EAMA · 2011-04-05 · As a first, step two initiatives to be developed: First, to foster...

Metra Martech Ltd 27th September 2010

EAMA The Engineering and Machinery Alliance

Application of Automation in UK

Manufacturing

Volume I

For 27th Sept 2010


Blank page for back to back printing


7303/Sept 2010

CONTENTS Page

EXECUTIVE SUMMARY 1 I BACKGROUND TO THE PROJECT 3 II THE CASE FOR AUTOMATION 5 III UK INVESTMENT IN AUTOMATION 9 IV DIFFERENCES BETWEEN UK AND THE OTHERS 11 V BARRIERS TO AUTOMATION IN UK 15 VI RECOMMENDATIONS 19

Part Two: Report On Interviews With Automation Users

INTRODUCTION 25 1. LEVEL of AUTOMATION 27 2. DRIVING FACTORS 31 3. CAUSES FOR DIFFERENCES BETWEEN COUNTRIES 37 4. PERCIEVED DIFFERENCES BETWEEN COUNTRIES 39 5. REDUCTION, REDEPLOYMENT AND RETRAINING 43 6. STAKEHOLDERS 51 7. FUNDING 55 8. AVAILABLILITY OF ADVICE, ASSISTANCE & SUGGESTIONS 61

Part Three: Country Economic and incentive Comparisons 9. COUNTRY COMPARISON, FOOD AND ENGINEERING 69

10. EU INCENTIVES 81

11. FINANCIAL INCENTIVES FOR CAPITAL INVESTMENT 83

12. INNOVATION, RESEARCH & DEVELOPMENT GRANTS 87

13. OPERATIONAL INCENTIVE PACKAGES 93

14. EMPLOYMENT REGULATIONS & COUNTRIES 97

15. HIRING AND FIRING 103

16. SUMMARY BY COUNTRY 107


APPENDICES 117

Sample and Contact list 119 Case Studies 125

Volume II WORKING PAPERS, [not published] Sector notes Verbatim Comments Immigrants Skills Training Peter Gorle/Andrew Clive 21st June, 27th Sept 2010 METRA MARTECH Limited Telephone: (0)20 8742 7888 7 Chiswick High Road Facsimile: (0)20 8742 8558 London W4 2ND email:[email protected] http://www.metra-martech.com/

Summary


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Executive Summary

Manufacturing is a vital contributor to the UK economy and provides over half of the

country‟s exports. Based on sustainable businesses, growth of the UK‟s manufacturing

base is key to rebalancing the economy, generating exports and future prosperity.

In a relatively high cost economy such as the UK, the application of automation

(industrial robots or electro-mechanical devices under the control of microprocessors

performing handling or processing functions) is an essential ingredient in the

sustainability of manufacturing businesses, enabling them to compete more

successfully in globally. Automating manufacturing processes not only drives

manufacturing costs down, it improves quality, reduces waste and optimises energy

use.

Industry statistics, confirmed by this report, show that UK manufacturing has

fallen behind our European competitors in the application of automation. For

example, Germany has an installed base of 144,800 industrial robots and Spain

28,600, whereas the UK records only 15,100.

Between 2000 & 2008 UK employment in the Engineered Products sector fell by 20% and output fell by 10%. In the equivalent German sector, employment fell by only 5% whilst output rose by 20%.

By comparing UK manufacturing companies with similar businesses in Germany, Spain

and Sweden, this study, which focused particularly on Small and Medium sized

Enterprises [SME], has identified three main barriers compared to the other countries.

1. Awareness Not enough is known within the UK SMEs of what can be and has been automated

successfully elsewhere, or of the costs and sometimes overwhelming benefits.

2. Risk In many instances the SMEs do not have the confidence, due to lack of experience

and technical expertise, to risk changing existing manufacturing systems and have

little support to minimise these risks.

Financing projects in the UK is also more challenging. Payback expectations are

shorter – typically less than 2 years, even though the plant will run for a minimum of

five years and can provide a useful life in excess of ten years.

3. Skills

The Government‟s growth strategy (A strategy for sustainable growth, BIS July 2010)

has recognised that UK manufacturing generally lacks engineering skills to apply

automation skills, at apprentice, technician and engineer level. There are not enough

UK colleges and universities developing the skills that modern manufacturing

operations and automation require.

Summary


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Recommendations

In order to address these barriers this report makes the following recommendations:

1. Automation Council

To ensure a strategic approach we recommend the formation of an Automation

Council, whose purpose will be to provide long term, high profile leadership:

Stimulating manufacturing and R&D investment in automation.

Furthering successful cross sector fertilisation

Supporting government departments and bodies (including BIS, Defra, TSB,

EPSRC) by providing advice and assistance.

The Council will start to address the specific barriers identified in the study,

namely:

2. Awareness:

To initiate a promotional programme based on success stories from UK SMEs,

highlighting the benefits they have gained from their investment in automation.

3. Risk:

To be addressed with three initiatives:

A resource of impartial and expert advice to be provided.

Automation vendors to be encouraged to strengthen their supply chains and

provide enhanced support to their end customers.

Clearer signposting to, and information about all forms of support including

any relevant Government services (e.g. through the Manufacturing Advisory

Service or tax incentives).

4. Skills:

As a first, step two initiatives to be developed:

First, to foster collaboration between universities and SMEs, perhaps using

the Swedish Robotdalen initiative as a model.

Second, to utilise the excitement and interest generated by robotics as a

vehicle to encourage greater participation in STEM subjects at all levels in

education.

The formation of an active and influential Automation Council coupled with these

initiatives is recommended as the best way to tackle the decline in UK

manufacturing competitiveness and build manufacturing to become a stronger and

larger contributor to the UK economy.

Summary


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I Background to the project The Engineering and Machinery Alliance (EAMA) and its partners commissioned

this study to determine why „UK Manufacturing‟ normally invests far less in

automated manufacturing plant than its European counterparts, what that means

for UK manufacturing competitiveness and what might usefully be done to rectify

the situation.

This is a critical issue for „UK Manufacturing‟ as it is well recognised that

automation is essential in a relatively high cost economy, if business is to be

retained in the longer term. Germany, Korea and more especially Japan are

examples of countries which have benefited from investment in automation.

Besides the obvious increases in productivity, automation can also improve quality

and health & safety performance and reduce waste and environmental impact

more generally. Automation enhances competitiveness and thus enables

manufacturing businesses of all sizes to be more successful on the international

market. It is also enlightening that Chinese and Indian companies, despite their

lower cost of labour, are significantly increasing their investment in automation.

The study focuses on two sectors, engineered components and food

manufacturing, both important UK manufacturing sectors. The study benchmarked

these activities against three other countries, Germany, Spain and Sweden, to

provide a good representation of the situation across our main competitors in the

European Union.

The project is based on a study of industry statistics and incentives in the four

countries, backed up by 133 interviews [51 in UK] with companies across the

sectors and countries studied. The majority of the respondents are SMEs, most

with some knowledge of automation. The interviews provide a comparison of the

process which the companies went through to achieve their automation. There is

a list of participants in the appendix.

EAMA commissioned the study from Metra Martech Ltd, an independent market

research consultancy on behalf of the sponsors:

Department for Business Innovation and Skills,

East Midlands Development Agency (the lead RDA for Manufacturing),

North West Development Agency,

ABB Robotics,

KUKA Automation + Robotics and

the Centre for Food Robotics and Automation, with support from the British

Automation and Robot Association.

The client project manager was Martin Walder, administration was handled by the

Processing and Packaging Machinery Association

Summary


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Summary


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II The Case for Automation

In today‟s highly competitive world markets the industrialising economies are growing

fast to meet their own market demand. At the same time they are pulling manufacturing

away from the traditional manufacturing countries in Europe and America. The UK is

the world‟s 6th largest manufacturer but its industry has come under increasing pressure

not only from lower cost competitors, but also from competitors in the developed world

that have invested more in their manufacturing sectors‟ productive capacity, to sharpen

their competitiveness.

A vibrant manufacturing sector has the potential to grow a nation‟s GDP and increase

its gross value added to the benefit of all citizens, not just those working in the sector.

To succeed on world markets, manufacturers have to build product and process

competitiveness through their technological strengths. They achieve this by investing in

manufacturing systems, the benefits of which more than offset the four or five-to-one

labour cost advantage typically held by the lower cost economies.

Automated systems deliver these benefits and if they are used to a greater extent will

enable UK manufacturing to compete more successfully in world markets.

Benefits of Automation

Automation delivers a whole series of benefits. However it needs to be fully integrated

into the overall manufacturing and production business strategy for these to be realised.

Full automation is not appropriate in all instances and not all benefits apply to all

situations. Nonetheless, appropriate and well applied automation will bring multiple

gains.

Many UK industries, in particular the more traditional sectors such as engineering and

food, face the problem of an ageing work force and the difficulties of attracting new,

younger employees. The increased use of automation provides a solution by reducing

the number required with traditional skills and harnessing IT and computer operating

skills commonly found among the younger generation.

Improved Productivity

Reduces the unit manufacturing cost by producing more while using less.

Increases the yield produced for a given resource input by ensuring consistency

of process and quality.

Automation removes the need for humans in the more mundane and repetitive

tasks in manufacturing – freeing them to work on other tasks where their

decision making skills and flexibility will provide a better return against their

costs.

Summary


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The flexibility of automation in many [but not all] applications, allows for quick

changeovers leading to smaller batch sizes, reduced stock and work in progress.

Improved Customer Response and Service

The flexibility of automation allows output to increase and decrease as demand

fluctuates, for example, by running lights-out shifts or during weekends for limited

additional cost.

Automation can speed up switchover between products allowing consistent quality, shorter runs and quicker, more frequent deliveries which ultimately results in better customer service.

The repeatability and consistency of automation allows control of processes,

through tighter tolerances, keeping product quality levels high and costs

minimised.

Improved Employee Satisfaction & Performance

Automated systems can replace humans in hazardous areas and dangerous

operations.

Highly repetitive tasks, where a lapse in concentration affects costs and quality,

can be automated leaving the more skilled activities to humans and improving

their job satisfaction at the same time.

Some processes require skills which can be difficult to find and retain,

particularly as the workforce ages. Automation can be treated as an added

resource, particularly for the more repetitive tasks.

Automation can replace the lower cost, largely eastern European, labour pool as

the availability of this resource declines and the workers return home.

German industry experience shows how the use of automation has reduced job losses

by keeping industry competitive. Yes the skills needed may change, but it has been

proven, many times, that automation actually improves the satisfaction and

performance.

Supports Environmental Agenda

Automation can operate in harsh conditions and at greater extremes of

temperature than humans. The reduced need to condition operating

environments results in savings on energy costs.

Automation may need less manufacturing space. Reducing the amount of room

required provides more compact facilities or produces more output from existing

resources and removes the need to expand.

Automation reduces scrap and rework and improves yield, consequently

reducing energy bills.

Summary


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Robot use as an Indicator of manufacturing competitiveness

Robots are only one element of automation, but they provide a measurable indication of

levels of automation, and one that is reported internationally. Robot density, that is the

number of robots in use per 10,000 persons employed, provides a relative comparison

between the levels of automation in different countries.

Number of robots in use per 10,000 persons employed

The above chart (International Federation of Robotics “World Robotics” 2009) shows

the robot density for all industries, except automotive which is a special case.

The table below shows the total installed population of robots and together they

demonstrate the remarkable lack of robot installations in UK manufacturing when

compared with competing European countries, and at the extreme, Japan.

Industrial

Robot Population [2008]

Robots in non Automotive applications

Japan 356,000 217,160

Germany 144,800 67,000

Spain 28,600 11,440

Sweden 9,400 6,400

UK 15,100 6,000

[BARA, IFR].

The current study specifically widens the scope beyond “robots” to automated capital

equipment. The target area for the study, and the definition used in the interviews, is:

“Plant under the control of PLCs and using industrial robots or electro mechanical

devices in pre-production, production and subsequent activity.”

124

103

81

37 35

23

0

20

40

60

80

100

120

140

Germany Sweden Italy Spain France UK

Summary


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Level of Automation in UK

The most important message from the industry statistics already mentioned, is the very

low figures for robot use in UK. This subject is pursued further in the interviews; the

sample of companies used by the study consisted principally of automation users and

therefore almost every company had some automation within one activity of its

operations. It shows that even when robots are used, they are less broadly spread

across the spectrum of operations, from raw material handling through to despatch, in

the UK as compared to the other countries.

Although it is not included within the study, the automotive sector is worth a comment,

as it has such an important role, as the leading user of robots. Due to the

internationalisation of the automotive sector, UK automotive is now dominated by

overseas companies who often develop their manufacturing technologies, plant and

equipment in their base country rather than the UK.

One observation is that the majority of the larger suppliers of automated equipment in

the UK are subsidiaries of overseas parents rather than centres of innovation in their

own right. In addition, the UK owned automation suppliers are often relatively small.

The result is that there is less strength in the UK supply chain from which to promote

and sell automation across all the other sectors, including food and engineered

components.

Job Creation

Automation is sometimes seen as a threat to jobs, when in fact it is often quite the

reverse. In addition to the high technology jobs that are required to implement and

maintain automation systems, competitive, profitable businesses grow and expand their

workforce across all functions.

A number of companies within the study specifically stress that automation has enabled

them to increase production, allowing the re-deployment and re-skilling of the displaced

labour (see case studies in appendix). The higher level of automation and the smaller

reduction in the engineering work force in Germany over the past eight years reinforces

this point.

The most active companies appear to be automating to meet demand rather than to

survive, and there is considerable attention to retraining, redeploying staff rather than

redundancy. Most of the companies say that a good proportion of those who could be

displaced, are of a standard that they can be retrained. The workforce often recognizes

the need for businesses to remain competitive even at the expense of some jobs.

Summary


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III UK Investment In Automation Fewer UK companies using automation

The statistics show many fewer companies with automation. The interviews show that

even among automation users, UK has less broad use of automation technologies.

Engineering Components Activity in the sample companies

% in the sample companies with some automation

Automated UK SME in the two sectors, compared with similar companies in the other three countries

Raw materials handling? 30% Low

Manufacturing/machining/processing? 85% Same/Higher

Packaging? 14% Same/Lower

Stocking/palletising and despatch? 20% Low

Food Manufacturing

Activity in the sample companies

Raw materials handling? 40% Low

Processing and picking? 60% Same/Lower

Packaging? 60% Same/Higher

Stocking/palletising and despatch? 25% Low

The interviews provide a comparison of the process which the companies went through

to achieve their automation. It does not measure the relative level of automation in use.

UK companies recognise they are falling behind the international competition The UK companies interviewed tended to think they were advanced compared with

others in their country, but where they could comment, they rated the Germans as

being more advanced.

Limited stakeholder involvement outside the top management team UK SME companies tend to rely on top management for decisions on automation. In

Germany there is more pressure from the manufacturing engineers. There was

evidence of positive stance in the companies to which we spoke, but in some cases a

small reaction against automation from workers‟ representatives. In many cases they

were not involved. Almost certainly, there is a less positive lead on automation in the

companies that have not adopted it.

Summary


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Workforce re-skilling as a prelude to greater, more competitive output In the interviews, the successfully automated companies stress that automation has

allowed them to increase production, which has meant that re-deployment of displaced

labour has been possible. It is wrongly assumed that automation inevitably leads to a

reduction in the workforce.

The most active companies are automating to meet or anticipate demand rather than to

survive, there is considerable attention to retraining and redeploying displaced staff.

Most of the companies say that a good proportion of those who could be displaced by

introduction of automation, can be retrained. None said that there was a problem in

getting training, or that it was a barrier to investing in automation.

Use of low cost temporary workers The employment of low cost temporary workers allows flexibility to respond to peaks in

demand, for example seasonal harvests or Christmas sales.

UK employment legislation allows more flexibility than in the other three countries,

which reduces the apparent need to cut labour costs by introducing automation.

However, this neglects the other benefits to be gained, of quality and consistency.

The UK food industry reports use of temporary workers at peak/seasonal times. The

response is very varied, and there are cases of 50% of the unskilled workers being

agency or short term staff. On the engineering side, there were a few cases of small

numbers of short term workers, and skilled East Europeans on longer contracts.

Funding Internal sources are the most usual sources of funding, reinforcing the idea that it is

successful companies which invest in automation. Fourteen of the fifty one UK

companies said that their investment had been prevented or delayed by lack of funds.

Only one of the overseas companies interviewed reported this problem.

The responses from those who had experienced problems in funding suggest that the

recession had made borrowing more difficult, but more importantly, that they:

a) were not in a strong enough position to self fund, and

b) they had not worked out a convincing case, or had failed to prioritise what they

wanted to do. A conversation in one interview reinforces this point.

“The issue is not availability of funds, it‟s the justification of funds for investment in automation.”

“So if the investment can be justified then the money will be found?”

“ Yes, that‟s right.”

Summary


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IV Differences between UK and The Others 1. Industry structures [see table opposite] The German engineering sector is more than twice as large as its UK counterpart and

has a greater number of larger companies. In Spain, the average number of employees

per company, in both food and engineering, is much smaller than for the other three

countries. In contrast to engineering, the UK food industry is made up of some very

large companies and has significantly fewer small companies than the other three

countries.

Significant changes have taken place in the engineering sector, in the eight years up to

2008. As can be seen above the German productivity increase of more than twice that

achieved in UK, enabled German industry to grow output and to keep many more

people employed as a result.

Engineering Sector Changes 2000 to 2008

-30%

-20%

-10%

0%

10%

20%

30%

Employment Output Productivity

UK Germany Spain

In the food industry, over the same period, the numbers employed have declined in the

UK and Sweden [18% and 22% respectively] while output has increased by 15% in both

countries. Both employment and production have increased in the food industries of

Germany and Spain. In the UK and Sweden, companies tend to be larger than in

Germany and Spain. Although productivity increases in the UK and Sweden have been

as much as 30% in the larger companies, the SMEs in the UK have fallen behind.

Summary


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Industry Structures

Numbers employed 2008 UK Germany Spain Sweden

Engineering activities of interest* 1.3m 3.3m 860,000 247,000

Food, beverages and tobacco 405,000 872,000 446,000 52,000

Average employees per company 2008

Engineering 21 55 13 20

Food, beverages and tobacco 63 26 13 15

Employment trends 2000 to 2008

Engineering -16.6 -5.1 +26.6 =

Food, beverages and tobacco -17.5% +10.5% +28.2% -22.4%

Output trends 2000 to 2008

Engineering -10% +20% +20% +15%

Food beverages and tobacco +15% +24% +33% +15%

[Source: Eurostat, who have converted the monetary figures into Euros at the then prevailing rate ]

*Excludes automotive, the main categories included are:Fabricated metal products(D28), Machinery and equipment (D29), Office equip; Electrical machinery; Radio & TV; Medical, & optical (D30-33), Furniture; Manufacturing n.e.c. (D36)

2 Grants / corporation tax & tax breaks

UK investment support is less than in the other countries.

UK Germany Spain Sweden

The EU Incentives Framework Broadly similar offerings

Financial Incentives For Capital Investment

= + + =

Innovation Research and Development Grants

Many small grants

Wider range

Greater scope

Greater scope

R&D Grants and Tax Relief More for large projects

More flexible

Remarkable range

Advanced R&D funds

Operational Incentive Packages Difficult for SME ?

Appears to offer more

Wide range available

Well developed

Summary


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Labour costs & flexibility

UK manufacturing companies benefit from more flexible employment and redundancy

terms than the other three countries, particularly Spain.

We found little evidence of low cost short term labour in the engineering sector in UK,

although there is evidence of migration of skilled EC labour to Germany and UK. The

German situation is different, with several of the companies saying that they stopped

employing many of their contract workers when the recession bit.

Personnel costs in the UK engineering sector are midway between those in Germany

and Spain.

Because the UK food industry has a greater proportion of large companies, the average

cost per person is relatively higher than in Germany. There is a large seasonal [in-field

picking of crops and at Christmas] employment of lower cost, often immigrant, labour in

Spain and UK. Full time immigrant labour is also employed in the UK food industry, but

this is less evident in our sample of users of automation.

Factor UK Germany Spain Sweden

Employment contracts and conditions

Most flexible Less flexible

Least flexible

Less flexible

Hiring and redundancy Most flexible by far*

Less flexible

Least flexible

Less flexible

Confidence in their own relative level of automation

The German companies tend to believe they are at a similar level to others in their

sector in Germany, but more advanced than competitors in the other countries.

UK and Swedish companies tended to think they were advanced compared with others

in their country. Where they could comment, they rated the Germans more advanced.

The Spanish companies interviewed rated themselves highly in Spain and also as

compared with competitors in the other countries, including Germany.

Attitude to risk taking & change The great majority of people that we spoke to, in all four countries, said that they took a

similar view to business risks as those in UK or elsewhere.

Summary


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Key customers & security of contracts with them We found nothing unexpected here. The motor industry has special relationships with

suppliers in engineering. The study is only peripherally interested in this sector.

In the food sector, the big supermarkets, particularly in UK, demand specific

performance, and may assist with production specification. We did not find contracts

tied to automation, although they may exist. One supplier mentioned that they had

invested in automation, and the supermarket is now asking other suppliers to produce

to the same [high quality] standard, but not specifying the method.

Skills – in engineering & specification, and operational support

The interviews show that the training offered by suppliers is good. Sometimes it is at

the supplier‟s overseas headquarters.

When it comes to the initial specification of a new automation solution, there is more

dissatisfaction among UK customers. They, typically the less advanced, report that the

supplier does not know enough about their business. In contrast, the more advanced

customers and those in Germany are more prepared to specify exactly what they want

for the supplier to quote against.

In Germany, the less experienced buyers find that the suppliers have done what they

want before, and can advise them. The more advanced buyers have more skill in

preparing their specifications.

This indicates a problem in UK in the interface between the robot suppliers and

the manufacturer/customer.

It further suggests a lack of skills within customers, lack of resources within

integrators and probably lack of specific industry knowledge at the UK office of

the main suppliers.

International competition from low cost countries

Not currently a problem for the food industry.

This is a problem for the UK engineering manufacturers, but the interviews showed this

to be less of a problem for the manufacturers in the other countries.

Summary


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V Barriers To Automation In UK

Driving factors for investing in automation German and Swedish engineering companies stress cost saving, productivity, quality

and repeatability. UK responses from the engineering companies are less focused,

suggesting less awareness of the key benefits to be gained.

The food sector also has less focused answers.

An important factor in the decision to invest is also the establishment of new

manufacturing facilities and replacement of worn out equipment.

The case histories point to a variety of aspirational reasons for investing in automation:

expanding to meet demand, small company invests to double production, getting more

capacity out of existing machinery, the investment saved many jobs, investing to

compete internationally, introducing a cost effective in-house solution…

Why does Germany automate more than UK? Germany has the most automation because of:

High wages, leading to more need to reduce labour costs to remain competitive.

Relatively strict employment legislation which makes companies cautious about

the number and cost of their employees.

Larger engineering companies, and more of them, which means that there are

larger teams of skilled experienced engineers.

Availability of skilled designers, brought about by the large size of the

engineering sector.

Automation skills migrating from other sectors, particularly from the large

automotive industry.

Availability of funding.

Spain

Spain has high activity, despite lower wages and availability of immigrant labour,

because of:

Recent fast growth, which has resulted in newly built automated plants.

Receptive unions and active stakeholders.

Payback flexibility, allowing less restrictive time scales in which new equipment

has to pay back its cost.

Available Government assistance.

Limited product ranges, often set up by overseas companies.

Less flexible employment contracts.

Summary


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Sweden

The Swedish position includes medium to high personnel costs, receptive unions and

involved stakeholders, with good awareness of regional support. There is good support

and encouragement for the development of automation within SMEs (eg Robotdalen).

Within Sweden there is also a limited labour pool, with strict and expensive severance

legislation, as well as a strong health and safety ethic within the community supported

by reasonably stringent regulations.

UK

The UK has a weaker position because of:

Lack of awareness of the potential benefits

Less awareness of, or enthusiasm for automation.

More emphasis on bespoke products, which the companies say do not lend

themselves to automation. Note that “bespoke” production can often benefit

from the flexibility which robotic automation technology can provide.

There is evidence from the interviews that users or potential users of automation in UK

lack knowledge of automation potential and therefore cannot envisage the advantages

or brief the supplier correctly (on, for example, real tolerances). This is particularly true

in the food industry where there are fewer engineers on site. Nor do they know where

to go to get advice. Limited impartial advice is available, because it has not been a

focus for the existing business support organisations such as the Manufacturing

Advisory Service (MAS) and Business Link.

The interviews suggest that the SMEs interviewed recognise that they are [mostly] as

automated as their UK counterparts, but less automated than their German equivalents.

Increases in productivity are being achieved, but not fast enough to keep up with the

German increases. It seems that the situation is not being treated as a priority.

Risk and funding

Problems with obtaining funding [in some cases].

Lack of awareness of, or ease of access to, Government assistance.

Less involved stakeholders.

There is considerable variety in the responses, but comparison with the responses from

the other countries suggests that UK companies take a more severe view on payback

required from a project, typically within two years, than do the companies in Spain and

Germany where 3 to 5 years is more often mentioned.

Summary


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There appears a lack of skill in assessing the risk and presenting the case, both

operationally and financially, for new technologies.

UK and Swedish companies are slightly more likely to use banks. Only UK companies

(20%) reported that lack of funds had held up their investment in automation whereas

no overseas companies said that they had been held up for lack of funds.

Availability of low cost, flexible labour.

The significantly greater flexibility and continued availability of lower cost labour makes

this an easier choice than the investment in automation. However, this is not a long

term solution.

Skills shortages

Not as good a match as there should be between suppliers‟ skills and users‟

requirements.

Part of the lack of knowledge about the benefits of automation may be attributable to

the lack of on-site engineering skills. This is particularly evident for food manufacturing

companies, where there are usually fewer engineers and they often have to concentrate

on daily production rather than thinking about new equipment.

