Welsh universities and governments, praising Scottish First Minister Alex Salmond's coherent development policy. As for industry, "the North and West of England and Scotland and Wales have benefited from having a heavy industry heritage and from making inward investors more welcome," while British and FDI projects can often be thwarted by "not in my backyard" sentiment from people in "many parts of the rich and overcrowded South East of England."
One path toward "in my backyard" thinking is through the next generations of students. In the short term, says David Upton, there's a strong need for more mid-level technician training and apprenticeship programs. He cites Germany as a model. He also says manufacturing companies "need to work a little bit on emphasizing the advantages of working in manufacturing. They need to work on a much clearer progression ladder for people. And we need to have manufacturing companies that see manufacturing as important. Look at the boards of directors in the U.K. and U.S. that are made up of finance and marketing people. If we don't have manufacturing people making it to the top of the ladder, it's hard to make it attractive."
Meantime, at the bottom of the ladder, Dyson in 2002 founded the James Dyson Foundation to encourage more young people to take up engineering, and just expanded it this year to the U.S. via a collaboration with Chicago schools out of the company's U.S. home base in that city. Asked if he thinks young people seem more inclined than their parents to make things, as opposed to making, say, financial formulas, he says, "I think all children are natural inventors. They can take risks and are great problem solvers more than adults. Through our after-school workshops I have seen the spark of creativity and design when the children develop their idea. As they further develop their idea they'll discover the science and math principles behind how things work.
"Children — and adults — shouldn't be afraid to make new mistakes," he says. "Building things and discovering how they work will lead to new ideas, the future of invention."