Journal Column

20/10/2016

John Savage is a business associate of mine, he is a blue-collar entrepreneur who is making a difference in the North East. He deservedly won an award at the North East Entrepreneur Awards a week ago. He established Flame Heating Spares which is the fastest growing Heating & Plumbing merchant in the North East opening 6 branches in just 5 years. His business is not in the vanguard of creative or tech industry but it is at the heart of an economy that requires tradespeople to have resilient and carefully priced supplies.

I mention John because his award presentation was the last event I attended in a week that started with the Conservative Conference and included a trip to British Steel on Teesside. It was a whirlwind week, and I think John’s award was the highlight that drew together the best thinking at the other events.

At British Steel at Lackenby in Teesside, my group of Institute of Directors members were given a tour of one of the most exciting production plants in the North. This is a plant that takes steel ingots, incidentally made in Scunthorpe rather than nearby Redcar, and shapes them into the steel girders that support legions of spectacular new buildings across the world.

This is a lean operation. Its success is due to the investment in state-of-the-art equipment and sharp attention to productivity. Around 40 people operate the plant in a shift system that employs several hundred. The different sized girders are made from melting down the ingots and shaping them through a series of processes along a massive production line just under a mile long! When a new batch of girders is made the massive rollers that shape each girder need to be changed. The very best Formula 1 style pit stop operation is employed, but on a scale that makes a pit stop look like a scalextric set. The workers take great pride in using massive cranes to perform this enormous task in under half an hour. Every minute counts. Every moment on the production line costs money, every day stock is kept in the yard is a wasted day. But this month productivity is up, output is up and market share is up!

This plant needs the people who specify new buildings to make an issue out of UK content. It’s got the right product at the right price, but who outside of Teesside, even thinks British Steel is still in existence? The 12 months of bad publicity as a result of the blast furnace closure, undermines the entire sector. Furthermore, public sector specifiers have got so used to the European Union contracting processes, that they will need to be reminded – particularly after Brexit – that it is OK to ask for a UK supply chain, provided it is a good deal for taxpayers.

This is precisely the sort of populist yet practical approach that a ‘good’ Brexit could herald. I voted Remain, but I’m no ‘remoaner’; I don’t want to re-run the referendum arguments ad-nausea. The current attempt by MPs to force the Government into putting its negotiating positions in front of the House of Commons before starting negotiations seems, to me, like playing a game of poker with your cards on display. The Great Repeal Bill, in which the law that took us into the EU will be revoked and all current EU regulations will be put under UK jurisdiction, is an ideal moment for Parliament to have its say. Once that law is passed it will be up to MPs which EU rules we keep and which we jettison.

Everybody knows Brexit is dangerous and difficult for the economy, the pound plunged, but shares have risen, the mixed messages cause instability and business investment has weakened.

The inflationary pressures are hard to bear, but it is not just Tesco that can keep them at bay. All retailers need to argue on behalf of consumers with suppliers, and suppliers need to force the pace of productivity growth. As one economist put it, ‘productivity isn’t everything, but it’s almost everything.’ Suppliers, especially those from abroad, can’t expect to gouge prices on the basis of an exchange rate. The Marmite saga proves that transparent, activity based accounting can help keep costs down and that ‘across the board’ increase was for another era. In this internet age, most people can work out where costs are and understand the need for fair profits for all.

John Savage gets this. His business is growing by sharing the proceeds of its success with his key staff. Managers at each branch have a share of the profits and as a result are committed to deliver great results. We are living in new times; we need more people like John Savage. The Government needs to shelter him and others from the Brexit storms and is showing every sign that it is trying to do so. It will be a hard task we must hope they succeed.

 

 



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