Automation is often supplied via Systems Integrators [SI]. The interviews suggest that

the UK SI are fewer in number, smaller and less industry skilled than their counterparts

in Germany, for example. We found several cases where the customer said that the

UK supplier did not have enough specific industry knowledge to provide a solution. By

contrast, we found another example where specialist welding skills gained in the

automotive industry were applied by the supplier in quite another industry with success.

Structural problems

More relaxed employment regime.

The availability of immigrant labour, particularly in the food industry.

The reduced size of the UK manufacturing activity has resulted in a well

documented decline in skills.

These structural weaknesses are outside the scope of this study and are therefore not

considered further.

Summary


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Summary


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VI Recommendations for the UK

Although the UK is a long way behind in the use of automation, when compared to the

other countries, manufacturing in the UK has many strengths including reasonable

productivity levels achieved by the widespread assimilation of lean concepts. If the use

of automation can be increased, UK manufacturing has the potential to be a significant

force in global markets.

To address the barriers identified by the study and to provide an environment in which

UK manufacturing will not only increase its usage of automation but start to close the

gap with our competitors there is a need for an overall strategy to be coordinated and

driven at a national level.

It is recommended that an influential multi interest group, to be called The Automation Council, be assembled to provide focus and to deliver a strategy consisting of:

A programme to raise awareness.

Initiatives to encourage uptake by reducing risk.

Strengthening of the skills base.

Automation Council

Rationale:

The study has demonstrated the need to increase UK activity in automation. This

cannot be addressed by a single initiative. There needs to be an on-going programme

to build UK expertise and activity over a number of years. This would be best

addressed by a strategic approach.

One of the major problems in terms of raising the awareness of automation is that it

impacts across all sectors from energy generation via engineering and food to health

care. There are therefore activities and interested parties working across many sectors

and at different stages of automation maturity, from research in the academic

community through to fully proven production systems in manufacturing.

Although the Automation Study has focused on manufacturing, the benefit to the UK

would be optimised by the implementation of a strategic approach. The objective would

be to maximise the benefit and output by ensuring all automation initiatives were

coordinated and to facilitate dissemination between sectors.

Summary


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Purpose:

To provide high profile leadership, which will promote automation throughout all aspects

of UK activity and will assist cross sector fertilisation and dissemination.

To stimulate investment and activities related to automation throughout UK

manufacturing and research and development.

To support various government departments and bodies (including BIS, Defra, TSB,

EPSRC) providing advice and assistance to ensure activities are coordinated and

provide best value for money.

Operation:

The Council needs to be made up of high profile representatives from each of the major

sectors, with interest in and knowledge of automation within their sector, as well as

banking and academia. It is hoped Government would also be represented.

The Automation Council would have a website, managed by others, to provide a focal

point and signposting for all UK automation activities. This would also provide the follow

up mechanism to support the anticipated awareness programmes undertaken by the

Council.

The Council would meet, say, four times per year with the objective of implementing

and coordinating tactical initiatives which would be carried out by working groups drawn

from the relevant sectors. One of the meetings should be a high profile event, attended

by a Minister, to review activities and progress.

Raising Awareness

The interviews in the UK show that many of the companies are not fully aware of the

potential for increased quality, reduced cost and the other benefits that automation

offers at all stages of production and subsequent despatch. Nor do they appear

generally worried by their increasing lack of productivity compared with their potential

overseas competitors.

There is a need for more specific focus by MAS or alternative influential bodies on the

benefits achieved by automation, its effect on the up-skilling of employees as well as

the potential to compete more widely.

The study has identified very successful manufacturing companies, in conventional industries, which are creating their success in world markets by investing in automation.

Increased competitiveness. processes and achieving:

Significant export growth.

Energy savings.

Waste reduction.

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A series of case histories has been prepared, and it is recommended that these

be the centre of a promotional programme, to show the approach, the need and

the benefit gained.

The banks are under pressure to increase their lending to small companies, but may

not be aware of the potential benefits of automated processes. Other audiences for this

awareness campaign include the academic planners, to alert them to the special

need, the engineering institutions to persuade them to give higher priority in their

Continuing Professional Development, the Knowledge Transfer Networks and

Government, to alert the policy makers to the particular benefits which automation can

bring to the competitiveness of UK industry.

The above case histories can be used across these other situations, for example,

to help persuade the banks and other funding sources of the potential benefits of

automation and the advantage to be gained by their clients.

Initiatives to Encourage Uptake

Within the implementation of automation systems there are two perceived risks which need to managed and mitigated to achieve a successful result:

Firstly, that the installation may not meet expectations. This could result from many causes; the initial objectives were unachievable, the system may be too expensive to operate, too difficult to manage or even too disruptive to existing production.

This is often the result of lack of knowledge and unrealistic expectations at the start of the automation process.

Second, the financial justification for the investment cannot be proven, or the funding body (internal or external) is not persuaded to see beyond the short term, refusing funding, thereby threatening the future performance of the business.

This is often a combination of lack of knowledge of the benefits and lack of skills in making the case for investment, coupled within the very short payback criteria often applied. It is recommended that a resource of impartial, expert assistance is provided to

assist companies in developing their automation solutions and the supporting

business case.

The existing support bodies such as CenFRA and MAS have limitations and have not

been tasked with providing national leadership and support for automation. It would be

beneficial for a national body to be appointed to fulfil this role with access to the

necessary expertise to provide the support required to the SMEs.

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Each new automation project is a risk. The manufacturer abandons an old method for a

new one. It appears that the manufacturer, often due to lack of knowledge, places as

much risk as possible onto the supplier. The actual supplier may be a System

Integrator, but these companies are often small. If the system does not work, the

Systems Integrator may not have the resources to recover the situation.

Re-appraisal by the robot suppliers is indicated, of their supplier partnerships in

the UK to strengthen the specific sector knowledge which automation equipment

systems integrators can bring to SMEs, and to help share the risk.

Within the recommendation above the external advisors would also be working

with the manufacturer to ensure the risk is both understood and minimised.

The more successful and the larger companies have the resources to seek out support

in funding, both of investment and training, related to automation systems. The

feedback from the interviews shows that this process of navigating routes to

government support are perceived to be complex and time consuming. Simplification of

the process is already under way, and this should be continued as a priority.

More clarity is needed concerning the availability of Government support and

how to access it for an SME.

Skills

Lack of skills needed to successfully apply automation systems are evident at three

levels: the engineers working at SME level, the shop floor workforce, and the suppliers.

In the short term existing vehicles should be used to address the provision of

support. This might include the development of capabilities in MAS, engagement of

one or a number of the Knowledge Transfer Networks (KTN), with the support of the

Technology Strategy Board (TSB), and other academic-commercial bridging initiatives

such as the “Robotdalen” programme in Sweden designed to further the use of robotics

into Swedish SME‟s.

We recommend the “Robotdalen” programme be examined to determine potential

benefits of a similar programme in UK, perhaps introduced through existing KTN.

In the longer term there is a need for enhanced, and relevant, engineering skills to be

output from the universities, colleges and schools. This is the subject of significant

national debate and therefore probably better covered by other studies. However, it is

worthwhile emphasising the appeal of robotics.

Robotics is, and is perceived as, an exciting, stimulating and interesting area of

technology that encompasses many forms of engineering as well as computing.

It could be used as a vehicle, at all levels to stimulate interest in STEM subjects.

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Part Two

Report On The Interviews With Automation Users

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INTRODUCTION Sustainable manufacturing, in a high cost economy, often depends on automated

equipment, able to produce products with maximum efficiency and with minimum manual

input. In 2004, well before the current crisis, German manufacturing costs were much

higher than those in UK, which could account for a greater need for automation.

However Spain had lower costs and yet had a greater apparent investment in automation

than UK. This may be explained by Spain‟s more stringent Employment Protection

Legislation. The background to the introduction of automation in Spain is summarised

by a Spanis integrator interviewed in the study.

“ Foreign capital came into Spain in the 1980’s to take advantage of cheap labour. After the

Eurozone was created and during the boom, cheap labour was no longer available and many

factories closed down again, or looked at automation as a solution. Some of the big multinationals

left are those that are subsidised like the automotive industry.“

We observe that low cost labour is not the only factor. Where and constant quality is

required, automation is a necessity even in the low cost countries.

A second observation is that the automotive sector is by far the most important user of

robots, [60% of total robotics investment in UK and Spain, and just under 60% in

Germany], and this study excludes automotive.

The proportion of different industry sectors in the three countries has an effect on the

investment in automation, for example in Japan the very strong electronics sector and in

Italy the very strong chemicals sector decrease the dominance of automotive.

However, the national associations‟ reporting on the number of robots in use suggests

that the UK is out of line with its competitors in total numbers of robots in use.

Non automotive as a proportion of total robotics stock [the figure in brackets], in use:

Spain 40% [ 28,600] UK 40% [ 15,000] Germany 46% [145,000] Japan 61% [356,000] Italy 66% [ 63,000]

The current study specifically widens the scope beyond “Robots” to automated capital

equipment. The target area for the study is plant under the control of PLCs and using

industrial robots or electro mechanical devices in pre-production, production and

subsequent activity. In the interviews it has, however, not always been possible to be as

precise as this. For example, there are systems for conveying, inspection, form/fill/ seal

etc, which are automated capital equipment in the user‟s eyes.

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OBJECTIVE

To establish automated capital equipment buying behaviour in the UK, in two nominated sectors : Food Production and Engineering Components

To identify differences and reasons for those differences, in usual practice when automated capital equipment is bought, in UK and Germany, Spain and Sweden.

Assuming that the UK companies are investing less in automated capital equipment, to establish what barriers UK companies face that are not present in the other two countries, which cause them to invest less in similar automation.

METHOD

The project has two parts,

1. A comparative analysis of the practices of similar businesses in different countries. 2. Identification and review of industry statistics, the business environment and

external support, both technical and financial, provided to these businesses. The interview programme.

Country Planned Actual

UK 40 51

Germany 20 to 25 30

Spain 20 21

Sweden 12 to 15 26

Total 90 to100 127

The interviews were either by visit [38] or by telephone [89]. Interviews were carried out in local language, based on Listings prepared by Metra Martech and by the sponsors. Metra Martech called an additional ten companies chosen by one of the project sponsors, on the basis that they might not have any automation. We achieved seven interviews from this list, but all have at least partial automation. The Swedish list was prepared by Robotdalen in Sweden, at the request of ABB Robotics.

The detailed breakdown of the sample is shown in the appendix.

Many other helpful meetings and discussions have been held with experts from the

industries, Government bodies, academia and national statistical sources in the

countries.

Steering group meetings: 31st March, 21st April, 19th May.

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QUESTION BY QUESTION ANSWERS

1. Level of Automation in the automated companies interviewed. In each of the interviews we have asked for the level of automation in the main activities of the company. The set of engineering activities is slightly different from the food industry activities. The table below, while it is not based on sufficient replies to be statistically sound, suggests that when there is automation, UK has a similar level of automation in the SME engineering sector in the manufacturing and packaging activities, but is well behind on raw materials handling, stocking, palletising and despatch. In the SME food sector, when there is automation in an application, the UK appears to have more automated packaging, similar or higher levels of automation in packaging and despatch, but much lower levels in raw materials and processing /picking activities.

1.1 How automated is your:.. [Q1]

Engineering products companies With some automation [number of companies]

% with automation in this application

UK comparative position, from the interviews*

Raw materials handling ? UK[29] 30% Low

Germany[20] 40%

Spain[11] 50%

Sweden[17] 20%

Manufacturing/machining/processingUK 85% Same/higher

Germany 75%

Spain 50%

Sweden 55%

Packaging ? UK 14% Same/Low

Germany 15%

Spain 30%

Sweden 30%

Stocking/palletising and despatch? UK 20% Low

Germany 40%

Spain 40%

Sweden 10%

*not a statistically valid sample, but an indication of the situation.

When automated in an application, to what level ?

Partially Considerably Totally automated

UK 60% 10% 30%

Germany 85% 5% 10%

Spain 70% - 30%

Sweden 65% 5% 30%

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The more bespoke products sometimes do not call for automation at all levels, for example, one engineering interview reported: “Main components manufactured internally are made from steel plate and copper. Handling of

these is partially automated, as is the manufacturing of generator components (e.g.coils, poles).

The most automated process is component testing Manufacture of blades is totally manual and

would be difficult to automate.. There is no warehouse for finished products, only for raw

materials and components before production (not currently automated).”

Food Products companies With some automation [number of companies]

% with

automation in this application

UK comparative position, from the interviews.*

Raw materials handling ? UK[21] 40% Low

Germany[10] 80%

Spain[13] 60%

Sweden[10] 30%

Processing and picking UK 60% Same

Germany 70%

Spain 75%

Sweden 70%

Packaging ? UK 60% Same/Higher

Germany 50%

Spain 45%

Sweden 60%

Stocking/palletising and despatch? UK 25% Low

Germany 40%

Spain 55%

Sweden 30%

*not a statistically valid sample, but an indication of the situation. Note that the German responses are mostly that their automation is partial, while in the other countries there are more who classify their automation as total.

When automated in an appication, to what level ?

Partially

Considerably

Totally automated

UK 75% 12% 12%

Germany 85% 5% 10%

Spain 65% - 35%

Sweden 50% 15% 35%

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1.2 Future activity [Q4] How much further do you plan to develop your automation in the next 3 to 5 years ? The number of companies which already have automation, with plans for further development, are quite similar between the countries, with UK Food respondents a little less likely to be planning to invest.

Some of these are “maybe” rather than definite plans 1.3 What was the cost of your most recent automation ? [Q2b]

Spending on new or update projects varies greatly and there is no difference between the countries. Very varied costs are reported. £50,000, to £100,000 to £3million.

UK Engineering UK Food

£54,000, £150,000, £200,000, £250,000, £1m, £1.3m £8,000, £25,000, £60,000, £100,000 [2]

Germany Engineering Germany Food

Minimal [2], € 2,000, € 9,000, € 30,000, €1.8m, € 5m € 35,000, € 500,000, €1.5m

Spain Engineering Spain Food

€ 240,000, We invest annually, €1 to 2m € 30/40,000, € 600,000

Sweden Engineering Sweden Food

€50,000, €100,000, €800,000, €1 m, €1.7m, €3.5m €100,000

Engineering companies with automation

Number [plans/sample]

% with plans to automate or up-date an activity in any of the four categories.

UK [16/23] 70%

Germany [10/16] 65%

Spain [7/11] 65%

Sweden [11/13] 85%

Food companies with automation

UK [10/18] 55%

Germany [5/8] 65%

Spain [7/12] 60%

Sweden [6/10] 60%

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2. Driving factors for investing in Automation [Q6]

2.1 The top factors This question is in response to a list of possible factors. The overall picture for the two sectors shows more emphasis on higher productivity for engineering and more on waste saving for food.

The Germany and Swedish engineers interviewed stress cost saving and productivity.

Efficiency, quality and repeatability were stressed by German and Spanish engineers.

UK responses were less focused.

The food sector also has less focused answers Two other important factors, not on the question list, are the establishment of new manufacturing facilities and replacement of worn out equipment. Commentary from a Spanish food producer shows how interdependent the factors are. Spain Food: “…The aim of our automation has been to improve quality, to ensure bags were properly sealed during manufacturing etc., and to standardise production parameters, so that production would not depend on subjective criteria linked to operators. The other motivation was to enable the company to grow when it was impossible to find enough personnel. A third reason was to improve the working conditions for personnel (remove the need for them to lift heavy weights. Automation has not led to reduced personnel numbers. People have been redeployed in other areas as the company has grown. We now have more people working for the company than when we began automating in 2000.

Top five factors driving the use of automation in the two sectors

Engineering

total [50]

UK [14]

Germany [12]

Spain [11]

Sweden [14]

Higher productivity 34 8 11 5 10

Cost saving 32 8 11 3 10

Greater process efficiency, quality, repeatability 26 7 10 7 2

Better health and safety performance, quieter safer production environment.

18 4 6 5 3

Lack of suitable manpower 16 4 3 4 3

Other 37

161

Food

total [43]

UK [13]

Germany [7]

Spain [13]

Sweden [10]

Higher productivity 22 8 5 7 2

Greater process efficiency, quality, repeatability 20 8 4 6 2

Cost saving 15 3 6 4 2

Less materials waste 12 3 5 3 1

Better H&S performance, quieter/safer environ‟t. 11 2 4 3 2

Other 26

104

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Quotes from the interviews on reasons given by UK companies for automating are shown here. More quotes, including some from the other three countries are provided in the Appendix. UK Engineering:

Reduce risk by switching to automation - less human error. In F1 Motor sport & Aviation -

high performance is vital. We cannot afford to make mistakes therefore need to reduce

risk. Key reason for automation - high performance & required for the parts we produce

therefore any opportunity to reduce the risk of failure is a good thing, hence we automate

where possible to reduce the risk of human error.

We were launching a completely new product therefore needed investment in appropriate

equipment & systems in order to be able to produce it.

Machine assembly & testing. Previously the costs of automation in this area were not

affordable. Prices have now come down so it costs less to invest in automation.

Bringing in a brand new process, therefore needed to invest in the appropriate equipment. Key reason - replacement of worn out machines.

UK Food:

Palletising robots; accountability & full traceability of products

Improved capability means we can increase size of business Pressure from supermarkets. Also packaging costs very high, so need to automate to cut costs.

2.2 Reasons why UK companies have not automated The most prominent reasons appear to be: Lack of persuasion that the process could benefit from automation. Belief that bespoke products cannot benefit from automation. Lack of skill in defining the problem and putting the case for automation.

Quotes: UK Engineering: Due to resource issues & [lack of] knowledge of what can be automated. We lack engineering expertise in the business to deliver the solution correctly.

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Equipment available was not flexible enough for our requirements. We could not buy off the shelf. Would have needed a bespoke system. It was too complex. It was just not feasible and therefore not a viable course of action. Suppliers were not sufficiently knowledgeable. Could only advise on solutions they could provide. They were not able to give a clear picture of solutions available outside of their own offering.

Although suppliers had suitable equipment that would work, they were not willing to guarantee it when integrated with our kit, especially as we were not prepared to pay them unless the solution worked. There was a lack of flexibility. They would only guarantee performance when integrated with equipment from specific brands with whom they worked. The process does not lend itself to automation as we produce bespoke products. Have no standard products so automation is not a viable option. We design components & get them manufactured elsewhere - mostly in UK though. Most of items we produce are bespoke. Due to the complexity we can't produce in an automated fashion. Its the same situation for our competition. We can't really automate our processes except for manufacture of components, but this is done in China. UK Food:

Engineering manager against it - he's old school. Modernisation a step too far. We're a

small company that has so far always done things the traditional way.

Cost vs benefits did not add up. Was going to cost us over £1million. Also needed more space than currently have to accommodate the equipment.

Costs were prohibitive.

No opposition. Just that automation proved non viable.

2.3 Potential for using more Automation The comments from the interviews show that there is plenty of scope for further automation in UK. It also shows the barriers that have to be overcome in some cases. Quotes from companies who have identified processes in their operation which could use automation, but does not currently do so: UK Engineering

fabrication; assembly; coatings i.e painting.

cleaning system & getting rid of effluent; spraying process (powdercoating aluminium).

manual assembly

material handling; welding

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manual handling

Press components

Polyeurathane tool manufacturing. Using out-of-date equipment - needs updating and

made automated.

Repetitive jobs - drilling & maching

None [6]

UK Food, processes within the companies’ operations which could be

automated.

Washing salad ingredients; hand making baguettes & rolls (due to the shape & low volume it has to be done by hand & cost for staff are less than for a machine); seal, package & label long rolls & baguettes (would be more efficient if done by flowrapper) Packing & weighing, mundance repetitive tasks - not cost effective to automate due to costs involved. Box filling due to variable sizes etc - not uniform therefore an issue for automation. Lack of space means we can't fit in anymore equiment for automation. Sticking on labels; palletising Hand pack, palletise & apply labels Raw material handling, moving palettes, slicing operations Sauce depositing into container & weighing; moving palettes; packaging, labelling, date codes etc Decanting pulp i.e repetitive tasks. Not enough volume to warrant automation i.e 2.5 tons pulp. Also done manually to maintain flexibility in staffing - peak period can use agency staff to relieve permanent staff & prevent boredom from repetitive tasks. Pastry line; bread & roll forming; connection between blending & forming. We can only do one step at a time. Not a flow production. If had flow production this would speed up production. Crop harvesting Bagging product; grading spinach leaves; however re quality control - would not gain anything from automation as too minute level of product scrutiny required.

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Factors affecting the introduction of automation

UK German

Spanish

Swedish

Lower wages medium higher lower medium

Immigrant labour yes yes

Govt. funds and incentives Weakness? high high

Availability of funding Weakness

Payback flexibility yes

Tax relief

£ weakness makes equipment expensive

yes

More bespoke products* UK more bespoke ?

More standardised?

Smaller companies less able to invest ?

Larger UK food companies

Larger German engineering

Many small companies

Attitude to automation UK less aware

Availability of training yes yes yes yes

Availaibility of skilled labour many

Availability of skilled designers**

whether in-house or at supplier level.

Questions raised about lack of practical qualified engineers

yes From o/seas parent, but… Questions raised about lack of practical qualified engineers

Automation from other sectors yes

Growing economies no Growing

[was]

Growing

[was]

Receptive unions mixed yes yes

Involved stakeholders less partial yes yes

*High capital cost to maintain the required flexibility. ** “Several good competent suppliers, but they do not know about our specialist industry/application”.

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3. What has caused the differences between countries [Q3b] 3.1 Overall The respondents‟ comments, examination of the answers to the other questions and the business background in the four countries shows: Germany has the most automation in the study sectors because of… higher wages, larger engineering companies, availability of skilled designers, automation skills migrating from other sectors. Spain has high activity because of …recent fast growth, receptive unions and involved stakeholders, payback flexibility, available Government assistance, limited product ranges, often set up by overseas companies. All this despite lower wages, relatively strict employment legislation and availability of immigrant labour. The Swedish position includes medium high personnel costs, receptive unions and involved stakeholders, good awareness of regional support. UK has a weaker position because of the availability of immigrant labour [in many cases this has been a benefit , but not to the introduction of automation], particularly in the food industry, stagnant or declining manufacturing activity, problems with funding [a few cases], lack of awareness of Government assistance, more emphasis on bespoke products, less involved stakeholders, less enthusiasm for automation and a more relaxed employment regime [itself a benefit to inward investment, but not to the introduction of automation]. The overall position is described in the table opposite. 3.2 Stakeholder involvement UK companies tend to rely on management for decisions on automation. There was evidence of small reaction against the automation from workers‟ representatives, but in many cases they were not involved. The other three countries‟ answers suggest more, but not always, involvement from their other stakeholders. 3.3 Attitude to risk taking Very few of the answers said that the respondent was less positive in terms of risk taking.

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3.4. Effect of the recession [Q4, Q5] The recession cannot be held responsible for the low UK use of automation, which is a position built up over at least a decade. Generally it has not caused companies to abandon their development plans, although some of the companies [see comments below] reported that it had caused delay, and made some companies more cautious. In the case of the Spanish integrator, it has caused a severe drop in business. UK companies are only slightly more likely to say that their plans will be delayed or reduced in size. German and Spanish answers suggest a more positive approach. In terms of lessons learnt from the recession [Q5], Generally, it has created a more cautious approach. One of the German companies interviewed said that they had automated to achieve a more flexible 24 hour availability. Quotes: UK Want to wait & see how market pans out. Caution re investment until concrete evidence of market recovery & market growth. Want to increase share of diminished market. We did not buy or replace machines last year as our sales were affected. Wanted to wait for a stabilised order book. Machines cost £50k+ so have to be cautious. We will buy more if we need more capacity but this is dependant on customers - we don't want to let customers down. We're ready & able to cope with adverse conditions. We need more confidence that the market will improve before investing further Need to aim for the future More quotes are shown in the appendix.

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4. Perceived Differences between Countries [Q3a] 4.1 How does your level of automation in these five applications compare with similar companies in your industry in UK, Germany, Spain, Sweden, is your automation CODE: 1 much more advanced, 2 more advanced, 3 about the same, 4 less than or 5 much less than, 6 [Don‟t know]

UK view about UK and the other countries

UK companies

German Spanish Swedish

Raw materials handling 3.2 6 6 6

Manufacturing/machining/processing 2.8 4 3.7 4.5

Packaging 3.2 6 6 6

Stocking/palletising and despatch 3.2 6 6 6

Overall average 3.1 4 3.7 4.5

The UK companies felt that they might be slightly ahead of their UK peers, but well behind Sweden and Germany, and behind Spain.

German view about UK and the other countries

UK companies


Raw materials handling 2.3 3 2.5 2.8

Manufacturing/machining/processing 2.3 3 2.3 2.3

Packaging 2.3 3.5 2.3 2.3

Stocking/palletising and despatch 2.3 3 2.3 2.3

Overall average 2.3 3.1 2.4 2.4

They show that the people we interviewed were confident that they were marginally more advanced than their competitors in Germany, and more confident against the other countries. UK is marginally perceived as least developed.

Swedish view about UK and the other countries

UK companies


Raw materials handling 3.2 3.2 3.1

Manufacturing/machining/processing 3.2 3.3 3.2

Packaging 3.2 3.3 3.2

Stocking/palletising and despatch 3.2 3.3 3.2

Overall average 3.2 3.3 3.1

On average, the Swedes feel marginally behind the automation levels in the other three countries. This is unexpected as the Swedes are major users of robots. It may reflect the sample focus on smaller companies. The Spanish replies were not sufficiently detailed to report here. 4.2 If there is a difference, what has caused this in all the four countries ? [Q3b]

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Quotes UK Engineering “UK market bespoke - lots of product variables. In Scandinavia it‟s more standardised - schools have to have what's available.” “Generally a better attitude towards automation [outside UK]”. UK Food

“ lower wages [less need] “ 5 replies Less available Government funds 2 replies “Weakness fo £ - therefore more difficult to afford investment; lack of funding for research; reduced sharp-end knowledge has affected industry - lack of technical knowledge has prevented UK from moving forward. “Due to low cost labour & also fragmentation & size of suppliers. In Spain high proportion of small growers so less willing to invest. Germany - large companies so can afford to invest.” More comments are shown in the appendix. 4.3 How much is known about the levels of automation in companies which you know in the same industry and levels of productivity ? [Q3c] Very mixed response here. Many of the companies have little idea of the overseas competion. Many of the comments are based on hearsay or stereotype, “The Germans must be the most advanced…” 4.4 How is international competition affecting your business, [Q3e] from, the EU, US/Japan, low cost countries and particularly Eastern Europe, China and India? The answers show some problems faced by the engineering companies in the other countries. The UK companies appear to have found this a greater problem, perhaps because they have not responded to the challenge as well as the Germans.. Not a problem for the food industry. UK Engineering Intense competition in 08-09 & market collapsed due to economic recession. Find components are being manufactured in China, India & Turkey, while competition from finished products from USA & S. Africa. We have got a joint venture with a Chinese company where we supply them with the trucks in kit form and they assemble in China. Cheap stock items being imported from China, India, America, Japan & Eastern Europe eg insoles - which can then be adapted. Very cut throat industry. No customer loyalty on international contracts. Recently lost out

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on a contract to a South American company. Germany, China, Sweden, Australia stealing market share in international markets due to cheap labour? Far East are stealing UK market share. Lower prices & cheaper to manufacture in China. Have lost international market share to Far East eg China. Cheaper labour there therefore cheaper products from China. Not affected. China manufacturing parts & importing into UK in bulk. We manuafacture polyurathane tools - market has been flooded with cheap products from China, so market now destroyed. We are a market leader in UK for workbenches & we occasionally export to France & Germany - but it is very much a closed shop over there. Key competition from Germany who are market leaders. But we're not affected at moment due to £ exchange rates being in our favour at moment. Don‟t know - we are part of an international group UK Food Not affected [7 replies] Not affected. UK supermarkets want UK products. Out of season i.e winter - they can only get a limited supply from elsewhere. Increasing competition in “free-from” products , from Australia & Germany. Dutch export to UK market but we're not affected. NB! There's a global shortage of onions so prices have gone up,. we have a bigger international market. UK used to be 70% self-sufficient in food production, but over last 20 years has reduced to 50% - through lack of investment. Internationals are stealing UK market through cheap production methods. More comments are shown in the appendix.

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5. Reduction, Redeployment, Retraining 5.1 Effect on the workforce What impact would more automation have on your existing workforce ? [Q7d] Most comments are about the possible reduction in workforce. However, the most active of our respondents appear to be automating to meet demand rather than to survive, and there is considerable attention to retraining, redeploying staff rather than reducing headcount. The Engineering companies are more positive about this than the food companies. The experience of those who have invested in automation is generally that efficiencies and quality improvements create new jobs. Quotes UK Engineering Less staff would be required. Less jobs. Reduce staffing levels, reduce costs, but would increase business…

No of mentions

3

Not much impact. No impact on workforce. Allows us to be more competitive. No impact other than make jobs easier & more pleasant; more efficient

6

We have a factory in Beijing that supplies us with part built lanterns, so we can just assemble them in the UK. Offshoring has reduced workforce rather than automation. However as business increases in UK we'd need more forklift truck drivers to move the product around.

1

Move them to other jobs in factory therefore would require training. 1

UK Food Redundancies, 4 Reduce number of staff - it‟s a very labour intensive business. Less people, less labour in order to pay for kit. Possibly reduce numbers, but become more competitive & safer. Stay the same level of staffing. Would not seek to lay people off.

Reduce number of agency workers, but productivity & sales would increase & would then slowly increase permanent staff levels as company grows.

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Depends on area of automation. A bagging machine would reduce seasonal labour by 30% . Increased skill level; improved job satisfaction; less risk of RSI; enhanced working conditions, a safer product for the consumer. More comments are shown in the appendix. 5.2 How would you expect the company to act …what should they do to help the workforce to take advantage of the benefits and minimise the problems ? [Q7e] The responses across all of the countries were that their company would provide support and training. Quotes UK Engineering Full support with training. 5 - 6 days training for each new machine; full support & cross training. Provide training. Full training provided. Training programme. Provide training exercise. Show them job enrichment & provide training. Provide training - expect suppliers to include training as part of contract. UK Food Fully supportive…3 replies.. Full support as training given. Would support workforce.

Provide training programmes. Also created new post to cover technical duties.

Full support & training given. Key staff sent abroad to supplier for in-depth training.

Provide training; link projects with Governement & participate in advisory committees.

Provide inhouse training.

More comments are shown in the appendix.

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5.3 Retraining What proportion of your current workforce has skills or could be trained to take on the skills required for automation ? [Q8b] Replies from the engineering companies are quite varied on this question. Half said that more than half of those affected could be retrained, but a significant minority said that less than 20% could be. The Food industry replies were more positive. Most said that more than half could be retrained. How available are training or re-training facilities, needed to help you to use the automated equipment. [Q9e] Most said that there was no problem in getting training, or that lack of training facilities is a barrier to investing in automation. 5.4 Use of low cost temporary [agency] workers [Q9d] UK food industry reports use of temporary workers at peak/seasonal times. The response is very varied, and there are cases of 50% of the unskilled workers being agency or short term staff. One of the Spanish food companies reported very large employment of short term workers. On the engineering side there were a few cases of small numbers of short term workers. None of these were in Germany or Sweden, but two of the German interviews showed that when the recession came, workers on contract did not have their contracts renewed. 5.5 Outsourcing [Q8c,d,e]

If installing or planning to install automation, do you plan to outsource the design, installation and maintenance ? The question was not asked in all the interviews, but from the data we have, it suggests, as could be expected, that few of the groups feel confident to do their own design, slightly more get involved in installation, and more still in maintenance. This question is more important than it appeared. Particularly in UK, the inability of some of the people we spoke to, to define what the design needed to cover, [ie, the initial brief to the supplier] is probably one of the key factors in the lower use of automation. In UK, the answers show well over half of the design being subcontracted, a quarter being a joint effort with the supplier, and almost none in-house. Some of the shared design is where a company buys robots off the shelf, but needs help applying them. For installation, almost half is done in house. More than half of the maintenance is done in house. Outsourcing or shared maintenance is for situations where the specialist supplier knowledge is needed, or there is a specific servicing requirement.

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UK Design Installation Maintenance

Engineering Outsource 13 12 5

Share, partner with supplier 8 2 5

In house 2 9 13

23 23 23

Food Outsource 11 9 5


In house 3 6 10

17 17 17

Overall UK Outsource 24 21 10


In house 5 15 23

40 40 40

Overall UK % Outsource 60% 53% 25%

Share, partner with supplier 28% 10% 18%

In house 12% 37% 57%

100 100 100

Comparing UK with the german answers shows:

Outsource, or shared UK Food [17 companies] UK engineering [ 23 companies]

Design 14 [80%] 21 [90%]

Installation 11 [65%] 14 [60%]

Maintenance 7 [40%] 10 [40%]

Outsource, or shared German [13companies]

Design 8 [60%]

Installation 8 [60%]

Maintenance 5 [40%]

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Quotes UK Engineering Outsource design & manufacture. Keep day-to-day maintenance inhouse, but outsource

specialist maintenance

Outsource all three & keep only routine maintenance inhouse.

Outsource design & install. Keep routine maintenance inhouse with support from

manufacturer

Probably outsource design & installation. Keep maintenance inhouse unless its too

specialised.

Robot based automation - buy off the shelf & adapt inhouse but will depend on projects &

capabilities inhouse. Maintenance would be done inhouse.

We purchase about 80% from outside, but we work in partnership with supplier to tailor

solution to our needs. Maintenance is done inhouse unless equipment still under

manufacturers guarantee. In such a case manufacturer takes care of maintenance.

We design, & installation is done inhouse. Maintenance & service - outsourced for first

year & then take inhouse.

We make off the shelf purchases. Maintenance done inhouse & regular service from

manufacturer under guarantee.

UK Food

Installation & maintentance as do not have any staff familiar with the machinery.

Only outsource where lack in-house expertise. But would then work in tandem with the

supplier as buy off the peg & then have it adapted. Have 4 inhouse engineers: electrical,

mechanical, build & fabrication.

Outsource maintenance & calibration as we have no inhouse resource.

Outsource design, installation & maintenance & training.

Would look for a partnership between supplier & inhouse engineering.

More comments are provided in the appendix.

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5.6 How competent are the suppliers and system designers of automated equipment that you have considered or used ? [Q8f] The great majority say that the suppliers are competent, although often not in the user‟s particular industry. The German replies suggest more depth in the user companies and in the suppliers‟ knowledge. Many good experiences. These tend to be from the more experienced users.

1) They‟ve all been pretty good. Certainly from the proposals we‟ve had in for

various machinery and stuff we‟ve bought, it‟s all been very thorough. We select them

ourselves.

2) We are also working alongside another partner, Warwick University, who will

possibly slot in alongside xx. They have a facility and installation using xx robotics that

we can utilise and experiment with. They also might bring other training partners that

could be useful to have on hand. By dint of the fact that we insist on an uptime warranty,

they are very competent because we are only looking at the very best in the world. We

require a minimum of 96% uptime in each month. If that drops below that then the

month‟s lease doesn‟t get paid. Or it does, but it gets paid by the company themselves.

3) They‟re very competent; very good: I‟m very impressed with them. What do you

like about them? They know their products. They‟ve had a lot of experience in a lot of

diverse industries. I don‟t think that zz had put any robots into a foundry environment

before although they do have a foundry quality robot that is protected from the

environment. They have a wealth of experience into how to jig things up and how to set it

up. It was very good.

Some shortcomings: these are not necessarily at the design stage, but in support after

the sale. To a less experienced user, lack of the supplier‟s knowledge of the buyer‟s

industry and worry about support after the sale are reasons for not buying.

4) If you‟re putting in something that has been widely used and that has been about

for some time, you know you‟re getting to get what the supplier says that you‟re going to

get. But, if you‟re investing in something that‟s quite blue sky, new, innovative

technology, you‟re going to have to work with the supplier to develop the kit to work in

your processes.

5) They‟re good with their equipment but they‟re not good on the application into our

industry. What problems ensue as result of that? They don‟t have any specialists so they

don‟t quite talk our language.

6) They are very varied. Obviously, the poor ones don‟t exist for long. The poor ones

don‟t provide the full package of training and engineering support. What‟s missing?

Usually maintenance capability.

7. In YY there are really only a couple of people that are up to working on those robots that we value. Again, getting hold of the right staff can be an issue.

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8) The main problem we experience is that a lot of the manuals are in foreign languages (native language of the manufacturer). A lot of the equipment on Base 7 is Italian so it‟s all been programmed in Italian …then you struggle to identify fault codes and how to fix them.

5.7 Has lack of locally available skills been a reason for not investing in automation ? [Q8f] Many of the companies have good solutions. However, there are two questions here, local skills to run the project, and local skills at the supplier level. At the company level, most of the people we spoke to have solved the problem, but many who have not gone for automation will face this. One solution is training the company‟s own apprentices; the apprentice question is currently widely debated. The other is buying in staff from outside. Both are costly.

UK is not alone with the apprentice debate, This is also said to be a problem in Spain, where one respondent said; “Modern engineering degrees turn out engineers for the modern workplace, where they will do administrative jobs, such as budget management, project management, statistics management but are not hands-on. There is no one capable of developing a project.” It is hard for the respondent [Spanish] to find good people.

UK Quotes about in-house skills: Not a problem, because we‟ve invested in training our apprentices. „Apprentices‟ is the answer to all your questions! I can‟t very easily hire an automation engineer and we‟re not a motor car company.

Yes if we were to go to a fully automated line that would be a big issue. That‟s one the reasons why we wouldn‟t do it currently: we don‟t have sufficient skills in-house. It‟s difficult to find local people to work for you who could maintain and support the equipment.

The other side of the question is the availability of supplier skills [see also section 5.6 above].

UK Quotes about supplier skills:

Yes, not invested - our solution requirements were too complex.

Yes, not invested - this adds a layer of difficulty in terms of how easy it will be to get the right solution & integrate it.

On occasion - availability of short term skilled staff a problem. Yes sometimes its been difficult to source the right skillset

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6. Stakeholders

6.1 Which of the following groups were the Leaders in proposing the automation when investment was most recently made in automated capital equipment? [Q7a] The more restricted participation in the decision is clear from the UK responses. Which groups were in Favour, which were Against it, which were Not Involved?

UK

Leader

For

Against

Not involved

Don‟t Know

Workers‟ representatives

- 5 3 16 2

Top Management 13 14 - 5

Middle Management

4 6 - 7 7

Banks or other funding bodies

- - - -

Shareholders - - - -

Local Government/region

- - - -

Customers - - - -

Other ?... - - - -

Germany

Leader

For

Against

Not involved

Don‟t Know


1 2 1 3 2

Top Management 4 10 - 3 2

Middle Management

4 13 - 2 2


- 2 1 -

Shareholders - 2 - -


- 2 - -

Customers - 1 - -

Other ?... - - - -

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Spain

Leader

For

Against

Not involved

Don‟t Know


1 7 1

Top Management 1 8

Middle Management

7 1


5 4

Shareholders 2 4 2


7 3

Customers 6 2 2

Other ?...

Sweden

Leader

For

Against

Not involved

Don‟t

Know


4 10 1

Top Management 9 10

Middle Management

7 10


3 7

Shareholders 5 6 1


2 6

Customers 7 2

Other ?...

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6.2 Do some of your customers demand that you have automated plant? [Q9.2]

Very few customers are involved. 6.3 How do you rate your organisation‟s attitudes to risk taking & change?[Q9.3]


We are ahead of competition internationally in adopting new production ideas

15

[40%]

9

[30%]

3

[10%]

9

[40%]

We are the same 10 11 18 10

We are behind 3 3 - -

Don‟t know 10 5 2 4

Very few of the companies in any of the countries felt that they were behind in their approach. The UK companies, [the leaders in their fields] were more likely to say they were ahead. Quotes: UK engineering: We have pioneered new product development in a traditional market. We re-engineer the products rather than just manufacture old traditional product like everyone else.

German engineering: I do not regard our organisation as either risk taking or conservative. I regard us as innovative, analytical and venturesome. Anybody who is conservative is doing something wrong and taking high risks is dangerous. Within our group we have secured business procedures using analytical tools such ROI to support decision-making.

Spanish engineering: It is quite a small world. We consider ourselves to be at same level as the best manufacturers in Europe. We try to be aware of what is happening elsewhere and think we are doing similar things.

Sweden engineering: We are the market leader in Sweden and feel that being that we are willing to take more chances compared to the competition.

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7. Funding

Internal sources are the most usual sources of funding, [reinforcing the idea that it is successful companies which invest in automation]. UK and Swedish companies are slightly more likely to use banks. 7.1 How was[were] the investment[s] funded, and how important to your decision to buy was the availability of specific funds? [Q10]

Source of funds

UK companies German Spanish Swedish

51 31 25 26

internal 34 22 12 19

parent company

6 6 - -

banks 10 3 7 12

government 3 - 3 1

shareholders 1 1 1 5

customer/ partnership

1 - - -

elsewhere 3* - - -

Don‟t know [DK] or not answered

14 5 10 5

*some mentioned leasing as the alternative source. Leasing is used by at least 5 of the UK respondents. Some are joint funding.

7.2 Has the lack of availability of funds, access to finance, bank support, other financing costs delayed or prevented your investment in automation?

Lack of funds delayed or prevented investment

UK companies


yes 14 0 1 0

no 26 18 18 24

DK, not answered 11 13 6 2

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14 of the 51 UK companies said that their investment had been prevented or delayed by

lack of funds. All but one of the overseas companies said that they had not been held up

for lack of funds.

The respondents were chosen because they had some knowledge of the subject. The

results, which show over 60% investing internal funds in their automation projects,

demonstrate that these are organisations which have been successful enough to allow

them to fund their own growth. The responses from those who had experienced

problems in funding suggests that the recession had made borrowing more difficult, but

also that they:

a) were not in a strong enough position to self fund, and

b) they had not worked out a convincing case, or had failed to prioritise what they

wanted to do.

The comments on the cause and result of lack of funds were as follows:

UK Quotes

The issue is not availability of funds it’s the justification of funds for investment in

automation. So if the investment can be justified then the money will be found? Yes,

that‟s right.

The fact that we didn‟t need to borrow money helped but it was a proper internal rate of

return decision. It just made sense. We had the funds available so there was no issue.

It‟s about being selective. Everybody wants to spend money. If you‟re in a vibrant

company like this then everybody wants to invest. …We‟ve been selective in terms of

what capital investment to approve. It hasn‟t been so difficult because some of the

projects have been so exciting both in terms of financial payback and all the benefits like

Health and Safety improvements and better consistency of packing and packaging.

Even internal funding has its delays:

We could have actually advanced a lot quicker on a lot of projects than we have done if

we didn‟t have to go through the internal capital expenditure process required by the

parent company board. You need approval before you can access the capital to carry on

with a project, regardless of how small it is.

How long does that whole process take?

The process can take years: I‟m not joking! …

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“There have been some delays because of the range of projects that we have in hand at

any one time. We‟ve got to have a bit of a priority list because we‟ve got such an

aggressive strategy going forward.”

“We would have bought the rotary axis much earlier on if we had the money available.

We also would have bought the second robot quicker if money was available from other

sources.”

“We would dearly love to invest more. We were just talking about this today. We‟ve got

one job which has been running for about two days now because it‟s just a slow process.

So we would love to invest more and to buy another robot. It would increase our

capacity by double! So, hopefully this year we will buy another one. I just know that I‟ve

pretty much got to get the money upfront. …if you speak to the bank you‟re wasting your

time. The banks don‟t take risks do they? …The thing is if you owe £50 million then it‟s

their problem but if you want to borrow £20,000 or £50,000 they will want you to sign all

sorts of things and provide all sorts of guarantees.”

Spanish quote;

“As long as the proposal can be fully justified & shown to be workable, we can make decisions very quickly & move fast.” 7.3 What was the basis for measuring the profitability / desirability /necessity of your most investment in automation equipment? [Q11a] UK Engineering We are currently not able to meet demand.

UK Food As I said before we look at KPIs, particularly savings in terms of labour days. The labour

days figures are worse now and that‟s why we‟re having to make redundancies.

Obviously, robots are coming in and doing their job so we will see a big improvement in

labour costs.

Return on investment and safety. 7.4 How soon is the investment expected to recover its capital cost ? [Q11.b] Feedback from the suppliers suggests that the potential buyers [those who buy as well as those who decide not to] consistently look for very short payback periods, one to two years at the most. The sample, who are almost all buyers of automation show a very varied pattern.

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The small private company [see the two engineering quotes below] tends to be very flexible. Six of the fifteen UK engineering companies and three of the six UK food companies responding to this question set two years or less, but two of these engineering companies accept longer payback if there is a strategic need. The German view is similar to that found in UK.

The Spanish view is rather more relaxed.

Quotes from UK Engineering

Not more than 12 months, 1 year - 4 years depending, 1 - 2 years, 2 yrs, 2 yrs, 2 yrs but no time limit if its strategic investment.

x

2 -3 yrs, depends on the outlay. 2-3 years

3-5, 3 years

5 years, 5 yrs , 4 -5 years, up to 5 yrs, 4-5yrs, 5-6 years, 5 to 7 years x

n/a x 19

UK Food

1 year, 2 years, 2 years,

3 years in normal trading conditions, 3 years

5 - 7 years, n/a x 5

Quotes from SpaIn, showing flexibility:

1.5 years.

It depends, some may take 2 years others up to 10 years.

It depends on the kind of machine, it could be between 1 to 5 years.

More or less 2 to 3 years. It depends on the investment and the automation. some it

takes just 1 year, some other it takes 2/3 years.

It depends, some may be more some less, between 5 to 10 years.

5 years, 5 years.

Two UK Examples where a more strategic approach has been adopted 1) This installation offers four times the production that we currently do, so a £150k

investment seems quite reasonable. Capital cost will be recouped fairly soon I would

expect. There is nothing to be lost and strategically it is absolutely paramount to go

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ahead. Without it we can‟t convince ourselves that as a broader engineering company we

are able to move into other sectors

It varies but if it goes beyond 5 years…funnily enough it‟s not an issue. I know that‟s the

wrong thing to say from an accounting point of view and my accountant would be very

upset with that: If we can afford it and the cash flow can stand it, the margin on

production is good, I‟ve got to automate it otherwise I can‟t make it. So, I don‟t look at it

as though I‟m Kraft or Cadbury: it‟s a bottom up decision-that‟s the best way of making it.

We take cost out. I suppose 2 years pay back is what we‟re looking for.

2) It depends on the operation and the projected return. For example, the xx line we

put in last year and because of the significant labour savings that we‟re making that will

be paid back in under a year. But, on the yy line, because we invested heavily in future

volume going through it, that will probably take 5-8 years to pay back.

We usually say two years but we‟re a bit flexible.

7.5 What are the criteria by which cost recovery is measured? [11C]

UK companies Germany Spain Sweden

Installation and capital cost 11 6 14 14

Cost of training 2 6 4 1

Benefits such as health and safety 3 1

Including cost savings, productivity 2 2 7 3

Depreciation 2

UK Engineering Return on investment. Cost of having to outsource the process. Depreciation also costed in. Increase in productivity. Increase in productivity & level of cost saving. .

UK Food

All financial costs & fulfillment of any legislative requirements.

Efficiency of the line which has a cost value; increased production &sales; cost reduction.

Customer satisfaction; our position as a supplier in the market place - more competitive.

Degree of customer pressure i.e from supermarkets.

German/Spanish comments focus more on the intangibles, including survival.

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8. Availability of advice and assistance, and suggestions 8.1 What assistance is available from your Region, National Government, EU in terms of grants, tax breaks, or other financial incentives to encourage you to invest in automation ? [Q10a,b] UK Many knew about Regional Development Agencies Very little was known about EU funding, and there were few mentions of actual bodies that were known to be offering funding. The three mentioned were: Scottish Investment Fund; Scottish Enterprise; another Scottish govt scheme but can't remember name. MAS manufacturing advisory service - helped fund implementation & software of an IT project Carbon Trust interest free loan 8.2 What other encouragement is available such as subsidised training or consultancy ? [Q10d] The apparent recall of sources of assistance is sporadic. Quotes UK Engineering

We have bought subsidised training in the past - but the content & quality was disappointing. The money would have been better spent & would have delivered greater return if it had been invested in capital.

Yes - top management are aware of schemes.

Yes, know that these exist.

Yes, Train to Gain. Train to Gain; BusinessLink. BusinessLink for advice.

Subsidised training through Train to Gain. We take on apprentices.

Scottish Engineering - grant for training & development.

Yes, from local development agency & govt regional enterprise agency - EG ELTEC also Chamber of Commerce.

Think local commerce organisations help with funds.

Yes, there is some but can't remember from where.

Don‟t‟ know x 6

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UK Food

Aware some local agencies provide subsidized training.

Can tap into Regional Food Group for consultancy.

Getting a grant from for NVQ traqining from Cumbrian Business & Envirnment Network.

Yorkshire Business provide incentives. Provide subsidised advice & training.

Govt training groups & local business groups.

I can‟t remember name of organization.

Don‟t know x 3.

8.3 What more do you suggest should be done to help companies to invest in

automation? [Q10dii]

The two main themes of the comments are that:

More should should be done to make organisations aware of the availability and benefits

to be gained from automation,

More incentives should be made available to help companies to take advantage of the

new technologies.

Quotes

UK Engineering

Increase knowledge of what is available

Increase knowledge of what kinds of automation available to equipment suppliers & purchasers. We lack knowledge of what is possible.

Knowledge of what's available and what can be automated; education& investment .

Education & training - education about what's out there, what can be done, how it works & how it can be used. Exhibitions, information resource, presentations to the company so all employees can learn & understand what's possible.

Would like access to publicly available independent automation consultants who can provide expert advice on automation solutions available in marketplace, advantages/disadvantages, benefits, how to install them & integrate them etc. Automation solution suppliers do not see the whole picture & are unable to provide this sort of information.

It would probably be better to have just one useful body that could really support investments to improve our efficiency and productivity rather than all these different departments. There needs to be more personal service.

They should come in and really look at your processes to identify where improvements can be made?

Yes, you should be able to speak to one person who will say „right I will come and see your business‟. Small businesses want one guy to come around and see your business

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and say „actually this is quite good but we can help with x or y‟. We just need somebody to make a decision that helps us in a practical way.

So you want to deal with somebody that has technical expertise to understand the impact of investments in automation?

Yes, they should come around and do an audit and say „I think that this is a viable business. If you invest in another robot we will help you out with this cost or that cost‟ without having to spend six months going through hoops and being told „do you want help in writing a business plan?‟ At the moment, what‟s offered is just impractical help which isn‟t useful. They ask us „do you want help with marketing?‟ Stuff like that just isn‟t helpful.

Government support Industry

Govt needs to show interest in manufacturing & come & speak to the industry, find out what we do & what we need. Ministers are invited to speak to Terex!

Create appropriate conditions for manufacturing to be viable & profitable. If could eradicate govt budget deficit, this would help. Need to make a career in manufacturing attractive & aspirational.

Financial incentives

Make it easier to invest in capital. There's too much focus on providing training & consultancy that never really delivers anything.

Banks to start lending & offer low interest rates. Govt should reduce taxes.

Provide funding.

Fund research & development work to investigate opportunities for automation.

Greater availability of grants, help with how to complete grant applications. Its very time consuming - prohibitive - by the time applied for grant & had it authorised the deadline for purchasing the automation has already gone. Its too late!.

Provide funding.

Fund research & development work to investigate opportunities for automation.

Easier access to finance, tax breaks for investment.

Financial incentive.

Tax incentives.

Combat cheap imports - make grants available for investment in automation.

This is up to the Government: Give us a vision for where manufacturing sits in our much vaunted balanced economy. Give us a clear, predictable tax policy and taxation system, including the implementation and policing of it through HMRC, which gives businessmen the confidence to reinvest profits aggressively in capital equipment.

What about the training/education side?

I regard that as going hand in glove…When I say investment in capital equipment, I‟m covering investment in training to go with it, the one is of no worth without the other.

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Skills and training

I‟d love to be able to hire well-educated, young people.

So the lack of training is a major issue?

Well, a couple of months ago there was big [former] Government prattle about increasing apprentices and when you look at it then it‟s totally useless! I mean, they‟re fine for shopkeepers. But, they‟re not suitable for a 3-4 year course that we need for apprentices and they only apply to under-17s and so on. It suits McDonald‟s but it has no relevance for us.

UK Food

Increase knowledge of what is available

Grass roots level - need to extol benefits & show how to work this way. Colleges need to teach automation.

Have a central database of who does what, so make it easier to find suitable suppliers & find out info on products.

Government investment in research & development - work needed to lead the industry & to help solve technical problems; Foster greater links between universities, research institutions & industry.

I think that subsidised government support is always a good thing for independents or for producer organisations.

Is there any particular support that would be most useful?

It‟s mainly access to people, information and possibly consultancy.

I think the barriers are inside the managers‟ heads. Are they nervous, conservative or

risk averse?

You mentioned earlier that different sectors have different approaches. This sector of

the food industry is doing some catch up. It‟s probably concerned about flexibility:

Things change and formats change. If you‟re filling a can of Heinz beans which is a very

strong brand which has been going for many years, and you produce half a million tins a

day and someone comes up with a completely new tin, it may not be acceptable in six

months time. But, you‟ve already put the investment in!

I think other factors also come into play like the health and safety improvements that can

be gained by taking out the manual handling involved in some of the basic jobs because

you won‟t be able to get people to do them in the years to come.

So there‟s a risk aversion caused by the perception that automated packaging

technology is inflexible. Because packaging requirements can change rapidly you need

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to retain flexibility and there seems to be doubts in the food industry about the versatility

of automated equipment.

Absolutely!

Financial incentives

Publicise available funding & make funding more widely available; 0% finance deals; increase awareness of machines available; more trade shows where all under one roof - can all be sorted in one go, purchase & deliver straight away;

Financial reurn is the key driver therefore need to ensure delivers a financial return.

Provide funding to buy online training facility for staff, togther with Regional Food Group.

Make grants & funding more available.

I think that other financing options are probably worth considering. We don‟t seem to „trial‟ much or install project for short term evaluation.

Actually some companies do that. I spoke to growers who will bring in equipment for six months if they‟re doing new product where market acceptance is an unknown. If the product is a success then they will buy the equipment and if not, they can return it without having made a costly capital outlay. So, there‟s flexibility which means that they don‟t have to make a massive investment upfront.

Yes, so I would look at new ways of financing investments in automation and looking longer term at life cycle costs rather than short term payback.

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Part three: Country Economic Comparisons

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9. Country Comparison Food and Engineering 9.1 Overview We are looking for differences which would cause different approaches to automated capital equipment investment. The results show big differences in structure: The UK food industry has many fewer small companies than the other three countries. The German engineering sector , by contrast, has more larger companies. The average number of employees per company in Spain in the two sectors is much smaller than for the other three countries. The financial data which we have used is the most comprehensive set, at 2006 it is a little dated, but it has been prepared on a comparable basis for each country. One of the pitfalls is the £:€ exchange rate. There have been large swings since 2006, and we have commented on key comparisons used below based on a compromise figure that would have the £:€ exchange rate 15% lower in current terms than it was then. R&D expenditure in manufacturing in Germany is more than twice the level found in UK. Spanish expenditure on R&D in manufacturing is about a third of UK expenditure, but has grown at five times the rate of the other three countries. Employment and productivity shows output growing in UK while employment has been falling. The apparent productivity of the UK food industry is better than the other three countries. Sweden is showing a similar decline in employment, while Spanish and German employment is still rising. In the manufacturing sector, despite the larger companies in Germany, the difference in output per employee is less pronounced. Earnings levels in the four countries show Germany 18% higher than UK, and Spain 15% lower. [Using the 15% exchange rate adjustment mentioned above, that would make the German disadvantage 25 to 30% and the Spanish advantage would disappear.] Sweden is only slightly lower. At the two sector level that we are examining, the different industry structures have a big effect on average cost per employee. In the food industry,UK personnel costs were 25% higher than those in Germany, but in the Engineering sector UK costs are 10% lower. [10 to 15% higher for food, and 20%+ lower than German costs for engineering using the compromise exchange rate.]

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9.2 Numbers employed (in Thousands) Total Men & Women

Industry Sector

Manufacture of: UK Germany Spain Sweden

Food; Beverages; Tobacco (D15-16)* 405 872 446 52

Selected Engineering subsectors

Fabricated Metal Products (D28), Except Machinery and Equipment

375 1,013 307 73

Machinery & Equipment (D29), including [D29.3] Agricultural and Forestry Machinery

367 1,128 224 92

Office equip; Electrical machinery; Radio &

TV; Medical, & optical (D30-33) 396 879 153 58

Furniture; Manufacturing n.e.c. (D36-37) 168 337 177 24

A. Total Employment in above sectors (million)

1.7 4.2 1.3 0.3

B. Total Manufacturing Employment (million)

3.5 8.0 2.7 0.6

A as % of B 48% 53% 49% 49%

This shows that employment in the manufacturing sectors that have been selected for this study, represents approximately 50% of total manufacturing employment in each country.

C. Total Paid Employment (million) 29.4 33.5 16.7 4.1

B as % of C 12% 24% 16% 15%

However total manufacturing employment as a percentage of total paid employment shows a great variation, ranging from 24% in Germany down to 12% in the UK Source: (BA) Labour force survey (Laborsta 2F and 2E). ISIC-Rev.3 - D 1 2 *Note that the food sector includes Tobacco here. Note also that Manufacture of Aerospace (Aircraft & Spacecraft, D35.3) is not included. Note that the figures produced by Eurostat, differ in detail from the above.

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9.3 Size and structure of companies The Eurostat figures point to the very much larger food manufacturing companies in UK, and the very much larger machinery and equipment companies in Germany. It also shows Spain in [2006] with the highest investment rate. Manufacture of food products and beverages (NACE Division 15) Main indicators, 2006

Indicators, food industry Germany Spain UK Comment

*Companies (thousands) 31.7 29.0 7.0

Employees (thousands) 822 390 441

Ave employees per company

26 13 63 UK firms much larger

Turnover (Euro billion) 156 90 107

Turnover per employee (Eu th.)

190 231 243 Germany smallest!

Production (Euro billion) 143 85 98

Production per employee (Eu th.)

174 218 222

[190]**

Germany smallest

Value added (Euro billion) 33.3 18.9 30.7

Value added as % of Production

23% 22% 31% UK most productive

Personnel costs (Euro billion) 21.5 10.2 16.2

[20]**

Pers. Costs as % of Value Added

65% 54% 53% Germany highest

Gross operating surplus (Eu bill)

11.8 8.7 14.5

Gross investment (Euro bill) 4.66 5.05 3.66

Investment rate % 14% 27% 12% Spain top (to catch up)

Ave. personnel costs (Eu th.) 27.6 27.5 37.2 UK most expensive

Source: Eurostat 2006 *Sweden = 3.3 thousand companies **If middle £:€ rate is applied, the UK productivity in € terms would be of the order of 190. The average personnel cost for UK would become €20,000 NB. The Eurostat figures do not include Sweden in this analysis.

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Note on the UK food industry apparent size inconsistency The number of enterprises reported is consistent with Eurostat, the only source that

provides EU information under what are strict classification guidelines. The UK has only

just recently aligned the Standard Industrial Classification system (SIC) to the EU NACE

system for 2008 figures. Before this, the numbers reported in the UK by the Office of

National Statistics followed a different methodology. In fact in the UK, food and non-

alcoholic beverages actually increased by £9 billion between 2007 and 2008 (the figure

below includes alcohol). The change in classification system meant that companies that

weren‟t previously listed as food and drink manufacturers were included (an example

could be Unilever that produces a wide range of products being classified as F&D) The

number of enterprises also increased in 2008 compared to 2007 but only by a few

hundred. [source: Food and Drink Federation]

Food and Beverages UK

Classification SIC 2003 SIC 2003 SIC 2007

Year 2006 2007 2008

Turnover (£m) 72,744 72,835 76,164

Enterprises 6,946 7,028 7,452

Employment (000's) 442 437 424

Spain and Germany are both larger by area with regional tastes, it is likely that many

food and drink companies supply only to suit local demand hence the lower average

employee rate. Heavy consolidation in the UK points to an industry full of multi-nationals

with large sites supplying the whole nation.

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The difference in structure between the German and UK food industries is shown below. Over 50% of UK food industry employees work in companies with 250 or more employees, whereas in Germany the proportion is 30%. The Spanish food industry is even more skewed to the smaller companies, and the Swedish industry is half way between UK and Germany, with large companies and small companies predominating. This is shown in the charts below. Food Industry structures Proportion of national output for each size group of companies

Food industry [NACE 15 and 16 Food, Beverages and Tobacco], proportion of total employees in the three company size groups

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Manufacture of machinery and equipment n.e.c.* (NACE Division 29) Main indicators, 2006

Indicators, machinery and equipment.*

DE ES UK SE Comment

Companies (thousands) 19.2 14.5 13.0 5.8

Employees (thousands) 1,056 194 278 117

Ave employees per company 55 13 21 20 German companies much larger

Turnover (Euro billion) 208 30.3 53.9 25.6

Turnover per employee (Eu th.) 197 156 194** 219

Production (Euro billion) 199 28.2 49.7 22.7

Production per employee (Eu th) 188 145 179 194

Value added (Euro billion) 70.5 9.32 19.0 7.03

Value added as % of Production 35% 33% 38% 31%

Personnel costs (Euro billion) 53.8 6.33 12.5 4.95

Pers. Costs as % of Value Added

76% 68% 66% 70%

Gross operating surplus (Eu bill) 16.8 2.99 6.43 1.88

Gross investment (Euro mill) 5.40 1.01 1.17 0.68

Investment rate % 8% 11% 6% 10% Spain and Sweden investing more

Ave. personnel costs (Eu th.) 51.4 34.1 46.1 49.1

Source: Eurostat 2006 * Note that this category does not include all engineering manufacture. ** 169 at the middle € exchange rate. The larger engineering companies account for 60% of the German and Swedish employees. In UK the figure is 40% and in Spain only 20%

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Mechanical Engineering sector structures Proportion of national output for each size group of companies

Engineering industry [NACE 29 mechanical engineering], proportion of total employees in the three company size groups

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9.4 Investment and R&D UK rather lower than Germany. Spain had the highest rate, followed by Sweden.

Investment rate %

Industry Sector

Manufacture of: UK Germany Spain Sweden

Food; Beverages; Tobacco (D15) 12% 14% 27% ?

Fabricated metal products (D28) 8% 10% 12% 12%

Machinery & Equipment (D29) 6% 8% 11% 10%

Office equip; Electrical machinery;

Radio & TV; Medical, & optical

(D30-33)

7% 11% 10% 5%

Furniture; Manufacturing n.e.c. (D36)

8% 8% 13% 10%

Source: Eurostat 2006

R & D Expenditure in Manufacturing 2000 to 2006 Taken from the STAN (Structural Analysis Database) on the OECD website. This table presents data on research and development (R&D) expenditure performed in the business enterprise sector by industry according to the International Standard Industrial Classification (ISIC) revision 3.1. The table shows that:

In year 2000, Germany had relatively the highest R&D spending per manufactured unit, followed by Sweden, UK and Spain (with less than Euro 1Billion spending on the sectors we have listed).

Over the following six years, Germany, Sweden and UK grew their R&D spending by much the same rate (14% to 17%) - but Spain‟s R&D spending rose by 83%.

R&D spending in Germany and Sweden on the sectors we have listed, also grew by much the same rate (19% and 17% respectively).

However, comparable R&D spending in the UK fell by 7%, largely accounted for by less spending on radio, television, and communication equipment (D32).

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SIC

Code

Germany (Eu. Bn) Spain (Euro Bn) Sweden (SK Bn) UK (£ BN)

2000 2006

+/-%

2000 2006

+/-%

2000 2006

+/-%

2000 2006

+/-%

All 32.4 37.0 +14 2.18 4.00 +83 58.7 67.6 +17 9.23 10.8 +17

15/16 0.25 0.29 +14 0.10 0.21 +116 0.45 0.53 +28 0.26 0.31 +19

28 0.56 0.49 +14 0.05 0.15 +200 0.20 0.91 +350 0.07 0.07 -7

29 3.40 4.26 -20 0.19 0.39 +100 5.35 7.33 +37 0.70 0.81 +15

30 0.63 0.55 +16 0.03 0.06 +138 0.47 0.81 +71 0.11 0.03 -73

31 1.02 1.25 -18 0.13 0.22 +72 0.95 1.66 +75 0.42 0.43 +2

32 3.64 3.49 +4 0.28 0.16 -44 18.2 17.6 -3 1.02 0.75 -26

33 1.67 2.98 -44 0.07 0.12 +74 3.44 4.40 +28 0.48 0.44 -7

30/33 6.96 8.27 +19 0.51 0.56 +10 23.1 24.5 +59 2.03 1.65 -19

36/37 0.18 0.17 -1 0.03 0.06 +91 0.10 0.82 +680 0.03 0.02 -11

All 11.4 13.5 +19% 0.88 1.37 +56% 29.2 34.1 +17% 3.09 2.86 -7%

9.5 Employment trends [2000 to 2008] Numbers employed in Thousands Total Men & Women [Laborsta 2E & F]

Industry Sector UK Germany Spain Sweden

Manufacture of:

Food; Beverages; Tobacco (D15-16) 491-405

-17.5%

789-872

+10.5%

348-446

+28.2%

67-52

-22.4%

Fabricated metal products (D28) 385-375

-2.6%

936-1013

+8.2%

257-307

+19.5%

78-73

-6.4%

Machinery & Equipment (D29) 440-367

-16.6%

1188-1128

-5.1%

177-224

+26.6%

92-92

=

Office equip; Electrical machinery;

Radio & TV; Medical, & opt. (D30-

33)

625-396

-36.6%

1260-979

-22.3%

183-154

-15.8%

101-58

-42.6%

Furniture; Recycling (D36-37) 249-166

-33.3%

361-337

-6.6%

183-177

-3.3%

28-24

-14.3%

Total Engineering Employment -22% -6% +14% -17%

Other Economic Activity:

Total All Employment +7.6% +3.0% +34.8% +10.3%

Source: (BA) Labour force survey ISIC-Rev.3

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9.6 Wages in manufacturing The trend in earnings has been a gentle slowdown in the most expensive of the four countries, Germany, and a hierachy of earnings from Germany at the highest to Spain just the cheapest. The figures for cost per employee [as opposed to what they get] are shown in the comparative tables above. Social security costs as % of total personnel costs

The proportion of total personnel costs that is accounted for by social security costs

tends to be relatively uniform across activities within a single Member State, as

employers‟ contributions are often set on a statutory basis for the whole economy. As

such, the main differences observed for this ratio tend to be across countries.

Social security costs accounted for a low share of total personnel costs in

Denmark (8.4 %), Ireland, Luxembourg, the United Kingdom (13%, by inspection) and

Slovenia (all between 11.9 % and 14.5 %), while their relative importance rose to

upwards of 30.0 % in France and Sweden (32% by inspection). These costs are often

cited (by employers) as impinging on the competitiveness of their enterprises. [The

comparable proportions, by inspection, are Germany (20%) and Spain (22%).]

Earnings per hour / Wage earners / Total Men & Women ISIC-Rev.3 - D

UK

(£)

Germany (Euro)

Spain

(Euro)

Sweden

(Krona)

2001 9.31 14.42 10.46 114.90

2006 11.37 15.74 12.40 133.80

Increase p.a.% (01-06) +4.4% +1.8% +3.7% +3.3%

2007 11.74 19.09* 13.35 139.50

2008 12.32 19.51 14.05 n/a

16.48 € 15.00€ est

Min Wage

Increase p.a.% (05-08) +4.9% +2.2% +5.2% n/a

*NB Method of calculation changed between 2006 and 2007 for Germany ** SEK/Euro Dec 2007 = 9.4, currently 9.6 Source: (DA) Labour-related establishment survey (Laborsta 5B)

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Comparative Business Environment :

Factor UK Germany Spain Sweden

The EU Incentives Framework

Broadly similar offerings

Financial Incentives For Capital Investment

= + + =

Innovation Research and Development Grants

Many small grants

Wider range of incentives

Much greater scope

Much greater scope

R&D Tax Relief More for large projects

More flexible

Remarkable range

Most advanced R&D funds

Operational Incentive Packages

Difficult for SME to access?

Appears to offer more

Wide range available

Well developed

Employment contracts and conditions

Most flexible Less flexible

Least flexible

Less flexible

Hiring and redundancy Most flexible

by far

Less flexible

Least flexible

Less flexible

We have discussed these with a variety of interested parties, and have incorporated the

responses of the National sources.

The details suggest that UK offers less support than Germany and Spain in particular. It

also offers more flexible employment and redundancy terms.

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10. EU Incentives

10.1 The EU Incentives Framework

The European Commission (EC) regulates National Regional Aid across the EU to

avoid distortion of competition within the common market. It generally consists of:

aid for investment granted to large companies targeted on specific regions in order

to redress regional disparities, or

increased investment to small and medium-sized companies (``SMEs‟‟) in those

regions over and above what is allowed in other areas.

The EC establishes an aid map for each Member State, stipulating the maximum limit of

financial aid or subsidies that can be received by each region under regional incentives.

COMMENT

There is an impression that during 2009 and 2010, the EC has started to relax these

rules. This may be true in so far as it applies to where the aid may be applied. However,

because of the German dominance in drafting these rules, the UK has probably ended up

with German standards – which the Germans probably apply as rigorously as the UK

does.

10.2 The Specific Regions In UK The Specific Regions are known as Assisted Areas, which between 2007-2013 comprise:

Tier1 covering Cornwall and Isles of Scilly; West Wales and the Valleys; Highlands & Islands

Tier 2 covering much of the “old” industrial heartland of England.

Within the Assisted Areas, GBI (Grant for Business Investment) support may be given to large companies and SMEs. Outside of the Assisted Areas, in ”Tier 3‟‟ regions, GBI(SME) support may be given (only) to SMEs. In Germany The EU has defined two types of regions which receive different levels of support, but both of which are eligible for a broad variety of public financial support programs:

“Convergence Regions” that require comprehensive support in order to bridge the gap with well-developed regions in Europe. Eastern Germany is classified as a “Convergence Region”.

“Regional Competitiveness and Employment Regions” that receive assistance to maintain and expand their economic competitiveness levels. Western Germany has largely been defined as a “Regional Competitiveness and Employment Region”

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In Spain The Convergence regions are: Galicia, Principado de Asturias, Castille-La Mancha, Extremadura, Andalucia, Region de Murcia, Centa and Melilla. In Sweden The EU has not specified any Convergence Regions - but companies that invest in a Regional Development Area can apply for Regional Investment Grants. To be eligible, the business must operate in Regional Development Areas A or B. These cover all the north of the country, with Area B comprising a narrow strip down the Eastern and extending further south than Area A.

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11 Financial Incentives for Capital Investment

In UK

Enterprise Finance Guarantee. This is a Government loan guarantee facilitating

additional bank lending for small businesses, intended primarily to improve the

availability of working capital. It also supports lending for business growth and

development in cases where a sound proposition may otherwise be declined due

to a lack of security. SMEs (under 250 employees) in the UK with an annual

turnover of up to £25 million who have no or insufficient security, are eligible to

borrow between £1,000 and £1,000,000 when this would not otherwise have been

possible.

The Enterprise Finance Guarantee was introduced in 2009, relacing the Small

Firms Loan Guarantee (SFLG) Scheme which had been the UK Government‟s

principal debt finance instrument.

Government Equity Funds. Since 2000 the Government has supported

programmes to address an equity gap which showed that SMEs seeking relatively

small amounts of finance (between £250,000 and £2 million) were disadvantaged

by the lack of private sector venture capital funds operating at that size. At the

same time, Regional Development Agencies have provided additional equity

opportunities via venture capital loan funds (VCLFs), which are co-financed by the

European Regional Development Fund (ERDF).

Enterprise Capital Funds (ECF) were launched in 2006. They invest a mix of

private and public money in small high growth businesses that are seeking up to

£2 million in risk capital. The Government provides up to two thirds of the capital in

each ECF but takes only a limited share of the profits in order to encourage private

investors to participate where they would not otherwise.

Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs). The

Government has also used the tax system to provide an additional incentive for

investment in early stage and growth businesses. EIS and VCTs are tax-based

schemes designed to improve small, unquoted, high-risk trading companies'

access to equity finance. They do so by providing a range of income tax and

capital gains tax reliefs to individuals who make direct investments (under EIS) or

indirect investments (mediated through a VCT) into qualifying small companies.

The „Annual Investment Allowance‟ for expenditure on plant and machinery,

which allows capital expenditure to be offset against profits chargeable to

corporation tax, was increased from £50,000 to £100,000* a year from April 1,

2010. This was thought by MTA to be a positive move for automation expenditure.

Expenditure above £100,000* will still be eligible for the standard capital

allowances relief, at a rate of 20 per cent. However, the special 40% first-year

allowance rate, introduced in 2009 last year, has now been ended which has

upset one company in particular which we have interviewed.

*NB. The £100,000 limit has since been reduced to £25,000, as from April 2012.

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When external funding sources are used to finance capital investment (for example: term loan, overdraft, hire purchase and finance leasing), 100% of interest or leasing charges are fully allowable against taxable profits. This is in addition to the Annual Investment Allowance and/or any other capital allowances for certain types of environmentally friendly equipment.

Operating lease and rental: These are „off balance sheet‟ finance options and therefore, 100% of monthly rentals are normally allowable against taxable profits.

COMMENT

Less scope in UK than in Germany and Spain – see on.

In Germany

Investment incentives can be made up of cash incentives, interest-reduced loans,

and public guarantees; during the investment phase (when capital needs are

high), cash incentives programs reimburse direct investment costs by

providing non-repayable cash grants. Public loan programs and guarantees are

also available. Most incentives programmes offer the highest incentives rates

to SMEs, and some programs may even specifically target SMEs.

There is a special cash incentives programme to promote investment activities in Eastern Germany called the Investment Allowance. This usually takes the form of a tax-free cash payment but can also be allotted in the form of a tax credit. Regions with the highest incentives rates offer grants of up to 30 percent of eligible expenditures for large enterprises, up to 40 percent for medium-sized enterprises, and up to 50 per cent for small enterprises respectively. Investors automatically receive Investment Allowance funding (subject to all eligibility criteria being satisfied) when investing in Eastern Germany – without having to go through general incentives program application procedures.

[Several regions within the western parts of Germany as well as Berlin are also designated incentives regions. In these regions, large companies can receive subsidy rates of up to 15 percent, medium-sized companies up to 25 percent, and small companies up to 35 percent of eligible project costs respectively.]

There are also publicly subsidized loan programs available in Germany, which offer loans at below current market value interest rates in combination with attractive grace periods. For example, in the case of The Entrepreneur Loan, all privately owned commercial enterprises with a turnover not exceeding EUR 500 million are eligible. Special emphasis is placed on start-ups. Loans of up to EUR 10 million are available for investment projects, for 100 percent of the eligible expenses (buildings, machinery, plant, equipment, etc.). Interest rates are at levels below existing market rates, and are generally fixed for ten years with a redemption-free grace period of up to three years.

Each German state has its own development bank financing projects within

the respective state. They offer their own loan programmes, largely targeted at

start-ups and growing companies. Companies which do not have the securities

demanded by the bank can apply for public guarantees for up to 80% of the

loan amount, either from individual State Governments for guarantees up to EUR

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10 million or from the Federal Government for guarantee needs of over EUR 10

million.

COMMENT

This appears to be a more comprehensive package of incentives than in the UK

In Spain

The incentives for investment projects in areas with the lowest level of

development consist of: Non-returnable subsidies; Subsidies for the interest

on loans obtained by the beneficiary from financial institutions; and

Subsidies for the repayment of those loans. Generally, at least 25% of the

investment must be equity-financed. There can also be reductions in the

employer‟s social security contribution.

Reindustrialization initiatives must be located in depressed areas, in which there

have been significant loss of production capacity and jobs and which, at the same

time, are eligible for regional aid. The aid takes the form of subsidies and loans,

on a multi-year basis. Financing is available for Infrastructure, both basic and

services, where subsidies may be for a maximum of 50% of the initiative‟s eligible

budget. Also repayable loans with nil interest for a maximum amount of 75% of the

initiative‟s eligible budget, with a maximum term of 15 years.

Financing is also available for industrial initiatives which create jobs and which act as a catalyst for the development of the business production sector. Loans are for a maximum of 50% of the initiative‟s eligible budget, with a nil interest rate and for a maximum term of 15 years.

SMEs: There are certain incentives and aid schemes designed especially for

SMEs between 2007 and 2013. In particular, there is an increase in the

maximum aid for investment in tangible or intangible assets; the 2009 budget

for the “InnoEmpresa” Programme was approximately €58 million. SME may also

obtain 100% financing for productive investments in new fixed assets up to a

maximum of €1.5 million per beneficiary per year.

The Instituto de Credito Oficial (ICO) has started to finance the working capital

of companies. The “Línea ICO-Liquidez” (ICO Liquidity Line) has made €10 bn

available to independent professionals and SMEs, maximum amount of financing

is €500,000 per beneficiary per year and transaction, with a repayment period of 3

years, including a 6 month grace period.

COMMENT

More scope than in the UK. Both Germany and Spain appear to be ahead of UK.

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In Sweden

There is a wide range of financial incentives available to assist both Swedish and foreign-

owned companies to establish or to expand their business in Sweden. These incentives

include grants, loans, credit guarantees etc. This support is primarily regional in nature.

Regional development grants are divided into regional investment grants and regional

employment grants, as well as a special social insurance related tax break. To be

eligible, the business must operate in Regional Development Areas A or B. A

company can obtain support either in the form of regional investment grant or a regional

employment grant, but never both. A grant is only made if it considered necessary to

bring about the investment.

- Size of grants

The maximum size of a regional investment grant is defined as a percentage of the

total investment cost. There are three determining factors:

Type of investment,

Type of company, and

The regional development area in which the company operates (see below). In rough terms, the maximum financing share for machinery and equipment is 30% to 35% for SMEs; 20% to 25% for Medium sized companies; and 10% to 15% for Large companies.

Type of Investment MAXIMUM FINANCING SHARE

Small

companies

Medium

sized

companies

Large companies

and groups of

companies

Machinery, equipment,

buildings, etc. and intangible

investments

RDA A 35%

RDA B 30%

RDA A 25%

RDA B 20%

RDA A 15%

RDA B 10%

Premises to let RDA A 25% RDA B 20% 0%

Consulting services,

participation in certain fairs and

exhibitions

50% 50% 0%

Special training 40% 40% 30%

Pre-competitive product

development

40% 40% 0%

No support is available for product development that can be described as current

development.

COMMENT: The scope of financial assistance offered, appears to be less than in

Germany and Spain.

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12. Innovation, Research and Development Grants

The EU‟s 7th Research Framework Program (FP7) offers financial support to R&D projects at the European level. Support is allocated in the form of grants covering up to 75 percent of project expenditures for small and medium-sized enterprises (SMEs). Support is usually provided to R&D projects working on a transnational level with different project partners. These are not directly relevant to the installation of automation except where an innovative process is involved. They do, however, provide a background for innovation to get companies thinking beyond the traditional approach.

In UK

In UK, there are numerous grants available to encourage investment in innovation,

research and development. But most of these are for very small amounts.

The Grant for Research and Development is a Solutions for Business product which

provides grants to help individuals and small and medium-sized businesses (SMEs) who

are based in England and are involved in researching and developing technologically

innovative products and processes. There are five different types of project that a

grant can be awarded for and each requires the applicant to make their own

contribution to the project costs:

Proof of Market grants to test the commercial potential of an innovative idea

for a new technology. A grant of up to £20,000 is available to businesses with

fewer than 250 employees.

Micro projects are simple, low-cost development projects lasting no longer

than 12 months. A grant of up to £20,000 is available to businesses with fewer

than ten employees.

Research projects aim to investigate the technical and commercial feasibility

of innovative technology and last six to 18 months. A grant of up to £100,000 is

available to businesses with fewer than 50 employees.

Development projects aim to develop a pre-production prototype of a new

product or process that involves a significant technological advance.

Projects take six to 36 months. A grant of up to £250,000 is available to

businesses with fewer than 250 employees.

Exceptional development projects involve a significant technological

advance and are strategically important for a particular technology or industrial

sector. Projects take six to 36 months. A negotiable grant of up to £500,000 is

available to businesses with a qualifying project.

Collaborative Research and Development grants. These are financial grants for

businesses working together to share knowledge, expertise and spend on R&D. They

also aim to encourage collaborative working on research and development between

businesses and knowledge base institutions (e.g. Higher Education Institutions).

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Businesses of all sizes and sectors in England are eligible if they show willingness and

potential to develop innovative products, processes or services.

Research and Development (R&D) Tax Relief

This is the biggest single intervention programme in the UK. To qualify, a business

must spend at least £10,000 in one year on R&D. Eligible R&D expenditure includes

categories like staff payments, material costs and subcontractor costs amongst others.

The level of enhanced tax relief available to SMEs is 175%. For example, an R&D project

costing £20,000 would result in £35,000 being offset against taxable profits. The amount

of tax relief a large business can claim has increased is 130%. Only companies which

are subject to UK corporation tax can submit a claim for R&D tax relief.

COMMENT

Probably not much here for a high technology SME like Harwin.

In Germany

There are many programmes allocating R&D grants, interest-reduced loans, and special partnership programs. The total amount of incentives a project may receive depends on the size of the enterprise (small, medium-sized or large), whether the project is conducted in cooperation with other companies or research institutes, and the research category of the project. - German Government R&D Incentives:

These relate either to programmes with specific technology focus, mostly cooperative projects, or to technology-open programmes where cooperation is not always necessary.

All research programs financed by the German federal government have been concentrated within the federal High-Tech Strategy. The High-Tech Strategy defines specific industry sectors with a high dependency on ongoing high-tech research and development. Each defined industry sector consists of a number of different R&D programmes.

Approximately EUR 12 billion in total is reserved for R&D projects in the form of non-repayable project grants.

Grant rates can reach up to 50 percent of eligible project costs. Higher rates may be possible for SMEs.

Cooperation between project partners, especially between enterprises and research institutions, is usually required.

- German Federal States R&D Incentives:

Each German state has R&D grant programs in place.

Some states put particular focus on specific industry clusters, generally reserved for SMEs, but individual programs without specific technological focus also exist.

Cooperation between project partners is not always necessary.

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- Further R&D Project Subsidy Options

R&D loans can be an alternative to R&D grants and entail several specific advantages: they are usually not attached to a specific technology field, application is possible at all times (no deadlines), and they can cover higher project costs.

R&D loans are provided by different governmental programmes. For instance, the ERP Innovation Program offers 100 percent financing of eligible R&D project costs up to EUR five million.

Public (silent) partnerships are offered by both the KfW Banking Group and state-owned venture capital companies to technically oriented companies. Direct shareholding by a public investment company is also possible.

COMMENT Superior to the UK.

In Spain

One of the priorities of the public authorities in Spain in recent years has been to

encourage technological improvement and innovation and research and

development projects. In this context, the government has prepared a related National

Plan for Scientific Research, Development and Technological Innovation, every four

years since 1988, in which it establishes the objectives and medium-term priorities of the

research, development and innovation policy. The Sixth National Plan for R&D and TI,

for 2008 to 2011, aimed to double the financing from that in the preceding period.

The main characteristics of the aid which can be granted are:

- Repayable subsidies, loans and advances, which can be applied for by

Companies (including SMEs)

Technological Centers.

Private university research and development centers.

Public R&D + TI centers.

Private non-profit research and development centers.

Other private non-profit entities.

Other public law entities.

Joint ventures

Economic interest groupings formed by companies or by companies and other entities,

Industry-wide non-profit business associations,

Innovative business groupings recognized by the Ministry of Industry, Tourism and Trade.

- Applications for aid may cover

Basic research projects.

Applied research projects.

Experimental development projects.

Technical viability studies.

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There are numerous examples of R&D programmes. For example:

- The INGENIO 2010 Programme, aimed at increasing both public and private

investment in R&D. The objectives of the INGENIO 2010 Program are:

R&D investment equal to 2% GDP in 2010;

55% private investment in R&D in 2010;

0.9% public investment in R&D as a percentage of GDP in 2010. During the first four years of the Programme, training projects of leading consortiums and the installation plans are expected to amount to approximately €2 billion, of which some 50% will be contributed by the State. - Besides all the financial programmes (CDTI, Plan INGENIO, etc.) another big incentive is the “patent box legal scheme”. Under this schem, 50% of revenues arising from the licensing of the right to use certain qualifying intellectual property (IP) rights are tax exempt. Spain is one of only 5 EU countries (BENELUX, Ireland and Spain) which have set up this patent box regime. - The R&D Projects line of the CDTI finances applied business projects for the

creation and significant improvement of a productive process, product or services,

including both industrial research activities and experimental development. This

line finances multi-year projects with a minimum budget in the range of €240,000.

This aid is partially repayable (only a part of the aid granted must be repaid to the

CDTI), for up to a maximum of 75% of the total budget of the approved project.

COMMENT

A remarkable array of R&D financing is available in Spain. According to OECD (STI

Scoreboard 2009) the Spanish R&D fiscal incentives framework is the second most

favourable (after France) among OECD countries.

In Sweden

Sweden is among the foremost participants in the EU Framework Programme for

Research and it is also one of the top recipients of funds from FP7.

Sweden‟s R&D intensity (the proportion of GDP spent on R&D) has long been among

the highest in the world, peaking at 4.3% in 2001 but still reaching 3.6% in 2007,

compared to an EU25 average of 1.84%. In 2007 €10.7bn was spent on R&D.

The business sector accounts for three-quarters of R&D: companies largely fund their

own research but receive some contributions from the central government and abroad.

[The Swedish Research Council is the largest governmental funding agency but their

focus is largely on funding basic research, rather than on how it can be applied by

companies to manufacturing.] Public-sector funding of R&D takes place both through

grants paid directly to higher education institutions, and through support from research

councils and sectoral research agencies. The largest share of publicly funded research is

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carried out at Sweden‟s higher education institutes, with only a small proportion being

done at research institutes.

VINNOVA: Swedish Agency for Innovation Systems. VINNOVA‟s mission is to

promote sustainable growth by financing R&D and developing effective innovation

systems. Its available resources were approximately €200m in 2006.

SIDA: Swedish Agency for International Development Co-operation. Most of

SIDA‟s grants are used to develop research cooperation in emerging countries,

and regional and international research programmes. Through SIDA‟s Research

Council, support is also provided for Swedish research. Its research funding

budget was approximately €97.5m in 2006, of which €35m goes to Swedish

research.

In addition to the research councils and research agencies, there are a number of

public research foundations, which together provide research funding in excess of

€156m a year. The most relevant foundation is:

The Swedish Foundation for Strategic Research. Its purpose is to support

research in the natural sciences, engineering and medicine. Its efforts are aimed

at establishing strategic research centres with an international impact. Its yearly

research budget was approximately €50m in 2006.

COMMENT

Sweden would appear to be the most advanced of the four countries in R&D financing.

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13. Operational Incentives Packages

In UK

Grants for Business Investment provide help for business investment projects which

increase productivity, skills and employment in disadvantaged areas. The grants are

available to most businesses in Assisted Areas. SMEs in other disadvantaged areas are

also eligible.

“Train to Gain” helps businesses of all sizes, in all sectors, to increase the skills of their

workforce and improve the performance of their business. The service is supported by

Business Link Advisers working with the Department of Business, Innovation and Skills,

the Skills Funding Agency and Sector Skills Councils (SSCs) who help to:

identify skills needs at all levels of the business

identify and source high quality, vocational skills training

Those running a private sector SME are offered alternative packages of support to make

it easier to carry on developing the skills of their employees. If the company has less than

50 employees it could get a contribution to wage costs for the time spent in training.

Training to help employees gain their first, full Level 2 NVQ qualification is free. Women

employees can access a selection of heavily subsidised Level 3 NVQ. £1,000 including

VAT is available towards leadership and Management training for Owners/Key Directors

or for Senior Managers with strategic responsibilities.

COMMENT

In practice, this has proved difficult for SMEs to access. A major evaluation in 2005 [DfES

and DWP: A Shared Evidence Base – The Role of Skills in the Labour Market. Report

694] found that as much as 90 per cent of Train to Gain provision was being used by

employers to finance the training they would have provided in any case. This was

supported by a 2008 survey which found that £91 million that companies would

previously have paid for themselves, had been spent on training through the scheme.

Furthermore, over two-thirds of business taking up training under the scheme had

already arranged training courses themselves in the previous 12 months [Learning and

Skills Council, Train to Gain Employer Evaluation: Sweep 1 Research Report, 2008].

In Germany

Germany‟s Federal Employment Agency (Bundesagentur für Arbeit) and the German

states offer a range of labour-related incentives programmes, which are available

throughout Germany independent of company size, industry sector, or investment project

location.

The range of programs offered can be classified into four main groups.

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Recruitment support:

The Federal Employment Agency, with over 800 local job centers located throughout Germany, assists companies in finding suitable new staff.

Pre-hiring Training support:

Prospective employees often need to participate in appropriate training measures and testing, before operating machinery and technical equipment. Such measures can be organized and administered by external specialist institutions under the authority of local job centers. In general, training programme costs of up to 100 % can be subsidized for up to 3 months.

Wage subsidies:

Wage subsidies are generally available if investors provide long-term employment contracts. They are granted before hiring long-term unemployed individuals or unemployed candidates under the age of 25 or above 50.

Employers can be granted a direct cash payment paid as a proportion of the employee‟s wage. Grants can account for up to 50 percent of wage costs including social security contributions. They may be provided for a period of up to twelve months.

When hiring long-term unemployed people who have disabilities or who are older, wage subsidies can be raised to a maximum 70 percent of wage costs paid for a period of up to eight years.

Advancing Professional Development, On-the-Job Training:

The German federal states and the European Social Fund (ESF) offer a variety of on-the-job training programs for all employees. Companies can be supported with subsidies covering up to 50 percent of all training costs. European Union (EU) authorization is required if the amount awarded to a single company exceeds EUR two million.

COMMENT

Appears in theory anyway to be more embracing than in the UK.

In Spain

Vocational Training for Employment is financed with funds from the vocational training contributions of companies and workers, aid from the European Social Fund and specific contributions from the National Employment Service budget. Local Communities may also earmark their own funds to finance the management of projected training initiatives. Groups of workers with particular difficulties in the job market (i.e., unemployed women, the disabled, those affected by and victims of terrorism, etc.) can be given priority to participate in training programs. The vocational training initiatives consist of:

Demand-based training: company training initiatives and individual leaves of absence for training, financed in whole or in part with public funds, to meet the specific training needs raised by companies and their workers.

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Companies are entitled to a credit for the training of their workers, in the form of reductions in their social security contributions, based on the amount they paid for vocational training during the preceding year. In 2009 companies were allowed a credit for training their workers equal to the amount paid by the company for vocational training in 2008, less a percentage, based on the size of the company, ranging from 100% credit for companies of 6 to 9 workers to 50% for companies of 250 or more workers. Companies granting their workers leave of absence for training are allowed an additional annual credit. In 2009 the additional annual credit was equal to the salary cost of the leave, ranging from the equivalent of 200 hours‟ costs for companies with a workforce of between 1 and 9 workers, up to 800 hours for firms with a workforce of between 250 and 499 workers … and the salary costs of another 200 hours for each additional 500 workers on the workforce.

Supply-based training: training initiatives aimed primarily at employed workers, and training initiatives aimed primarily at unemployed workers with a view to offering them training which prepares them for qualified work and access to jobs.

Training alternating with work: training initiatives under vocational training contracts and public training/work programmes, permitting the worker to combine training with professional practice on the job.

Companies opening new places of work as well as newly formed companies, are

entitled to a credit for the vocational training of their new workers , which in 2009, was

equivalent to €65 for each new worker.

Employment incentives

To encourage long-term employment and the conversion of temporary contracts into long-term contracts, The Spanish Central Government offers a wide range of employment incentives, consisting mainly of reductions in employer social security contributions for particular unemployed groups and people with disabilities. Examples are 850 Euros for 4 years for unemployed women; and 1,200 Euros for people aged over 45 for the entire term of the contract. The reduction in employer social security contributions for people with disabilities ranges from 4,500 to 6,300 Euros for the entire term of contract.

Local employment initiatives (no time limit). In addition to the employment incentives detailed in the previous section, aid and subsidies may also be granted for investment projects aimed at generating economic activity and stable employment in local and regional areas of Spain. Requirements include the incorporation of a new company with a maximum number of 25 employees at the time of incorporation, and projects must provide for the production of products and/or services which relate to emerging economic activities or, in the case of traditional activities in the area, which cover needs not covered by the existing structure.

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The incentives available for selected projects include: a) A reduction of up to 3% in interest rates on loans granted to the company related

to its incorporation and establishment. The maximum amount of this subsidy is €5,108

per indefinite-term job created.

b) Subsidies for the external contracting of market or technical studies, reports,

and/or training programs during the first year after the incorporation of the company,

covering 75% of the cost of the qualifying services up to a maximum of €12,020.

c) A subsidy for technical assistance for the hiring of highly-qualified technical

experts, covering 50% of total labor costs (including employer social security

contributions for a maximum period of one year). This is a one-time subsidy with a ceiling

of €18,030.

d) A one-time subsidy for each indefinite-term employment contract amounting to

€4,808 for each worker hired on a full-time basis.

COMMENT

Again, a wide variety of incentives available.

In Sweden

Companies may apply for regional employment grants when investing in regional

development areas. The main conditions are:

Newly started and established companies in development areas A and B may seek a regional employment grant to finance recruitment of new staff.

A regional employment grant can only be obtained for the activities entitled to support as listed under the section “Regional investment grants” above.

The activity must be deemed to be profitable and lead to lasting employment.

The grant must be deemed necessary to the planned employment increase.

The recruitment must aim at permanent employment and involve people who are out of work or about to lose their jobs.

Size of Grants: The maximum subsidy for each new full-year employee in regional

development area A is SEK 66,000 for each of the first three years; for RDA B the

comparable figure is SEK 40,000.

Regional social security contribution discount for employers

Apart from regional development grants, financial incentives for international investors

are also available in the regional social contribution discount scheme. Employers may

qualify for a special discount in the statutory social security contributions they pay on

behalf of their employees. Under certain conditions, an enterprise with a permanent

business base in a qualifying region may receive a 10% (5.28% for people aged under

26) discount on its total bill for social security contributions, up to a maximum amount of

SEK 7,100 per month.

COMMENT Appears to be more advanced than in the UK, as do Germany and Spain.

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14 Employment regulations and conditions

14.1 Hiring and Firing[see also chapter 15]

The Employment Contract

UK: The terms of the contract can be oral, written, implied or a mixture of all three. Even if you do not issue a written contract, you are under a legal duty to provide most employees with a written statement of main employment particulars. The employee must be free to leave the job if he/she no longer wants to work there. No one, including the employer, can stop them from doing this.

(In Germany, a contract of employment is usually drawn up in writing but verbal

agreement is also possible.

In Spain, the use of temporary contracts, normally for 3 or 6 months or in some cases

terminating upon the finishing of a job, is very common due to the difficulties and costs

involved with firing employees with a fixed contract. When the contract is completed the

employer can decide to renew the contract or not.

In Sweden, the employer must provide the employee with the key terms of employment

in writing. Contracts are governed by statutory rules and, in most cases, a collective

agreement between the employer and relevant trade union.

Fixed-term Employment Contracts

UK: Fixed-term employment lasts for a specified length of time or can end with the

completion of a specified task or when a particular event takes place. For example, fixed-

term employees can be brought in to cover for permanent staff on long-term sickness or

maternity leave or to cope with increased seasonal demand. Fixed-term employees have

the right not to be treated less favourably than comparable permanent employees

because they are on a fixed-term contract. The key advantage is that employers can

benefit from specific skills without the cost of a longer-term commitment.

(In Germany, standard employment contracts usually include a probation period of up to

six months. Companies are nonetheless free to offer fixed-term contracts, which expire

on a specific date. Fixed-term contracts are limited to a maximum of two years, and may

be extended up to three times provided the total duration of contract does not exceed the

maximum of two years. It is for the employer to decide whether to renew the contract.

In Spain, an indefinite contract is a contract that cannot be terminated unilaterally by the

employer without paying compensation unless the worker has clearly breached the

signed contract.

In Sweden, employment contracts are normally valid indefinitely. Recent legislation has

increased scope for fixed term contracts but trial periods and the duration of temporary

contracts have been extended. The social partners began to re-negotiate employment

conditions, but negotiations stalled in March 2009.

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Temporary Employment The European Council has been trying to introduce a new directive on agency workers since 2002, which would give temps in the EU the right to equal treatment with permanent employees on issues such as pay, working time and holidays. UK: Most EU states backed these proposals, but until recently the British government, in a minority with others, had succeeded in blocking progress on the directive being adopted, claiming it would damage the country‟s flexible labour market and hit jobs. However, the Agency Workers Regulations 2010 were laid before the UK parliament in January and are due to be applied from October 2011. The regulations are intended to give agency workers equal entitlement to pay and leave arrangements (including maternity rights) as if they had been recruited directly by their hirer, after an agency worker has worked for a hirer for at least 12 weeks. More than 3% of the UK workforce is estimated to be engaged temporarily, and the CBI went on record several years ago, as saying that a quarter of a million UK jobs would be in jeopardy if the directive came into force. (In Germany: The employee is legally employed by the temporary employment agency, as no contractual relationship exists between the hiring company and the employee. The duration and the terms of termination of the service of the employee in the hiring company are not subject to labor regulations, but only set out in the service contract between the hiring company and the temporary employment agency. In Spain, There are also part-time contracts, both fixed and temporary, where the employee has to work a specified number of hours, with a maximum of 30 hours per week. The successive use of temporary contracts was limited in 2006. The duration of fiscal support was extended for hires on permanent contracts with lower severance payments for targeted groups in the same year. The use of internships, is very common in Spain because it is a cheap form of labour and because the employer does not have to pay social security for an internee. In Sweden: Employment contracts may include an initial trial period of up to 6 months.

Employment Contract Changes/ Dismissal

UK: Staff must be consulted about any changes the employer wishes to introduce, and

this should include their trade union or other elected representatives. Simply imposing

changes could mean a claim by employees for damages in a civil court, employment

tribunal, or a constructive dismissal claim before an employment tribunal. If changes are

imposed without agreement, there will be a breach of contract. If the breach of contract is

a fundamental one - for instance, if it involves a significant change in pay or working

hours - an employee could resign and regard themselves as having been given no other

choice to do so ('constructively dismissed'). If they have one year or more of continuous

employment with the company, they will be able to claim unfair constructive dismissal in

an employment tribunal.

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In Germany, a contract of employment can be terminated by the employer or the

employee. The German Employment Protection Act draws distinctions between dismissal

for personal reasons, dismissal for conduct-related reasons and dismissal for business

reasons. If these conditions do not apply, employers generally have an unfettered right to

terminate employment contracts within statutory notice periods.

In Spain, if the employer wants to dismiss an employee, a written notice stating the

reasons for the dismissal has to be given with a 30 days notice. Depending on the

reasons for the dismissal, the employer may have to pay compensation equivalent to

between 20-45 days pay, per year of service. In some cases the dismissal of an

employee can be declared void (i.e. for discrimination or when basic rights of the

employee are infringed) which will result in a compulsory re-employment.

In Sweden, summary dismissal is only possible when the employee has grossly neglected his or her duties towards the employer. In case of wrongful dismissal, the employer may be liable to pay damages. Normally such damages range from 16 to 32 months of salary.

14.2 Other Employment Regulations and Conditions

National Minimum Wage

UK: This includes temporary, part-time and casual workers, homeworkers, pieceworkers,

and people from other countries. Employers cannot take out money for things like

equipment, protective clothing or uniforms if that reduces pay below the minimum wage.

In Germany and Sweden, there is no statutory minimum wage but there are

mechanisms to ensure that in practice, there is a minimum.

In Spain, the official minimum wage is 8,866.20 Euro per year, or 633.30 Euro per

month in 14 payments, 12 monthly ones plus two extra in July and December.

Working Hours

The Working Time Directive is applicable in all four countries but in practice there are

small variations as set out below.

UK: Workers do not have to work more than an average of 48 hours each week. This

applies to almost everyone working in the UK. Workers over 18 can choose to work

longer − but you cannot make them.

In Germany, working hours are very flexible. Employees are allowed to work 48 hours

per week. A total of 60 hours per week is possible under certain circumstances.

In Spain, the working week consists of a maximum of 40 hours, overtime cannot exceed

80 hours per year and daily work cannot exceed 9 hours. Workers also are entitled to a

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rest period of at least 12 hours between working days and at least 4 weeks of vacation

per year plus local holidays. However, collective agreements between workers unions

and employers can vary some of the above conditions.

In Sweden, the statutory basic working week is 40 hours.

Social Security and Pensions

The proportion of total personnel costs that is accounted for by social security costs

tends to be relatively uniform across activities within a single Member State, as

employers‟ contributions are often set on a statutory basis for the whole economy. As

such, the main differences observed for this ratio tend to be across countries.

Social security costs account for a relatively low share of total personnel costs in the UK

(13%). The comparable proportions for the other three countries are Germany (20%),

Spain (22%), and Sweden (32%).

UK: The Pensions Act 2008 introduced new obligations on employers to provide access

to, and contribute towards, a workplace pension scheme for eligible employees.

In Germany, in contrast to some other industrialized countries, the core social security is

financed collectively by means of a process of redistribution. The current costs (for

pensioners, sick people or those in need of nursing care, and unemployed people) are

paid directly from contributions by employees and employers. Generally speaking, social

security contributions are roughly shared equally by employer and employee. Only the

costs for accident insurance are exclusively borne by the employer.

In Spain, the social security system is much like the British one, in that the contributions

paid every month entitle the employee to a pension, unemployment benefit, sick pay,

maternity pay and the right to receive free healthcare. The monthly social security fee for

all workers is paid by both the employer and the employee. The monthly social security

fee per employee is about 30% of the employee wage, which the employer has to pay,

and the employees pay about 6% of their wages in social security.) In 2007, partial

retirement was restricted and the effective contribution period to acquire pension rights

was increased modestly. Stronger incentives to extend work beyond the current age at

which full pension rights can be acquired were introduced at the same time.

In Sweden, the national basic pension and insurance system is often combined with

occupational-based insurance plans. Sweden‟s social security system is primarily funded

by statutory contributions under the national basic pension and insurance plan. Many

employers supplement these contributions with payments under occupational-based

agreements with their employees. In 2009, the lower threshold for the state income tax

was raised, employer social security contributions were reduced and the in-work tax

credit was expanded through 2011. Two main types of occupational pension and

insurance plan are used in private industry to supplement basic statutory protection:

collectively agreed insurance or non-collective insurance.

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14.3 Trade Unions

Sweden: The labour market is regulated both by legislation and through collective bargaining agreements. Trade unions traditionally enjoy a powerful position in Sweden. Signing collective agreements is voluntary, but trade organisations can take industrial action to reach an agreement with an employer. Industrial disputes and conflicts are fairly rare. Trade unions are important partners for employers because the vast majority of workers are unionized. Some 71% of wage earners and 72% of salaried workers belong to a trade union. 14.4 Employee Representation Germany: A works council may be established in companies with five or more employees. Their activities range from information and non-binding consultation rights to exercising co-determination rights in organizational and social affairs. However, the works council is generally prohibited from becoming involved in corporate governance. Stock corporations (Aktiengesellschaft) must always install a supervisory board. For Limited Liability Companies (GmbH), the installation of a supervisory board is mandatory only if the company has more than 500 employees. 14.5 Private Health Insurance Germany: Employee and employer share the premiums. The basic flat health insurance contribution rate amounts to 14.6% of the employee‟s gross income. Employer and employee each pay half of this premium. As of July 1 2009, the basic flat health insurance contribution rate was reduced to 14%. In addition to the basic flat contribution rates shared equally between employer and employee, an additional 0.9% are paid by the employee only. Sweden: Individual employees can top up their provision with private insurance. All employers in Sweden pay statutory social security contributions on behalf of their employees, consisting of charges for pensions, health insurance and other social benefits. These contributions amount to 31.42% of gross salary. 14.6 Equality & Diversity/Anti-Discrimination UK: All workers in the UK have the right to be protected from discrimination by their employer. This includes discrimination because of race, sex, sexuality, disability, age, religion or belief. Germany: The General Equal Treatment Act of 2006, often referred to as the anti-discrimination act, implements EU regulations on anti-discrimination.

Sweden: The principle of equal pay for the same job, regardless of gender, has long applied in Sweden. Pay differentials between men and women are narrow compared to many other countries, though women still earn somewhat less than men on average. In Sweden, women constitute 48.3% of the total labour force, which is a very high proportion compared to other countries.

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15 Hiring and firing compared

Doing Business 2010 [www.doingbusiness.org, a co-publication of The World Bank

and the International Finance Corporation] measures the regulation of

employment, as it affects the hiring and redundancy of workers and the rigidity of

working hours.

The table below shows the main indicators:

Difficulty of hiring index: Applicability and maximum duration of fixed-term

contracts and minimum wage for trainee or first-time employee.

Rigidity of hours index: Scheduling of nonstandard work hours and annual paid

leave.

Difficulty of firing index: Notification and approval requirements for termination

of a redundant worker or a group of redundant workers, obligation to reassign or

retrain and priority rules for redundancy and reemployment.

Rigidity of employment index: A simple average of the above three indices.

Firing cost: Notice requirements, severance payments and penalties due when

terminating a redundant worker, expressed in weeks of salary.

HIGHER VALUES IN THE TABLE INDICATE MORE RIGID REGULATIONS.

Country Difficulty

of Hiring*

Rigidity

of

Hours*

Difficulty of

Firing*

Rigidity of

Employment*

Redundancy

Costs (Weeks)

UK 11 20 0 10 22

Germany 33 53 40 42 69

Spain 78 40 30 49 56

Sweden 33 40 40 38 26

*Minimum is nil; maximum is 100

This shows that the UK is ahead of the other three countries on all aspects of

hiring and firing.

The biggest deterrent to hiring is in Spain.

The greatest difficulty over working unusual hours is in Germany.

UK is much the easiest country for redundancy.

The costs of redundancy are much higher in Germany and Spain than in Sweden

and UK.

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HIRING, HOURS & HOLIDAYS

UK

Germany

Spain

Sweden

Are fixed-term contracts prohibited for

permanent tasks?

No No Yes No

Maximum duration of fixed-term contracts

including renewals (in months)

No

limit

24 12 24

Can the workweek extend to 50 hours

(including overtime) for 2 months per year to

respond to a seasonal increase in production?

Yes Yes Yes Yes

Maximum number of working days per week 6 6 6 6

Are there restrictions on night work when

continuous operations are necessary?

No Yes Yes No

Are there restrictions on "weekly holiday" work

when continuous operations are necessary?

No Yes Yes Yes

Paid annual vacation for an employee with 20

years of service (in working days)

28 24 22 25

* The Spanish organisation “Invest in Spain” have asked Metra Martech to mention that:

Our labour legal framework offers several modalities of labour contracts (fixed and

temporally), that give Spain a more flexible labour market than is described there. For

example, answering the question “are fixed term contracts prohibited for permanent

tasks?” (For Spain the answer is “no”), we consider that the labour contract “contract for

specific project or service” will apply for this question, changing the answer to “yes”. On

the same way, the maximum duration of fixed-term contracts will not be set in Spain in 12

months, but in “no limit” if you take into account this type of contract (“contract for specific

project or service”)

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DIFFICULTY OF REDUNDANCY UK Germany Spain* Sweden

Is the termination of workers due to redundancy legally authorized?

Yes Yes Yes Yes

Must the employer notify a third party before terminating a redundant worker?

No Yes Yes No

Does the employer need the approval of a third party to terminate one redundant worker?

No No No No

Must the employer notify a third party before terminating a group of 9 redundant workers?

No Yes Yes Yes

Does the employer need the approval of a third party to terminate 9 redundant workers?

No No Yes No

Is there a retraining or reassignment obligation before an employer can make a worker redundant?

No Yes No Yes

Are there priority rules applying to redundancies?

No Yes No Yes

Are there priority rules applying to re-employment?

No No No Yes

*Invest in Spain” have commented: “The redundancy should be only notify to a third party but the redundant workers, only in case the redundant workers are over 10% of the work staff (in the example used by Doing Business, a company with 50 workers, an a redundancy of 9 workers, the answer will be “yes” to this question, but in other cases not (i.e a company with over 100 workers)”

REDUNDANCY COSTS (Weeks of Salary) UK Germany Spain Sweden

What is the notice period for redundancy dismissal after 20 years of continuous employment?

12.0 26.0 4.3 26.0

What is the severance pay for redundancy dismissal after 20 years of employment?

10.1 43.3 52.0 0.0

What is the legally mandated penalty for redundancy dismissal?

0.0 0.0 0.0 0.0

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16 Summary by Country 16.1 UK National Minimum Wage Almost everyone has a right to the national minimum wage. Working Hours Workers do not have to work more than an average of 48 hours each week. The Employment Contract The terms of the contract can be oral, written, implied or a mixture of all three. Employment Contract Changes If you impose changes without agreement, there will be a breach of contract. If the breach is a fundamental one - for instance, if it involves a significant change in pay or working hours - an employee could resign and regard themselves as having been given no other choice to do so ('constructively dismissed'). If they have one year or more of continuous employment with you, they will be able to claim unfair constructive dismissal in an employment tribunal. If the breach of contract has caused them a measurable financial loss, employees can also sue for damages, either in employment tribunals or in the ordinary courts. Fixed-term employment contracts Fixed-term employees have the right not to be treated less favourably than comparable permanent employees because they are on a fixed-term contract. This means the same or equivalent (pro-rata) pay and conditions, benefits, pension rights and opportunity to apply for permanent positions within the business. Employees who have been on a fixed-term contract for four years or longer will usually be legally classed as permanent if their contract is renewed or if they are re-engaged on a new fixed-term contract. Pensions The Pensions Act 2008 introduced new obligations on employers to provide access to, and contribute towards, a workplace pension scheme for eligible employees. 16.2 Germany Fixed-Term Contracts Standard employment contracts usually include a probation period of up to six months. Companies are nonetheless free to offer fixed-term contracts, which expire on a specific date. Fixed-term contracts are limited to a maximum of two years, and may be extended up to three times provided the total duration of contract does not exceed the maximum of two years. However, during the first four years of a company‟s existence in Germany, employment contracts may be limited or extended several times up to a total duration of four years. It is for the employer to decide whether to renew the contract or not.

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Temporary Employment The employee is legally employed by the temporary employment agency, as no contractual relationship exists between the hiring company and the employee. The duration and the terms of termination of the service of the employee in the hiring company are not subject to labor regulations, but only set out in the service contract between the hiring company and the temporary employment agency. - Weekly working hours and wages are usually determined in collective agreements between unions and the respective employers‟ associations of the temporary employment industry. Mini and Midi Jobs “Mini” jobs are jobs with salaries below EUR 400 per month and an employment period in which the employee works 50 days per year or less for the company. Employers pay 30.1 percent of the gross wage as social security contributions and flat taxes (composed of 13 percent health insurance, 15 percent pension insurance, two percent flat tax, and 0.1 percent sick pay contribution allocation), while employees are fully exempt from social security contributions (even if they hold another fully taxable employment position). “Midi” jobs (or “low wage jobs”) are jobs that pay between EUR 400.01 and EUR 800 per month. They are subject to reduced employee social security contributions. Employers are subject to the normal social security contributions of around 21 percent of the gross wage, which represents a lower rate than the general tax for 400 Euro jobs. Terms of Employment A contract of employment is usually drawn up in writing but verbal agreement is also possible. There is no legally fixed form for a contract of employment. Nevertheless, it is highly advisable to define certain points. Payment Employee pay can be negotiated freely unless a minimum wage applies. German law does not prescribe a statutory minimum wage for most professions. Minimum wage agreements have only been established in some industries (not including manufacturing): Working hours are very flexible in Germany. Employees are allowed to work 48 hours per week. A total of 60 hours per week is possible under certain circumstances. Holidays: Full-time employees working six days per week are entitled to a minimum of 24 paid vacation days (the equivalent of four weeks) per year. Full-time employees working five days per week are entitled to a minimum of 20 days per year. Sick Leave: Where the period of sick leave exceeds three days, employees are obliged to have a general practitioner provide proof of their incapacity to work. Sick Pay: Employees are entitled to sick pay amounting to 100 percent of the normal salary until the time of recovery, though limited to a maximum of six weeks.

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Maternity Leave: A maternity protection period starts six weeks before the expected birth date and ends eight weeks after delivery. Pregnant employees are only allowed to work during this time if a doctor certifies that the work will not be harmful to the health of the mother and child. Anti-Discrimination: The General Equal Treatment Act of 2006, often referred to as the anti-discrimination act, implements EU regulations on anti-discrimination. Termination of Employment: A contract of employment can be terminated by the employer or the employee. Dismissals require written form and both parties have to observe the statutory notification periods. The German Employment Protection Act, which only applies to companies with a staff of more than ten employees, establishes certain rules for dismissals, drawing distinctions between dismissal for personal reasons, dismissal for conduct-related reasons and dismissal for business reasons. If these conditions do not apply, employers generally have an unfettered right to terminate employment contracts within statutory notice periods. Employee Representation Works Councils: A works council may be established in companies with five or more employees. Their activities range from information and non-binding consultation rights to exercising co-determination rights in organizational and social affairs. However, the works council is generally prohibited from becoming involved in corporate governance. Representation on the Supervisory Board Stock corporations (Aktiengesellschaft) must always install a supervisory board. For Limited Liability Companies (GmbH) the installation of a supervisory board is mandatory only if the company has more than 500 employees. The German Social Security System: In contrast to some other industrialized countries, the core social security in Germany is financed collectively by means of a process of redistribution. The current costs (for pensioners, sick people or those in need of nursing care, and unemployed people) are paid directly from contributions by employees and employers. Generally speaking, social security contributions are roughly shared equally by employer and employee. Only the costs for accident insurance are exclusively borne by the employer. Employees earning a gross wage of less than EUR 4,050.00 (2009) per month are compulsorily insured by one of the public health insurance providers. Employees whose earnings are above this income threshold can choose from both public and private insurance companies. Employee and employer also share the premiums for private health insurance plans. The basic flat health insurance contribution rate amounts to 14.6% of the employee‟s gross income. Employer and employee each pay half of this premium. As of July 1 2009,

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the basic flat health insurance contribution rate was reduced to 14%. In addition to the basic flat contribution rates shared equally between employer and employee, an additional 0.9% are paid by the employee only. 16.3 Spain General

In Spain the employment of workers is regulated by the government regarding to

minimum wages, working hours, contracts and the social security system. Apart from the

regulations the workers have two main rights - the right to join or set up a workers union

and the right to go on strike.

Working Hours and Wages

In Spain the working hours and wages are regulated by the worker's statute but there

exists many cases where collective agreements (normally reached by negotiations

between the major workers unions and the companies) have reached different conditions

for theirs members. Therefore many of the points below are not always applicable.

- In Spain the working week consists of a maximum of 40 hours, overtime cannot

exceed 80 hours per year and the daily work cannot exceed 9 hours. The workers

also are entitled to a rest period of at least 12 hours between working days and at least 4

weeks of vacation per year plus local holidays.

- The official minimum wage in Spain is 450 Eur per month in 14 payments (12

monthly payments and 2 extra payments in July and December)

Employee Contracts

In Spain there exist a number of different types of contracts that varies both in length,

type of payment and other factors.

- Temporary Contracts

The use of temporary contracts is very common due to the difficulties and costs involved

with firing employees with a fixed contract.

A temporary contract is given for a fixed amount of time (normally 3 or 6 months) or in

some cases the contract terminates upon the finishing of a job. When the contract is

completed the employer can decide to renovate the contract or not. For some sectors

there are a maximum amount of times an employer can renovate a temporary contract

with the employee before offering a fixed contract.

- Indefinite Contracts

An indefinite contract is a contract the employer cannot terminate unilaterally without

paying compensation unless the worker has done a major fault or breach of the contract

signed.

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In some cases the dismissal of an employee can be declared void (i.e. for discrimination

or when basic rights of the employee are infringed) which will result in a compulsory re-

employment.

If the employer wants to dismiss an employee a written notice stating the reasons for the

dismissal has to be given with a 30 days notice. Depending on the reasons for the

dismissal the employer have to pay a compensation equivalent to between 20-45 days

pay, per year of service.

Other types of contracts

Part-time contracts (which can both be fixed or temporary) where the employee works a

specified number of hours although maximum 30hours per week.

Internships: The use of internees is very common in Spain both because it is a cheap

form of labor (the employer do not have to pay although it is normal to pay between 300-

1000Eur per month) and because the employer do not have to pay social security for

an internee. This type of contract is seen as part of the studies or training of the student

and can only be offered up to 4 years after the students has finished their studies. The

work done by the internee furthermore has to be relevant to the type of education.

Trade Unions

Union density in Spain is relatively low at around 15%, although the results of elections to

works councils indicate that unions have much wider support. There are two dominant

union confederations in Spain, CCOO and the UGT, although there are other important

groupings at regional level and in the public sector.

There are around 2.5 million trade union members in Spain and the latest official figures

from the ministry of labour for 2007 show that 15.8% of all employees are union

members.[1] This is slightly higher than a comparative database of union membership,

which put union density at 14.6% in 2006.

Social Security

The Spanish social security system is much like the British one, in that you pay

your contributions every month, and that entitles you to a pension, unemployment

benefit, sick pay, maternity pay and the right to receive free healthcare. The amount

of pension or benefit you receive depends on the level of contributions you have been

paying.

When setting up a business the company needs to register both the company and

workers (including working owners) at the social security system. The system covers

benefits for health care (sickness and maternity), injuries at work, unemployment,

pensions, invalidity and death benefits.

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The monthly social security fee for all workers is paid by both the employer and

the employee. The exact amount depends on the how much the employee earns (with a

minimum and maximum amount) and on the category of the work performed. The

monthly social security fee per employee is approx. 30% of the employee wage,

which the employer have to pay and the employee pays approx. 6% of their wage

in social security.

Spanish Social Security System has two schemes applicable:

The general scheme, or scheme for the dependent worker: It imposes a set

percentage of income as a contribution to be paid jointly by the employer and the

employee.

The scheme for the self-employed: The employee, who works on his own account, is

responsible for the total amount of contribution, he can choose between a maximum and

a minimum percentage of contribution. It provides no unemployment benefits.

Employer and employee's contributions constitute the main social security financing,

however employer pays the greater share, he will usually complete all formalities to

ensure that workers are covered by the social security system.

Personnel are classified into labour categories for the purpose of determining their social

security contributions, the government annually establishes the maximum and minimum

contribution rate. The minimum salary on which social security contributions must

be paid is around € 421 a month.

Employees are entitled to unemployment benefits if they lose their jobs. The mandatory

unemployment contribution is paid as a percentage of the salary.

16.4 Sweden Regulation: The Swedish labour market is regulated both by legislation and through collective bargaining agreements. Trade unions traditionally enjoy a powerful position in Sweden. Although mandatory law and/or collective bargaining agreements provide the basic terms of employment, the employer must provide the employee with the key terms of employment in writing. Signing collective agreements is voluntary, but trade organisations can take industrial action to reach an agreement with an employer.

Wage levels are competitive for skilled employees: Salary levels for highly skilled staff are relatively low, and costs for manufacturing labour are similarly competitive. Wage differentials between different types of work are narrower than in many developed countries.

Minimum Wage: There is no statutory minimum wage; wage issues are instead left to

employers and employees and their representatives.

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Labour relations: Industrial disputes and conflicts are fairly rare. Trade unions are important partners for employers because the vast majority of workers are unionized.Some 71% of wage earners and 72% of salaried workers belong to a trade union. Dismissal: A dismissal by the employer must be based on objective grounds. Summary dismissal is only possible when the employee has grossly neglected his or her duties towards the employer. In a redundancy situation, the principle of “last in-first out” applies, in certain cases with modifications. If the employee is a member of a trade union (or if the employer is bound by a collective bargaining agreement) the employer must initiate and complete negotiations with the union of which the employee is a member before any action to dismiss the employee is taken. Notice of dismissal must include certain formal information. The period of notice normally varies between one and six months, depending on the duration of the employment. Under certain collective bargaining agreements, this period is prolonged when the employee has reached a certain age and has been employed for many years. An employer must always be able to establish “just cause” (objective and specific grounds) in cases of termination. In case of wrongful dismissal, the employer may be liable to pay damages. Normally such damages range from 16 to 32 months of salary.

Terms of employment: Swedish employment contracts are normally valid indefinitely

but may include an initial trial period - a so called probationary period in the contract. The maximum probationary period is six months. Recent legislation has also increased scope for fixed term contracts.

Contracts are governed by statutory rules and, in most cases, a collective

agreement between the employer and relevant trade union. The rules cover issues like working hours, holidays and termination of employment. Employers can agree other terms with trade unions in local collective agreements.

Working hours: The statutory basic working week is 40 hours. Overtime is limited to 48

hours over a four-week period and 200 hours per year. Deviations can also be arranged with the union, and workplaces are often flexible about working hours, particularly in smaller companies.

Holidays and time off: Employees are entitled to a minimum five weeks‟ paid annual

leave after their first 12 months of employment.

Equality and diversity – principle of non-discrimination The principle of equal pay for the same job, regardless of gender, has long applied in

Sweden. Pay differentials between men and women are narrow compared to many other countries, though women still earn somewhat less than men on average. In Sweden, women constitute 48.3% of the total labour force, which is a very high proportion compared to other countries.

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Sick leave: This is largely covered by the social insurance system. No sickness

allowance is payable for the first day off work. If an employee is absent from work due to illness the employer pays 80% of salary for days 2–14. From day 15 and onward, the social insurance system takes over and pays a sickness allowance of 80% of salary, up to a maximum annual amount (SEK 318,000 in 2010).

Parental leave: Both mothers and fathers are entitled to draw parental allowance.

Parents are together entitled to 480 days of leave from work per child, starting from birth. Parents are also entitled to leave from work to care for sick children, up to a maximum of 120 days per child per year. This leave is paid for by the state insurance system in the same way as parental allowances.

Publicly and privately funded social provision: The national basic pension and insurance system is often combined with occupational-based insurance plans. Social insurance in Sweden has many facets, ranging from parental leave and child care to sickness and accident insurance, disability assistance, and care for the elderly. It covers all Swedish residents.

Funding: Sweden‟s social security system is primarily funded by statutory contributions

under the national basic pension and insurance plan. Many employers supplement these contributions with payments under occupational-based agreements with their employees. Individual employees can also top up their provision with private insurance.

National basic pension and insurance: Employer contributions. All employers in Sweden pay statutory social security contributions on behalf of their

employees, consisting of charges for pensions, health insurance and other social benefits. These contributions amount to 31.42% of gross salary.

Long-term unemployed relief waives all statutory employer contributions for people

who have been receiving unemployment benefit, sickness benefit, disability pension or a social allowance for more than one year. This relief is valid for a period equal to the length of the person‟s unemployment (up to a maximum of five years). For foreign experts a reduction in employer contributions is available as part of the tax relief scheme for key foreign employees.

Occupational-based pension and insurance Many employers also pay into occupational-based insurance and pension plans on

behalf of their employees. Two main types of occupational pension and insurance plan are used in private industry to supplement basic statutory protection: collectively agreed insurance or non-collective insurance.

Collective insurance plans: A majority of employers in Sweden have collective

agreements with trade unions under which they make payments to occupational pension and insurance plans for their employees. These plans provide employees with supplementary insurance above their basic statutory provision.

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Non-collective insurance plans: Companies that are not bound by a collective agreement with a trade union can either sign a collective application agreement with a trade union or may as a benefit offer a non collective agreement solution. An employer can also use an insurance company to offer employees a non-collective occupational pension and insurance plan. If a company is not bound by a collective or collective application agreement it does not have to offer a non-collective insurance plan.

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Apendices


117

APPENDICES PARTICIPANTS LIST CASE HISTORIES

Participants


118

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Participants


119

APPENDIX

Sample breakdown and participants list

The sample breaks into the agreed subsectors, and as the target is SME, we can also

show the number of employees in most cases.


Bakery 6 1 4 4

Cut meat 3 4 1 1

Fruit and veg 5 2 5 2

Ready meals 4 2 1 3

Other 5 1 2 0

Food total 23 10 13 10

Aerospace 3 1 3 1

Engineering prod 16 11 4 9

Medical 2 1 2 2

Office furniture 2 1 1 2

Yellow and green 5 7 2 2

Engineering total 28 21 12 16

TOTAL 51 31 25 26

Number of employees

UK

Germany

Spain

Sweden

<50 17 6 9 10

50 to 99 16 6 5 7

100 to 499 10 7 3 5

500+ 8 11 7 4

Not known 0 1 1 0

TOTAL 51 31 25 26

target 40 25 20 12

Participants


120

Country Company name Sub

sector Number of employees

Automation

UK AH WARREN TRUST Other

85 Yes

UK ARDEN PACKAGED FOODS Other - Pkg

foods 20 Yes

UK BAKKAVOR Ready meals

8631 Yes

UK BELLS OF LAZONBY Bakery 20 Yes

UK BETTYS BAKERY Bakery 100 No

UK BV DAIRY Other -

Dairy goods 76 Yes

UK CHARCUTERIE CONTINENTAL Cut Meat 30 No

UK CHAUCER FOODS LTD Ready meals

120 Yes

Uk COOPERATIVE FARMS Fruits &

Veg 517 Yes

UK COUNTRY PRODUCTS Other - Pkg

food 11 to 50 Yes

UK ELVEDEN FARMS LTD Fruits &

Veg 51 to 100 No

UK FOSTERS BAKERY Bakery 116 Yes

UK FOX‟S BISCUITS Bakery 1590 Yes

UK G‟S MARKETING Fruits &

Veg 1175 Yes

UK GLOBAL FINE FOODS Ready meals

45 No

UK KP FOODS Other - Pkg

food 765 Yes

UK LIVEWELL Bakery 11 to 50 Yes

UK LOSCOE CHILLED FOODS LTD Cut Meat 139 Yes

UK PATERSON-ARRAN LTD Bakery 152 Yes

UK PDM PRODUCE Fruits &

Veg 1100 Yes

UK ROBERT MONTGOMERY Fruits &

Veg 11 to 50 Yes

UK ROWAN FOODS Ready meals

650 Yes

UK VION HALLS Cut meat 300 Yes

UK AK INDUSTRIES Engineering

products 77 Yes

UK ASM MEDICARE Medical 11 to 50 Yes

UK BANKSIDE PATTERSON Yellow & Green

95 Yes

UK BROMPTON BICYCLES LTD Engineering

products 120 Yes

UK CONCENTRIC PUMPS LTD Engineering components

190 NA

UK CRISPIN ORTHOTICS Medical 13 Yes

UK CU PHOSCO Aerospace 11 to 50 Yes

UK DABICO Aerospace 25 Yes

UK ELECTRO MECHANICAL SYSTEMS Engineering

products 11 to 50 Yes

UK EMIR Office

Furniture 77 Yes

UK HARWIN Aerospace 95 Yes

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Automation

UK HAYTER Yellow & Green

101 – 200 Yes

UK JBTC Engineering

products 55 No

UK JJ CHURCHILL LIMITED Engineering

products 75 Yes

UK MACHINE ELECTRICS Yellow & Green

35 No

UK MECC ALTE Engineering

products 90 Yes

UK NEWBY FOUNDRIES LTD Engineering

products 96 Yes

UK PERCY LANE AUTOMOTIVE Engineering 40 Yes

UK POLYTEC HOLDEN Engineering 180-200 Yes

UK PRESTIGE Engineering - Metalwork

85 Yes

UK RACKLINE LTD Office

Furniture 85 Yes

UK RGS SHEET METAL Engineering

- Fabricators

37 Yea

UK RICARDO

Engineering -

Automotive specials

85 Yes

UK ROBERT BON LTD

Engineering - Perf

metals & plastics

<20 Yes

UK STANDEN ENGINEERING Yellow & Green

70 Yes

UK TEREX Yellow & Green

20000 Yes

UK THE CNC FACTORY Engineering

products 3 Yes

UK YOUNGMAN Engineering

products 86 Yes

Germany BARTERODER FEINKOST GMBH Ready Meals

135 Yes

Germany BERTHOLD KLEFF

FLEISCHGROSSHANDEL GMBH Cut Meat 135 No

Germany BREISIA UND BEER GMBH UNDCO

KG Ready Meals

20 Yes

Germany CADERA GMBH AND CO KG Bakery 40 Yes

Germany DETLEV KASCH Cut Meat 440 Yes

Germany DRESITERN KONSERVEN GMBH Cut Meat 11 to 50 Yes

Germany DUEPMANN GMBH & CO KG Fruit & Veg 60 Yes

Germany FONTANA GARTENBAU GMBH Fruit & Veg 25 Yes

Germany SCHAFT Cut Meat 600

Germany SCHWÄLBCHEN DAIRY Other 353 Yes

Germany ALTEK GMBH FUER ALLGEMEINE

LANDTECHNIK Yellow & Green

11 to 50 Yes

Germany CARL ZEISS JENA Engineering 5000 yes

Germany CONTITECH Engineering 600 Yes

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Automation

Germany FC SONDERKONSTRUKTION Yellow & Green

99 Yes

Germany FRESENIUS KABI DEUTSCHLAND

GMBH Medical 21000 Yes

Germany FREUDLSPERGER BETON- UND

KIESWERKE GMBH

Yellow & Green - sand & gravel

65 Yes

Germany FREUDENBERG MEKTEC EUROPA Engineering

Products 160 No

Germany FRITZMEIER SYSTEMS GMBH & CO

KG Yellow & Green

51 to 100

Yes

Germany HARMONIC DRIVE Aerospace 300 No

Germany HIRSCHVOGEL UMFORMTECHNIK Engineering 1600 Yes

Germany JOHNSON CONTROLS Engineering 113000 Yes

Germany JULIUS TIELBUERGER GMBH & CO

KG Yellow & Green

51 to 100 Yes

Germany JUNGHEINRICH Engineering 65 Yes

Germany KS ALUMINIUM TECHNOLOGIE

GMBH Engineering 2000 Yes

Germany MASCHINENFABRIK BERNARD

KRONE GMBH Yellow & Green

500 Yes

Germany META-REGALBAU GMBH & CO Office

Furniture 101 to 200 Yes

Germany OSRAM Engineering 3500 Yes

Germany REICHARDT GMBH Yellow & Green

40 Yes

Germany REXROTH GUSS Engineering 600 Yes

Germany SONA BLW (2) Engineering Yes

Germany SONA Engineering 500 Yes

Spain A.G. VILLODRE SL Fruit & Veg 11 to 50 Yes

Spain AMEFRUITS SL Fruit & Veg - Yes

Spain ANITIN PANES ESPECIALES

SL. Bakery 101 to 200 Yes

Spain AZUCARERA EBRO

Other - Food sugar

2,000 Yes

Spain BARENYS CANALDAS SA Bakery 51 to 100 Yes

Spain CAMPOFRÍO

Cut meats 11,000 Yes

Spain CITRICOS THARSIS S.A. Fruit & Veg 11 to 50 No

Spain

COOPERATIVA AGRARIA

NARANJERA DE LOS ALCORES

SOCIEDAD COOPERATIVA

ANDALUZA

Fruit & Veg 51 to 100 Yes

Spain DULCESOL

Bakery 1,800 Yes

Spain HARINAS PARA ARTESANOS Bakery 11 to 50 Yes

Spain LECHE PASCUAL Dairy 2,500 Yes

Spain ULTRACONGELADOS VIRTU

Fruit & Ve 21 Yes

Participants


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Automation

Spain YBARRA GOURMET S.L. Ready Meals

11 to 50 No

Spain ARCHIMOVIL SA Office

furniture 11 to 50 Yes

Spain CENTRE ESPECIAL D OCUPACIO

DEL MARESME DE MATARO Medical 83 No

Spain CONST. ESPAÑOLAS DE HERR.

INDLES,SA Engineering 11 to 50 Yes

Spain CONST. ESPAÑOLAS DE HERR.

INDLES,SA Engineering 11 to 50 Yes

Spain CMH AUTOMACION, S.L.

Integrator 20 tbd

Spain HERMANOS ALFONSO Y JOSE SANZ Yellow & Green

90 Np

Spain IBERIA MANTENIMIENTO Aerospace 4,000 Yes

Spain MEUPE Aerospace 11 to 50 Yes

Spain M.TORRES DISEÑOS ENERGÉTICOS,

S.L Engineering Wind power

516 Tbd

Spain SUNRISE MEDICAL, S.L Medical 1850 Yes

Spain TALLERES MECACONTROL SL Yellow & Green

91 Yes

Spain TECNATOM Aerospace 201 - 500 No

Sweden BAKERIET

SJOSTRANDS & ERICS BRO Bakery 20 Yes

Sweden BJORNMAT INTERNATIONAL AB Fruit & Veg 5 DK

Sweden FAZER Bakery 443 Yes

Sweden GUNNAR DAFGARD AB Cut Meat 1050 Yes

Sweden HAFI, HALLANDS FRUKT Fruit & Veg 22 Yes

Sweden JASTBOLAGET AB Bakery 59 Yes

Sweden KALLBERG INDUSTRI AB Ready Meals

85 Yes

Sweden KLARAGO Ready Meals

34 No

Sweden NORDIC LUNCH DRIFT Ready Meals

78 Yes

Sweden SIGVANTS BAGERI AB Bakery 212 Yes

Sweden ARJO HOSPTAL EQUIPMENT Medical 171 Yes

Sweden BT PRODUCTS AB Yellow & Green

1420 Yes

Sweden CH INDUSTRY Engineering 41 Yes

Participants


124



Automation

Sweden GOTENE SPECIALINDRENINGAR AB Office

furniture 20 No

Sweden HOLJE MAKANISKA AB Engineering 22 Yes

Sweden KUNGSOR PLAST AB Engineering

Piping systems

60 Yes

Sweden LIKO AB Medical 107 Yes

Sweden NIKE HYDRAULIDCS Engineering 60 yes

Sweden SAAB AB Aerospace 13900 Yes

Sweden SANKT BERNHARD MEKANISKA AB Engineering 50 Yes

Sweden SKRUVA TEKNIK AB Engineering 40 Yes

Sweden SOLO MECHANICAL SOLUTIONS Engineering

Jobbing shop

50 Yes

Sweden SWEDWOOD TIBRO AB Office

furniture 218 Yes

Sweden TRANAS RASTFRIA Engineering 40 Yes

Sweden TRANAS ROSTFRIA Engineering 20 Yes

Sweden VADESTAVERKEN Yellow & Green

718 Yes

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Case histories


APPENDIX

CASE HISTORIES

These case histories have been prepared from interviews carried out during the

EAMA project. Each has been checked with the respondent to get their approval

before inclusion in this report. They are in two groups, the food manufacturers

and the engineering companies. The introductory pages come from the company

websites.

Food Manufacturers

Chaucer Food Group Chaucer Foods adds another automation element to keep internationally

competitive.

The Cooperative Farms The Co-operative Farms, introducing a cost effective in-house solution.

Fosters Bakery Fosters Bakery, getting more capacity out of existing machinery.

Engineering Companies A K Industries AK Industries, Automation wins back production from the Far East.

Brompton Bicycles Brompton Bicycles Ltd, expanding to meet demand.

J J Churchill JJ Churchill Limited: Very specific automation to achieve and rapid response.

The CNC Factory The CNC Factory, small company invests to double production.

Harwin Harwin plc., investing to compete internationally.

Youngman Group Youngman, short pay back and flexibility to meet the expected upturn.

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Case histories


Chaucer Foods Group are suppliers to major food producers over

the World We have leading global market positions in: • Freeze dried ingredients • Croutons • Mushroom Extract Our sales total over $110M We employ over 400 people We operate manufacturing sites in the UK, France and China All of our manufacturing sites are BRC Grade A accredited Our customer service centres are located in the UK, France, China, USA and Chile We sell our products in over 30 countries across all continents We operate an extensive network of established distributors across the globe Our global raw material sourcing capability provides us with full traceability and supply security We have an unparalleled record for product development and innovation We are in touch with markets across the World. Chaucer Foods Ltd Brighton Street Industrial Estate Freightliner Road Hull HU3 4UN, UK Telephone +44 (0) 1482 588088 Fax +44 (0) 1482 588082 www.chaucerfoods.com

http://www.chaucerfoods.com/freezedriedingredient/introduction.php

http://www.chaucerfoods.com/croutonsbreadbasedproducts/introduction.php

http://www.chaucerfoods.com/mushroomextracts/introduction.php

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Case histories


Chaucer Foods adds another automation element to keep

internationally competitive.

1. Brief description of the company and what it does.

Chaucer Foods is a manufacturer of bread based ingredients and fast re-hydrating

components designed for modern convenience foods. It is a global ingredients

business selling products in over 30 countries across all continents and is a

supplier to many leading multinational food producers.

The company has manufacturing sites in UK, France and China, employing over

400 people across the group. Chaucer Food's expert team of development

technologists is constantly innovating in new creative bread-based ingredients

designed to enhance customers' products. Products include soup croutons, salad

croutons, salad & soup sprinkles, snacks, toppings & crumbles for ready meals

and crumb cereal filler.

2. The reason for considering automated capital equipment, and the

application

Processing is almost entirely automated already, so the focus is on pre and post

processing. The most recent update was August 2009, this being automated

product loading into bulk IBC bags (Industrial Bulk Container). It was previously a

labour intensive manual operation, upgrading costing about £30,000.

The reason was - and will continue to be - cost reduction. Competitiveness is key,

our global competition normally competes on lower cost rather than higher quality.

With increased competition in the market place, any way to reduce cost and at the

same time improve quality and consistency, through automation, has to be worth

considering.

The main factors internationally have been increased demand in developing

markets outside Western Europe. So Chaucer Foods need to be closer to growing

markets and better able to compete locally with imports from the EC and beyond.

3. The decision process

In terms of sponsoring and originating the product, the initiative was taken by the

UK Technical and Development Manager and the Operations Manager. Their

main concerns were cost reduction and elimination of manual handling.

Middle managers were involved in preparing the case for automation and

evaluating case studies. They have slightly different concerns to the top

managers, being mainly interested in ease of operation and labour issues. “The

higher up you go, capital investments become more bottom line driven.”

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Case histories


4. Plans for people on the shop floor

Shop floor workers‟ representatives were heavily involved. They are reported to

have had a healthy, positive view towards investment within the business. It

seems that everyone is in favour of seeing investment in the future. It makes the

business more viable and their jobs more secure.

Concerns about job losses were addressed in team briefings, but the numbers

involved are not large and there were no major implications for the workforce. in

this case it involved one or two people being absorbed elsewhere in the business

5. Funding

The project was justified on an approximate 12 month payback.

The issue was not availability of funds, it was the justification of funds for

investment in automation.

“Sometimes you might get a leasing arrangement where you can switch to a buy

later and recover some of the costs, so in some ways it can reduce the risk on

vulnerable projects - but we would normally look at justifying buying outright in the

first place.”

Wherever possible funding guidance would be sought from government bodies

such as MAS (Manufacturing Advisory Service) or RDA (Reg. Dev. Agency)

6. Problems and how they were overcome

“The specialist nature of our business is a barrier to investing in automation. There

are lots of companies around that deal in automation but they do not know much

about manufacturing croutons.”

Flexibility of the system has also to be considered strongly. It has been a barrier to

automation to date so if there is a way of automating while incorporating flexibility

that would be very important. As the Technical Director says: “The company is

prepared to be innovative given an opportunity to reduce costs and improve

manufacturing efficiency or generate a business advantage. The company is

prepared to back a case if it can be justified, even if there‟s some added risk

involved.”

7. The result, in terms of what was bought and how it will be maintained.

The result was a simplified bulk product loading system. It was formerly a manual

operation which was logistically difficult and resulted in waste as well as delays.

The new faster, cleaner, more reliable system saved money and paid for itself

within 12 months. It did not lead to any redundancies. It is maintained by the

company team.

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The Co-operative Farms

The Co-operative currently farms around 50,000 acres of land in England and Scotland. We have been farming since 1896, when we bought our first farm to grow potatoes for our food stores, giving us over 100 years of farming expertise. Although methods of farming have changed and technology has progressed beyond recognition, the same principles of responsible farming, good land management, good people management and care for the environment still apply today. packing In 2006 we bought our first pack house at Langley Brook, Tamworth. Here we wash and pack potatoes grown on our own farms and by other Co-operative approved growers. We have since acquired two more packing facilities, another potato packhouse at Carnoustie, Angus and a broccoli and strawberry packhouse at Longforgan, Dundee. This ensures we can oversee more of the supply chain to give our customers the very best quality assurance. grown by us A branded Co-operative Farms range of food was launched in 2007. “Grown by us” is an expanding range of seasonal British fruit and vegetables, cereals and ambient lines. Our customers are increasingly concerned about the origin of their food. The Co-operative has a unique position as a leading British farmer and retailer, therefore we can assure our customers that our Grown by us range is of the highest quality. We don‟t just work closely with farmers, we are the famers! technology We operate a fleet of some of the most advanced machinery available. The combine harvester fleet is run as a central pool, whereby we can keep these expensive machines working at full capacity during harvest. We were early adopters of minimal cultivation practices, and wide tramline width self-propelled sprayers. We‟ve also harnessed technology and research in taking care of the environment. As environmental concerns heighten we were the first farming business to take positive steps to address this and train other farmers. our people In 1965 The Co-operative Farms introduced a management training scheme, which we still run today. It recognises the importance of investing in our people and developing skills and talent to produce the best farm managers. We‟ve made major investments in accommodation and facilities for our seasonal workers and we continue to look for ways that we can better support and develop our staff. In recent years we have won numerous awards for our training and our health and safety programme is one of the most highly regarded in the industry. The Co-operative Farms 4th Floor Old Bank Building Hanover Street Manchester M60 0AD, Phone: 0161 246 3155, Fax: 0161 246 2889, Email: [email protected]

mailto:[email protected]

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The Co-operative Farms, introducing a cost effective in-house

solution.


“The Co-operative Farms” sales are about £45 million. They are the UK‟s largest

farmers, farming approximately 50,000 acres in the UK. The focus within Co-

operative Farms at the moment is on aligning the business with “The Co-operative

Food”, delivering direct to the supermarket.

£10-14 million a year is invested in capital in the business, both in land

acquisitions and packhouse acquisitions, and there are plans to invest further in

automation in the packhouses in the next 3-5 years.

2. The reason for considering automated capital equipment And the application

In 2009 an integrated strawberry line was installed to put a field punnet in and get

a packed punnet out. This was followed by investment in top sealing of

strawberries. Instead of manually putting lids on all the punnets of strawberries,

they are now sealed with a blue printed film, with date codes. Manual lidding was

both expensive on labour and on packaging. It had to be done more cost

effectively and, because volumes year on year are increasing, the investment

was justified. The finished product is of a higher quality.

Cost saving is a massive driver due to the competitiveness in the UK food retailing

sector at the moment. “If you can take £1/tonne out of your potatoes and you‟re

doing 100,000 tonnes, it‟s a lot of money!”

Specifications are increasing all the time. UK retailers have high specifications and

demand perfectly uniform crop. It‟s to do with the aesthetics of your finished

product. If you are manually packing, sealing or wrapping, you‟ll get greater

variability in the aesthetics.: It‟s all about perception, because all retailers wants

repeat customers.


The senior manager instigated the strawberry project, it was run by the packhouse

site mangers, and the skilled workforce was involved at each stage


Automation will reduce headcount but it will give greater security to the rest of the

workforce. Part time workers, infield pickers and packhouse workers are

employed seasonally and account for 80% and 50% respectively.

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“In terms of infield picking exercises, such as the soft fruit and top fruit and such

like, there will be little effect. But that will reduce year on year, as technology gets

better. In packhouses, we will probably take out 10-20% of the existing workforce.”

“Automation has to be driven from the ground up. It‟s great to have a strategic

vision of automation but if you can‟t get your supervisors and line managers to buy

into it, then it won‟t work. However automated a system is, it‟s only as good as the

people actually managing it. I think that we‟re very good at that as a business.”

5. Funding

Internal Group funding has been used. “There have been some delays because

of the range of projects that we have in hand at any one time. We‟ve got to have a

priority list because we‟ve got such an aggressive strategy going forward.”

There is support from national and regional Government but to date we haven‟t

taken advantage of it. We‟ve funded investments out of internal funds and justified

them on the basis of the return that we hope to achieve. We‟re talking more and

more to the funding bodies to see what‟s out there. This means working in

conjunction with them in the development of ideas and discussing what else is

going on in the industry.


“With the strawberries, we‟re trying to integrate each of the processes so that they

flow: A lot of the systems in the UK and abroad have found a solution for part of

the chain but we‟ve tried to find a solution for the entire chain.”

Flexibility to accommodate change in product and packaging medium; M&S will

want different specifications to Tesco in terms of packaging, size of crates. A big

driver for automation is the flexibility of the product that you put in. If you have a

packhouse that has 20-30 different SKUs (Stock Keeping Unit) then you need that

automated line to be able to switch between each of those products quite quickly,

whereas, if you had a manual line you have to change packaging and people. So

if it‟s more automated, then you reduce physical downtime and decrease the

production hours.


The integrated strawberry line and top sealer cost about £350,000.It has reduced

the cost by 2 pence to 5 pence per punnet.

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Case histories


Fosters Bakery is based in Barnsley, South Yorkshire, from where we bake

and supply breads, rolls and confectionery to supermarkets, hotels, restaurants, catering establishments, food manufacturers and a variety of other outlets in the UK and abroad. Our Vision is to be YOUR favourite baker. Our Mission is “to enhance our reputation and that of our customers, in developing food service and retail markets” We make bespoke and unusual breads to enhance the design of sandwiches and other foods requiring bread as an ingredient. Our Values: We embrace open-mindedness, integrity and loyalty in all our dealings … . . and, of course, baking the most delicious products we can. The Bakery employs 230 people and, with worldwide sales of more than £10million per annum and more than a million products per week. Fosters Bakery embodies both quality and tradition but is also always forward thinking both in our willingness to integrate new technologies into this traditional industry and in our progressive employment policies. Fosters has made a commitment to the rural economy by sourcing flour milled from locally sourced wheat giving local farmers the confidence to grow bread making wheat and reducing the food miles for the bakery‟s products. We also support research and collaboration into more sustainable farming. Our bakery generally operates to the “BRC” Global Food Standard - Issue 5 Grade A with the exception of our confectionery (including fresh cream cakes) which are produced to the Salsa Food Safety Standard. Fosters Bakery (Staincross) Limited Towngate Mapplewell Barnsley South Yorkshire England S75 6AS Main Customer Contact Number: 01226 382877 Main Customer Fax Number: 01226 390087 www.bake-it.com

http://www.bake-it.com/

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Fosters Bakery, getting more capacity out of existing machinery.


Fosters supply bread nationally and internationally. Over half of the business is

frozen product, they bake it, palletise it, freeze it and ship it out internationally.

They also make gluten free products, for the likes of Waitrose and also for

pharmacies. There is a broad customer base and the business continues to grow.

“The bigger organisations are taking the complexity out of their business and

that‟s where we fit in: That‟s our niche! When I said that we‟re in all these different

customer bases: We‟re in Costa Coffee with one product; we‟re in Pret a Manger

with two products and so on and so forth. That‟s what we do. The products that we

do are a little bit difficult to do.”

2. The reason for considering automated capital equipment

And the application

“We needed to increase the capacity of one of our ovens, to meet a large new

contract. So, the idea with the robot was that we could increase the capacity of the

department.”


“The one thing about a company like this is that everybody talks! So, we‟re talking

to the middle managers; we‟re talking to everybody all the time. Because of this

open culture, if somebody has an idea they will come to you with it - and they‟re

doing it all the time. The whole workforce wants it working, and when it is working

they‟re like „wow!‟

It says „we‟re moving this company forward‟. So, everyone is behind it. When it

works it‟s interesting to see it, and they all want to train on it to learn how to use it

so that‟s a positive element.”


“It‟s not necessarily about taking jobs out; it‟s about creating higher skilled jobs,

and that is the case!

Loading and unloading the oven is a repetitive job and we‟re trying to take out

repetitive jobs. When we had a decent summer a few years ago it was unbearable

up there! The robot doesn‟t know about the sun shining in through the skylight

does it?”

There are no short term employees.

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5. Funding

“The company is financially very strong so the robot is bought and paid for. If we

want something we will go out and buy it. That‟s what we do! That‟s sometimes

why it takes a bit of time.”


The initial installation was not successful. CenFRA, Fanuc and Steron have been

involved in providing solutions. CenFRA innovation funds have been awarded to

help the development. Sheffield Hallam University and Yorkshire Forward have

also given effective support.

The automation requires , bakery equipment tends to come in many shapes and

sizes, and the heat expands some parts some of the time.


BAKING ROBOT (LOADING AND UNLOADING):

“There‟s an 80% capacity increase and an 80% reduction in energy use. Without a

robot, the oven at the moment runs full of product; it‟s then emptied: It‟s running

and the gas and electricity are still on even though there‟s no product in there.

The robot never runs empty: it takes one out and puts another one in. So, it can

improve it by at least 80%. Also, we‟ve dropped the temperature by 6 degrees,

and the manufacturer of the oven is now interested in this robot too.”

The other equipment which the company runs is modified and maintained by the

company.

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Case histories


aki plastic injection moulders

Programme

New product development "Design for manufacture"consultancy New business project

management Rapid prototyping Toolmaking

(prototype/production) (UK/overseas) Injection moulding (UK

and overseas) Finishing & assembly Advanced quality

systems

Facilities

Injection moulding Insert moulding Two shot moulding Controlled environment Thick walled moulding Gas injection Micro moulding Peek/LCP thin walled mouldings

Ultrasonic welding CNC 5 colour printing Assembly CAD/CAM Solidworks 2008 CAMWorks 2006

aki offers technical injection moulding solutions. aki will work with you from the concept stage and can supply in-house design, prototype and tooling services, significantly reducing delays normally experienced using several suppliers.

Market sectors served

Automotive Aviation Business machines Defence Domestic appliances Electrical & electronics Medical Showering and bathroom

products

The aki new product realisation and optimisation process

A K Industries Ltd, Foxwood Court, Rotherwas, Hereford, Tel: 01432 375100, email: [email protected]

http://www.aki.co.uk/page/Technical_moulding

http://www.aki.co.uk/page/finishing_processes

http://www.aki.co.uk/page/quality

http://www.aki.co.uk/page/quality

http://www.aki.co.uk/page/technical_moulding

http://www.aki.co.uk/page/insert_moulding

http://www.aki.co.uk/page/two_shot_injection_moulding

http://www.aki.co.uk/page/class_10000_clean_room

http://www.aki.co.uk/page/gas_injection

http://www.aki.co.uk/page/gas_injection

http://www.aki.co.uk/page/small_and_micro_injection_moulding

http://www.aki.co.uk/page/ultrasonic_welding

http://www.aki.co.uk/page/tampo_pad_printing

http://www.aki.co.uk/page/drilling_polishing_and_assembly

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Case histories


AK Industries, Automation wins back production from the Far

East

AK Industries specialises in injection moulding of plastics. Many of the parts they

produce are to replace parts formerly made of metal. They also do aesthetic parts

and printing, for plumbing, automotive, medical and laboratory ware as well.

Nylons are the main materials used. These are particularly difficult materials to

process.

The company says:

“ We‟ve gained a bit of a reputation for being a leader in processing this type of

material, so it‟s worked out quite nicely”.

Business was significantly affected by Far Eastern companies some years ago.

But, because of their new investment, new work has recently been taken on which

was previously being produced in China. The decision was made as exchange

rates became more favourable but, more importantly, because the new set up

allowed better quality and more flexible/faster delivery. The production process is

totally automated. The focus is now on the pre-production phase. The company

has 86 full-time people on three shifts over 24 hours and about 10 temporary

workers on the shop floor.

The reason for considering automated capital equipment

And the application

An automated assembly jig for a new product was specified by the customer.

Assembly is significantly more consistent when automated than if it is done

manually and it reduces the labour content. Health and safety is also a factor, as

it is a heated product and there‟s always the potential of risk there.

The decision process

The company is small and family owned Problems are discussed, solutions

agreed and decisions made. In the most recent project, the customer set the

pace, with quality and delivery targets which could best be met by automating.

Plans for people on the shop floor

When people work at AK Industries, they tend to stay, so there is a highly-skilled,

loyal workforce. If some people left they would not necessarily be replaced.

The shift system is currently in the process of shifting to 12 hour shifts, rather than

eight hours, to gain greater intensity of staff there at any one time. This will allow

the plant to run more efficiently.

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Staff initially saw automation as a threat, because if there is a robot on the

machine, they do not need a person. But because of the move to the 12 hour

structure, there will be a general up-skilling of the workforce which hopefully will

increase their potential.

The company does train in-house where they can. In terms of automation, up to

this point they have been capable of training in-house because they have got the

skills. If they were moving into six axis and assembly automation, then they would

probably look to outsource it because they would not necessarily have that skill

set readily available.

Funding

“I think we may have investigated external funding, but I don‟t think it‟s ever been

taken to any length. The decision has normally been based around internal funds

and what we can justify investing in. We‟re fortunate that we‟ve had 13 profitable

years so when we‟ve invested in new equipment it‟s been from cash reserves

within the company. We do know there are various supports you can get

regionally and from Government, but we‟ve not looked at them in any great detail

any time recently.”

Problems and how they were overcome

“I don‟t think we‟ve got into advanced enough automation that we‟ve not been able

to find somebody to do what we want. We‟ve got a project on the go at the

moment which has the potential to be something that nobody knows. The issue is

it is using technologies from a few different areas so there isn‟t one company that

can offer a complete solution. We may have to buy the various bits from various

people, integrate it ourselves and put the package together.

The result, in terms of what was bought and how it will be maintained.

The cost was of the order of £10,000. The equipment is flexible enough that, if the

component went out of production, the equipment could be reconfigured for

something else.

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Case histories


Brompton Bicycles

All Bromptons are designed and built in our factory in West London, England. Brompton is one of

only two major frame manufacturers still based in the UK, and we have been in full production

since 1988. The company has come a long way since its initial production facility in a railway arch,

and the current site occupies 22,000 ft2 (some 2,000m

2).

The company remains in private hands and is now led by Will Butler-Adams, though the

Brompton‟s inventor, Andrew Ritchie, continues to act as Technical Director. Private ownership

has played a big part in making Brompton successful as we have always been able to focus solely

on the bike, never the demands of corporate shareholders.

Today, Bromptons are sold in 33 export markets. In the UK, USA, Canada and Ireland, we sell

directly to carefully-selected bicycle retailers; in other territories, we sell to distributors who operate

their own dealer networks.

From the Mark 1 of the 1980s to today's superlight models, the Brompton has come a long way.

However, despite hundreds of detailed design changes over more than two decades, the elegant

folding principles laid down by the young Andrew Ritchie in his bedroom workshop have remained

essentially unchanged.

Brompton's order book has remained (over) full throughout this decade and demand has

continued to rise exponentially. Although demand like this might tempt some companies to make a

drastic dash for growth, such radical plans would threaten the fundamental nature of the company

and our faith in quality control above everything else. So, while Brompton Bicycle is aiming to keep

growing (indeed, we've taken on almost 20 employees over the past 12 months), we will never

chase sales at the risk of compromising on quality. That's the only way we can expect to still be

here in 20 years' time.

Brompton Bicycle Ltd

Kew Bridge DC

Lionel Road South

Brentford

Middlesex TW8 9QR

T: +44 (0)20 8232 8484, F: +44 (0)20 8232 8181, www.brompton.co.uk

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Case histories


Brompton Bicycles Ltd, expanding to meet demand.

The company is a world leader in high quality very compact folding bicycles.


and the application

The major European cycle makers have taken their production to China. Numbers

produced are in millions and while there is some automation, manual labour is still

important. The Brompton cycle is relatively high price, and is sold to enthusiasts.

The market is becoming more competitive and, while Brompton sales are

increasing, the lack of availability of skilled workers is holding up production.

Brazing of the frames is a key area.

It takes up to two years to train a skilled brazer to the standard required, so

the decision has been taken to introduce brazing robots for some of the

applications.

2. The Decision process.

Strategically the company has to move to automation of key processes if it is to

grow with the increasing demand. Top management is leading the decision.

Middle management is largely in favour, although some have had poor

experiences in the past. The overriding concern is to maintain quality standards.

The company has a comparatively young team.

The work force has also been involved, with some concerns, but these are

mitigated by the evidence that the demand is overtaking the ability to turn

out bicycles.


The small number of skilled people who will be displaced will immediately move to

another project in the company which will use their skills.

4. Funding

The company is privately owned and will fund the project from internal funds.

Support is anticipated from Government sources, but accessing the right source is

proving complex. “Tapping into it is a real skill!”

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What was originally proposed to Brompton as a turnkey solution, is not going to fit

their needs. The supplier does not have the in-depth understanding of what they

are trying to do.

The result is a compromise, Brompton will design the parts to suit the

process, under the supplier‟s guidance.


The automation purchased includes several automated brazing units. The

investment will be well over £100,000.

Training and the maintenance of the robotics will be the supplier‟s responsibility.

Design and production management remain key Brompton skills.

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JJ Churchill is a company whose heritage is inextricably bound-up with

the evolution of the jet engine industry. Founded 70 years ago by the grandfather of its present managing director, the company began making parts for the Merlin engine that went into the Spitfire. When the jet engine industry began in earnest in the 1940s, they made the first generation of compressor blades, and it is still a key part of the business.

Today about half of JJ Churchill‟s revenues are accounted for by the

production of high-horsepower diesel engines delivered on a line-side

sequence basis to the likes of Cummins and Caterpillar. The remainder of

the business is accounted for by various ferrous and non-ferrous parts that

are machined and built into assemblies, again for direct sequencing into

line-side.

JJ Churchill is the market leader in most of the segments it serves and is

also renowned as a world leader in lathe part-off tooling. The company is

determined to retain this position by reinvesting a sum equivalent to 10 per

cent of sales back into the business each year. This year that investment

has been close to £1.8 million.

“We invest in top of the range aerospace equipment for diesel engine work.

It is higher speed and gives greater productivity and repeatability. High

levels of capital investment are a key part of our strategy to combat the risk

of our customers‟ migrating to suppliers in low cost economies.”

JJ Churchill Limited Station Road Market Bosworth Nuneaton CV13 0PF United Kingdom

Phone Fax

01455 299600 01455 292330

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Case histories


JJ Churchill Limited: Very specific automation to achieve and rapid response. 1. JJ Churchill is a family-owned, private, engineering company, operating out of a modern purpose-built factory and office in the UK. There are 110 employees. The company competes in the world market for components. They are market leaders in components and assemblies for aerospace, powergen, defence and high-horsepower diesel engines. 2. The reason for considering automated capital equipment and the application. Modern milling machines tend to be palletised so they come with 2, 4 or even 32 pallets. As a result, there is intrinsic automation as part of the machine: not an add-on. These investments are necessary to stay internationally competitive. The company has a very aggressive capital reinvestment policy and much of the plant is less than 5 years old. Most high-end milling machines now have options for internal palletisation, and that is very attractive because it allows „lights-out‟ manufacture. JJ Churchill installed a further milling machine of this type last year as part of ongoing reinvestment; the cost was over £500,000. In the last month, a further 40 pallet machine has been added. 3. The Decision Process This is taken by the Board/Top Management team which comprises the directors and the heads of each department, with the Engineering Manager heading up the team responsible for specifying new capital equipment. The Shop Floor Supervisor for that cell is also involved, but it‟s neither a union nor an operator issue. Management communicates regularly, every 3 months, to the entire workforce in terms of where investment is being made and why. This is part of the long-standing, ongoing communication process. “We don‟t look at the desire or otherwise to specifically develop automation. Where there is a place for automation, then we will go for it. If, for instance, a package of power generation gas-turbine blades takes off and the customer says: „Right here‟s a long term agreement; we‟d like you to look after total demand for these over the next 5 years‟, then fine, we will automate! There is no point putting in that kind of investment unless we can see beyond typically 2-3 years out. It‟s done on a sale-by-sale /cell-by-cell basis as appropriate.” Justifying automation very much depends on the type of component we‟re machining and the machining cycle-times. If the cycle time is very short, we would need larger batch sizes to make automation investment worthwhile. If it‟s a longer cycle-time, you could manage a lower batch size. However, often our set-up is complex and costly, in which case, before we would even consider automation, we would have to have demand such that there was no need to break the machine down and set it up for a different job. This is different from a production unit that has less complex set-up processes, where automation may be used to achieve reliable short runs with minimum job change-over time.

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Case histories


Now, if you‟re leaving a machine running to produce one job, the only way that you can improve its productivity, apart from working on things like consumable cutter geometries (in other words, cutting metal more quickly), is how you handle the parts. So, at that point, we would be saying „Right, can we reduce the load/unload time by running it automatically with robotic feed? And with this automated feed, can we work with lights-out at the weekends where before, additional personnel or expensive overtime would have been required?” 4. Plans for people on the shop floor “We communicate regularly with the workforce, providing a quarterly update by division of how the business is doing by business division, progress against our strategic plan and where we‟re looking to invest, both in terms of skills and technologies. We have a Consultation Forum for whenever we‟re doing something new, and if it was a major automation plan, we would get the Consultation Forum together to explain. It‟s basic communication! The moment that you treat it as something exceptional or frightening you‟re setting it up to be a problem. Last year, throughout the recession, we invested more heavily than ever and we didn‟t have a single problem or comment. In fact, people saw the investment as a reassuring commitment to the future.” 5. Funding “Funding is generally from internal sources. We tend to reinvest from cash but we have no problem securing lines of credit. We‟re looking for a payback under 5 years because within 4-5 years, even though that very expensive £750,000 piece of equipment will still be accurate and reliable (probably for another 15 years), if I am still using it, I will be uncompetitive against my peer group as newer, faster equipment will have entered the market. For this reason, I must replace and up-grade at about the same rate as the evolution of the manufacturing technologies. When considering investment, it is not a choice of technology or automation, they tend to go hand in hand, and automation will be considered as part of an overall capital equipment renewal project. Requirements to apply for European funding are very onerous. Even trying to find out who has what funding available is difficult. The very big companies will have a department that is looking after this, whether it‟s applying for R&D tax credits or looking for an automotive-focused, regenerative programme from Europe. Small companies don‟t have those internal resources. If the Government wants to encourage investment in automation, investment in upskilling, investment in advanced manufacturing - my view is don‟t give rebates and have little pots of investment funds here and there. Instead, have a clear, straightforward tax regime that spells out what we are looking to encourage from a balanced economy perspective. What is really needed is a long term vision, with a stable, predictable and competitive tax regime that takes account of the much longer returns on investment typical in manufacturing versus many other parts of the economy.”

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Case histories


6. Problems and how they were overcome Shortage of skills is managed on a longer-term basis through the company apprenticeship scheme. This investment is as important as the more obvious investment in capital equipment. Training in new technologies is usually provided by the equipment suppliers as part of the package. 7. The result, in terms of what was bought and how it will be maintained New machines are an integral part of having a competitive, up-to-date plant, producing high quality parts - and meeting tight customer schedules. The company carries out the basic day-to-day, week-to-week, health checks and diagnostics maintenance, while all the calibration and planned maintenance of equipment is part of each machine‟s service contract. This is negotiated at the time of purchase and includes an up-time guarantee, failure of which to achieve, triggers financial penalties.

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Case histories


the CNC factory

The CNC Factory are specialist manufacturers of moulds, mould plugs, patterns and models using a range of materials, including expanded polystyrene, polyurethane and foams using the very latest in 3d cad/cam software and 5 axis cutting technology.

We offer 5-axis machining of materials, metal spraying and hard coating for the film, marine, construction and composite industries.

We are constantly on the look-out for new technologies, developing new materials and techniques to meet our clients‟ needs.

With many years‟ experience in CNC modeling and production, our team can offer the expert consultancy and technical skills required to manage your project from end to end.

Facilities

We use the very latest in CAD/CAM software, and are able to work with most industry-standard 3d files. Our machinery is accurate to very tight tolerances, ensuring the closest possible match between specifications and finished product.

The CNC Factory is more than just another CNC machining company. We can offer friendly and useful advice on your project, whether it be a model, a mould or prototype.

Polystyrene model from scanned maquette

Polystyrene pattern being milled for marine industry

The CNC Factory, Pinewood Studios, Pinewood Road Iver Heath, SL0 0NH

Telephone: (+44) (0) 1753 656 975 E-mail: [email protected]


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Case histories


The CNC Factory, small company invests to double production


The company does CNC machining of foam material, polyurethane and

polystyrene in the production of moulds, mould plugs, patterns and models for the

film industry, the boat building industry-anyone that needs plugs and models

making. They are a very small company with less than 10 employees.

“Everything we do is bespoke and one-off, which doesn‟t lend itself very well to

being made abroad unless it‟s a big job. You‟re not going to have a £4,000 job

made in South Africa or Lithuania. Also, everything we do is quite big so there

would be big transport costs if it had to be shipped from abroad. We have found a

good niche.”


And the application

“It‟s a far more efficient way of making moulds, plugs and pattern. You get a

precise, accurate job with no labour costs. And, it will work 24 hours/day!

Automation is definitely the way forward.

My theory is that the cheaper we can do stuff the more demand there is for our

products.”


We are a small company, decisions are made by the boss in consultation with the

team.


The purchases are for expansion. No one loses their job.

5. Funding

“In the UK, because of the recession I think it‟s very hard to get money to pay for

these things. We‟re only a small business, I don‟t have the time to spend literally

weeks filling out applications.

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Case histories


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Case histories


We were just talking this morning about the fact that we‟d like to buy a second

robot for machining/milling but unless I can afford it straight off (out of internal

funds) it can‟t really happen. It‟s almost impossible to borrow money at the

moment. In theory, there are grants available for businesses like ours but I‟ve

looked; I‟ve spent lots of time looking at Business Link this and that and the truth

is that you jump through hoops and hoops and you don‟t actually get anywhere!

It‟s a real nightmare!

It would probably be better to have just one useful body that could really support

investments to improve our efficiency and productivity rather than all these

different departments. There needs to be more personal service.

I‟ve taken some real risks and had to borrow. I have had to beg for favours to

make investments happen because if you speak to the bank they don‟t take risks,

do they? They will want you to sign all sorts of things and provide all sorts of

guarantees.”


“I did contact companies in the UK and it was almost like I was talking to a blank

wall! I wanted to do something a little bit different and they were just not ready to

help me! It‟s as simple as that.

The reason I got a Kuka robot was because they seemed to be able to get their

heads around using a robot for machining and milling. I went to see them in

Germany and they had a robot set up to do exactly what I wanted to do with it.

There was nothing like that here in the UK. None of the robot manufacturers were

familiar with the use of robots for CNC machining and milling.”


“We have a Kuka robot for machining which was installed in 2008. It cost £60,000.

We had another rotary axis put on it at the end of 2009 which cost £15,000. They

do the maintenance, we run them.

The rotary axis has increased capacity. It‟s almost the difference between

us being profitable and not being profitable!

Last year we were struggling to make jobs profitable. Before it took us 5 days to

make a job worth £5,000 and it cost us that in rent and wages. But, with this rotary

table which just makes the whole process so much quicker, we‟re suddenly much

more profitable. We would like other bits for our robot, but we just can‟t afford it at

the moment.”

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Case histories


Harwin is a manufacturer of; high reliability, industry standard, and application-

specific interconnect devices.

We command wide-ranging, global capabilities to satisfy customer needs on a local level. A network of distributors coupled with offices and manufacturing facilities in Europe, USA and Asia provides us a global reach and comprehensive understanding of the latest technologies. With more than 50 years history of successfully manufacturing electronic components Harwin has an active portfolio of over 20k highly reliable interconnects and PCB hardware items.

Harwin has a wealth of experience in the following markets:

Industrial/Instrumentation

Military/Aerospace

Medical

Consumer Electronics

Telecommunications

Test and Measurement

Automotive

Harwin's sales and service extend worldwide via offices and manufacturing facilities in the UK, USA, Germany, Singapore & Taiwan and a world wide distribution network.

Fitzherbert Road, Farlington, Portsmouth, Hampshire PO6 1RT

http://www.harwin.com/aboutus/markets/industrial.html

http://www.harwin.com/aboutus/markets/mil-aero.html

http://www.harwin.com/aboutus/markets/medical.html

http://www.harwin.com/aboutus/markets/consumer.html

http://www.harwin.com/aboutus/markets/telecomms.html

http://www.harwin.com/aboutus/markets/test_measure.html

http://www.harwin.com/aboutus/markets/automotive.html

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Case histories


Harwin plc., investing to compete internationally

Harwin designs and manufactures world-class electrical/ electronic interconnect solutions.

The company delivers total interconnect solutions worldwide for product designers and

OEMs, from standard and high reliability connectors to custom product. Industries which use

Harwin connectors include those involving harsh environments, aerospace, medical

equipment, white goods, cutting-edge mobile technology, test and measurement, and car

manufacturing. Without automated production, the company would not survive in the

international market. Harwin has a turnover of £12 million and employs 140 people. They

design their automation solutions and train their own staff to their very specialized needs.

1. The reason for considering automated capital equipment, and the

application.

Harwin is a small/medium size business operating in international markets. To remain

competitive in an industry which has well established low cost manufactures in Asia,

the company is constantly investing in updated manufacturing technology. The

improved productivity of each new generation of machines enables the company to

compete internationally and grow its turnover.

Capacity to meet orders, customer demands for both the technology and the timing of

deliveries, and cost are the main drivers. Small sample batches are sometimes

produced by hand, particularly for the more complicated assemblies like Datamate

Mix-Tek, Harwin‟s high performance coax, signal and power hybrid. But even as soon

as making products in units of ten, it is necessary to use automated assembly

systems.

Harwin‟s Datamate Mix-Tek product, for example, is highly specialized,

complicated assembly.


The company is management owned and takes decisions quickly and decisively

after consultation with the engineering staff. Typically the Chairman and the

Board of Directors agree areas that will require the allocation of resources.

Solutions are discussed and agreed, and in recent months Harwin has purpose

built two new pocketing machinery lines to keep up with growing demand for the

EZ-BoardWare range of PCB hardware.

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Case histories


Harwin purpose built machinery


As well as keeping plant and machinery up to date with the newest technology,

Harwin run a serious apprentice scheme that ensures the company has the skills

to run a modern hi-tech factory. The organisation is relatively flat and un-

hierarchical. There are no “Unskilled workers” and training is key.

4. Funding

In house purpose built automation systems development is from internal funds

and bank overdrafts. Acquisition of major pieces of automation equipment from

external suppliers is generally through hire purchase.


Most of Harwin‟s competitors manufacture in low cost areas such as China or

India. Harwin would find it very hard to compete with an Asian manufacturer, with

their cheap assembly labour and easy funding. So the company competes on

lower volumes of very highly specified products which can be automated. It is a

niche market for high and variants of global standards.

Lack of flexibility is perceived to be a barrier to investing in automation. It is said that

automation is not flexible enough to run a diverse range of products on one line.

157

Case histories


That is why Harwin build their own systems. The automatic assembly machines

used by the company are non-standard because they are flexible.

The Harwin automation solution is unusual in that they have the capability of

buying-in major pieces of manufacturing equipment and building the

automation systems around these to suit their own needs.

A degree in engineering is not practical enough for an engineering company of

Harwin‟s size. They have a problem in that UK universities cannot afford the

constant updating of equipment for training and the courses are not sufficiently

hands on. The UK has few companies that are small, specialised manufacturers of

non-standard product and has not had a very friendly regime from an industrial point

of view. Harwin say they cannot get automation skills from other sectors, because

there isn‟t the industrial density in the Portsmouth area where they are located.

In consequence, Harwin take on apprentices to train through the training schools

like South Down College and PETA (Portsmouth Education and Training). “You

can‟t hire somebody to run our production lines because they are very complex”.


Customers are increasingly automating their assembly and using surface-mount

assembly processes. Harwin are manufacturing more surface-mount board

components to meet this customer demand.

The result has been a surge in the need to insert components into tape and reel

packaging, which the customer can integrate straight into the production. Harwin

demand planning had highlighted this as an area where there could be a future

production bottleneck and which needed investment in automation.

Harwin has designed and built special purpose machines, and installed them in their

factory within two months. The maintenance will be an ongoing programme, in line

with their statistical control programme.

Harwin‟s EZ-BoardWare product is packaged in Tape & Reel for easy integration

into surface mount manufacturing processes. The machines will recover their cost

within two years, and they will enable Harwin to continue as a successful supplier

to the international markets.

158

Case histories


Youngman has been associated with safety, quality and innovation since it

was founded in the 1920s. We are now recognised internationally as a leading provider of innovative access equipment and systems, designed and manufactured to the highest quality standards. We supply thousands of rental, retail and resale customers across the UK, Europe and overseas, and have a turnover in excess of £30 million a year. Our determination to grow our business through continual product advancement and improvement is underpinned by our strongly held values of:

Safety Innovation Quality Customer care Integrity

Unrivalled product range Access Towers Stagings and Trestles Access and Work Platforms Extension Ladders and Accessories Combination Ladders Specialist Ladders Step Ladders Loft Ladders

We also design, manufacture and install bespoke access systems for a wide range of applications, and have high profile customers in, amongst others, the military and commercial aerospace, rail and petrochemical. Excellent UK coverage Our Essex-based factory and head office has:

State of the art production facilities High-tech BoSS Repair Centre Extensive warehousing and distribution Fully equipped training facilities Computerised customer service centre

This is complemented by our Glasgow office which also has a warehouse and distribution depot, sales office and training facilities. A worldwide presence Skilled field sales teams, working across Europe, Scandinavia, Australasia, Asia Pacific, and the Middle East. The Causeway Maldon, Essex CM9 4LJ UK Tel: 00 44 1621 745900, www.youngmangroup.com

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Case histories


Youngman, short pay back and flexibility to meet the expected

upturn.


The Youngman Group is a leading provider of innovative access equipment and

systems, designed and manufactured to the highest quality standards. These

include aluminum towers, stagings, work platforms, ladders, with small powered

access machines and lighting towers being added to the range recently. With a

turnover of over £30 million pa, Youngman supplies rental, retail and

resale customers across the UK, Europe and overseas.

They also design, manufacture and install bespoke access systems for a wide

range of applications, and have high profile customers in, amongst others, the

military and commercial aerospace, rail and petrochemical sectors.

Since a management buyout in 2005, there has been a determination to grow the

business through continual product development and range extension.

2. The reason for considering automated capital equipment and the

application

There had been very little investment in the Youngman business during the 5

years prior to the buy-out. All the main processes were manual; cutting, cropping

and welding aluminum tube. The manufacturing volume flex was achieved by

increasing the use of temporary skilled labour from Eastern Europe. It was clear

that costs were continuing to rise and that the Company was facing cheaper

competition from European and Chinese manufacturers.

The other major concern was that in the face of a slowdown in the traditionally

cyclical construction market, the company would be slow in reducing costs and

then slow in recovering if labour had to be recruited and trained in skilled welding

roles.

It became clear to the new management that investment in the UK was necessary

rather than outsourcing manufacture to China. Production engineers quickly

identified laser cutting and robotic welding as the optimal solutions.

The implementation of the tube laser was very quick, and was made

independently of the decision to move to robotic welding.

The investment was fully installed just ahead of the economic downturn putting the

business ahead of the curve in reducing costs and capacity ahead of the global

slowdown in business throughout 2008.

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Case histories



Youngman is a private equity backed business, and this allowed the flexibility to

make and implement the decision quickly. The business was performing well,

which strengthened the case, and there was no corporate hierarchy to fight the

way through to have the investment approved. The decision was taken round the

boardroom table.

The laser cutter supplier said it was the quickest demonstration to order that they

had ever experienced.


Youngman operates a unionised site, and the union was supportive of the

investment, recognising that it involved cutting the labour force but also that it

would help to secure the future of the people that were left. They fully appreciated

the importance of being able to compete globally

“It hasn‟t been a big challenge because it‟s about saying „look, we operate in a

global economy.‟ They see the significance of the export business that accounts

for 20% of our business. They see that as critical to the long term success of the

business.”

They see future investment in automation as a good proposition, in that it makes

the business more secure in the long term, particularly now that we‟re investing for

growth. The production engineers have updated their skills base. They have been

on training courses focused on automation including the use of robots and lasers.

Some of the people that left in late 2008 and in 2009 have recently been re-hired

as there has been an upturn in business

5. Funding

Funding was probably easier in 2006/7 when the business was performing well

and there was a very good financial rationale. Funding has certainly become

tighter and now the business case has to be watertight. The equipment was

leased and there was a very positive attitude for investment from the investors.


1) The investment was a major undertaking for the company and linking the

robotics with CMT welding was in its infancy particularly with aluminum tube. ABB

were selected as having the resource and scope to undertake a turnkey project.

The key risk was in designing the jigging configuration correctly to match with the

welding capability The jigging had to be capable of handling 3 ranges with 8

different frame types. ABB were committed to the project from day one. They

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Case histories


undertook stage tests to confirm the process and build confidence that the project

was viable. Once the technical issues were overcome then the investment had to

be financially assessed. That assessment was relatively straight forward as it was

an easily measurable cost out with strategic benefits attached.

“We‟re at the stage now where we‟re investing for growth rather than for cost

reduction. That gets a little bit more difficult. If it‟s all about cost reduction, then it‟s

easily accountable. If you‟re saying „look I want to put in an investment of

£500,000 because I think that there is going to be growth of £3 million of business,

that becomes a harder sell as there is increased uncertainty with sales

projections.”

“If the pay back is within two years then everyone says „yes, it‟s a good deal. Let‟s

get on with it”

2) There has been a shortage of skilled technicians and engineers, not only

for robotics but also for other areas of our business, although this has eased over

the last year, because there are fewer businesses chasing a limited number of

engineers. As a result, the investment was a turnkey operation with the skills

brought in to programme the robots. The plan is to continue to rely on those

external skills (outsourced maintenance) although internal training has taken place

to improve the company skill capability.


The total investment in the project was of the order of £2.5 million for a laser cutter

and two fully automatic welding cells. It allows them tremendous flexibility in

output to handle rapid changes in demand, as the equipment is set up to operate

round the clock, six days a week.

The investment has allowed the company to compete rigorously on the global

stage against imports from lower labour cost economies. Cell manufacturing has

reduced the reliance on skilled labour and to flex production to meet requirements

more quickly and reduce stockholding.

The equipment has performed as was originally specified and all key parameters

were achieved. The kit continues to be maintained by ABB. The investment has

changed the approach to manufacturing in terms of the scope of recent projects

that have been undertaken, and has significantly improved production efficiency.

“We are now looking at further investment in robotic manufacture to secure our

vision of growing the company in a very competitive global market which we

believe will be by continued investment in state of the art manufacturing

capability.”


7 Chiswick High Road, London W4 2ND Tel: (0) 20 8742 7888 Fax: (0) 20 8742 8558 e-mail: [email protected] http://www.metra-martech.com/


EAMA · 2011-04-05 · As a first, step two initiatives to be developed: First, to foster...

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